Feeds

Indirect proposition: Inside IBM UK software supremo's profit plan

Partners and tackling that PC myth...

High performance access to file storage

Don't buy the software, float the software

Customers are thinking twice about the need to purchase a license for a piece of software. Instead, they realise they can rent time on or outsource the job to a service provider's servers instead, or they can virtualise the software on their own high-density servers.

A byproduct of cloud is that customers’ expectations are becoming more pronounced when it comes to actually buying new software. They expect ROI in six to 12 months, not two to three years as they did in the past, Smith said.

In IBM's recent third quarter results, Software Group worldwide made $5.8bn while its sales grew – albeit modestly, by one per cent.

But, still, software did do better than hardware and services: hardware fell a whopping 17 per cent and services was down four per cent

The biggest sellers in the software group were Rational developer tools and something IBM is calling Social Workforce Solutions, which includes Lotus - up 12 and 14 per cent. Information management (DB2, Informix and BI tools), and Tivoli systems management grew two per cent respectively.

But what of the WebSphere middleware portfolio – home of the app server? This was the toast of enterprise sales during the 2000s. Now it's the biggest loser, with no growth at all during the third quarter.

Compare that to early 2004, the heyday of the battle of the Java application servers and middleware. Back then, WebSphere revenue was growing by 24 per cent a quarter.

And remember that one per cent Q3 growth for Software Group that was reported late last year? Back in 2004, WebSphere’s income helped the software group hit quarterly growth of 11 per cent to $3.5bn.

“I’d be fooling you and everyone else if I didn’t say it wasn’t more of a challenge in this current environment - you have to work an awful lot harder on articulating a business proposition” - Stephen Smith

IBM is making some money from cloud, but not much from what we can see.

IBM doesn’t break out revenue from its cloud business but in the third quarter said cloud revenue grew 70 per cent to “more” than $1bn. Of this, $460bn was delivered “as a service” - meaning from IBM’s own Smart Cloud with the rest of the money, we assume, coming from sale of IBM software, hardware and services to help others set up and run their own clouds.

“I’d be fooling you and everyone else if I didn’t say it wasn’t more of a challenge in this current environment - you have to work an awful lot harder on articulating a business proposition,” Smith told us just before the Q3 results were announced.

“ROI is more aggressive, but it it’s something we relish. You have to work that harder, it’s so competitive out there now. It’s driven by economic factors and the rate and pace of change is so fast,” Smith said.

The answer for IBM’s challenge is to reach a broader market by selling more software through partners.

Smith told The Reg he’s shifted resources away from face-to-face and direct sales to third parties to achieve scale. His goal is to sign up more partners in 2014.

“It’s where I see the growth coming from and what the market is demanding as we look to branch into non and less traditional IBM areas,” he said. “Traditionally, software has been a very high touch face to face approach that we have relied on... we are now looking to go to market with our partners.”

“We don’t have the scale to deal with the amount of demand there is. A key part of strategy from a 2015 perspective in the UK is to extend out through the ecosystem system and market he challenge, the ISVs, the resellers a key part of what we are drying to drive.”

He said sales have been re-tooled, with the software group in the UK and Ireland hiring and training the “right” kind of salespeople.

IBM has been laying off staff - 6,000 have gone globally since 2009 and 300 from the UK and Ireland last year as part of cost cutting and restructuring.

Smith wouldn’t comment on plans in the UK and Ireland for further layoffs, but did claim his sales team was growing.

He said his team has been hiring, while IBM is looking at more training, so sales can make “a more complex value proposition” rather than “traditional product based sales".

He added: “What you are seeing in IBM it’s fair to say is a rebalancing in terms of the skills to respond to the market opportunities. We are making huge investments in people.”

Smith and his team in the UK and Ireland now have 12 months left to see whether the strategy of partners and a smarter workforce pays off. ®

High performance access to file storage

More from The Register

next story
Windows 8.1, which you probably haven't upgraded to yet, ALREADY OBSOLETE
Pre-Update versions of new Windows version will no longer support patches
Android engineer: We DIDN'T copy Apple OR follow Samsung's orders
Veep testifies for Samsung during Apple patent trial
OpenSSL Heartbleed: Bloody nose for open-source bleeding hearts
Bloke behind the cockup says not enough people are helping crucial crypto project
Microsoft lobs pre-release Windows Phone 8.1 at devs who dare
App makers can load it before anyone else, but if they do they're stuck with it
Half of Twitter's 'active users' are SILENT STALKERS
Nearly 50% have NEVER tweeted a word
Windows XP still has 27 per cent market share on its deathbed
Windows 7 making some gains on XP Death Day
Internet-of-stuff startup dumps NoSQL for ... SQL?
NoSQL taste great at first but lacks proper nutrients, says startup cloud whiz
US taxman blows Win XP deadline, must now spend millions on custom support
Gov't IT likened to 'a Model T with a lot of things on top of it'
prev story

Whitepapers

Mainstay ROI - Does application security pay?
In this whitepaper learn how you and your enterprise might benefit from better software security.
Five 3D headsets to be won!
We were so impressed by the Durovis Dive headset we’ve asked the company to give some away to Reg readers.
3 Big data security analytics techniques
Applying these Big Data security analytics techniques can help you make your business safer by detecting attacks early, before significant damage is done.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Mobile application security study
Download this report to see the alarming realities regarding the sheer number of applications vulnerable to attack, as well as the most common and easily addressable vulnerability errors.