IBM and Software as a Service
What opportunity does IBM see as far as SAAS? What is your take on that? Well, we view this, I think, with a little bit wider definition than just SAAS as it is depicted by the venture capital community and some of the better known companies that people identify with this idea of software as a service.Most of the banks are involved with various forms of online services, delivered not just to consumers but on a business-to-business basis, especially for helping small businesses manage their finances. Companies like ADP have been in business for decades. American Express is in this business. UPS and Federal Express are in this business. They want to engage you in the process transformation of your inventory management supply chain. So it's far more than just wanting to ship your packages; it's really getting into your business processes, and part of their value proposition is they're actually going to use their computing systems to help you manage your environment more effectively. That's no different than Salesforce.com using their computing system to help you manage your remote sales force more effectively. Same idea. So as we look at this from an IBM perspective, we see ourselves participating from multiple angles. Obviously, all of these companies that are performing these services need hardware and software. So we're supplying them with hardware and software. They need scalability, reliability; they need strong technology that matches the need for a 7-by-24 service delivery environment. Certainly [that] matches our design points quite well. We're participating in this marketplace in terms of actually delivering some of these platform services. We have our managed business process services initiative, which actually involved IBM doing transformation and then operation of selected business processes. We have our Bluehouse initiative, which actually allows customers to effectively as a service get at a set of platform-hosted collaboration pieces that are part of our Lotus portfolio. All these things are examples where IBM is participating in this more broadly defined platform delivery of IT services, and, by anyone's definition, this stuff is software as a service. It's one of the things that we do. Do you think that data will ever live completely in the cloud? Is that inevitable? Although it's theoretically possible for you as an individual to put all your data in the cloud, it becomes a matter of personal choice as to whether you think that having your data out there is fully reliable and fully secure. I think most people step back from this and say, "Well, so what do I want to put in the cloud? What's really important to me?" You may have some casual activities and hobbies, you may be an avid opinion writer, and you're more than happy to have your documents somewhere else, and you don't care about a local copy. You may feel very differently about your personal health records or your investment data-that'll come down to personal choice. I think the same choice gets made by businesses: Whom do I trust with this information? What compliance requirements does it have? What about auditing, security, privacy? Clearly, companies do trust major providers with sensitive information. Hewitt [Associates] and Fidelity are in the human resources and benefits business, just to name two companies, and clearly by virtue of providing those services to corporate customers, they are holding confidential personal data. By the way, we outsource some of our HR and benefits to various companies; therefore, my information sits outside of IBM, not just inside of IBM. And I'm comfortable with that, because IBM as a company understands what criteria our suppliers have to adhere to, and the suppliers we choose are very serious about being auditable and meeting privacy and security compliance. ADP's been in business for more than 30 years keeping personal payroll information, for example. I think they have a stellar track record of security and privacy. So I think that there isn't anything in a business context that you might not trust; it really comes down to the decision of the user and the corporate buyers-how they feel about third-party service providers. But, obviously, the barrier related to security and privacy has clearly come down as companies are deploying business practice techniques and structures and are willing to allow themselves to be audited by outside auditors. You've read some of the counter ideas here. And my friend [Oracle CEO] Larry Ellison has been floating other notions out there of late-that this whole idea doesn't make a lot of sense. If you think through it more broadly, you realize that this is a concept that has been in place since service bureaus first began in the 1960s. Today we're using other terms. We seem to change the terminology every so many years to make it sound new, but software as a service is no different than the last 40 years of online service provider models that I think have evolved to become very sophisticated.
More broadly defined, this is really about business process outsourcing. There are a huge number of companies that participate in that. In fact, the companies you would view as more traditional business are far bigger than the venture-funded SAAS companies.