IBM Scales the Vertical Industry

Seizing on a growing trend among small and large enterprises alike, the IBM Software Group has spent the better part of the past year quietly executing a far-reaching plan to create bundled middleware solutions for specific vertical industries.

The effort, which officials said has been loosely ongoing since the late 1990s, came into sharp focus late last year when Steve Mills, senior vice president and group executive of the IBM Software Group, made the vertical-solution push a call to arms internally.

"Its perfectly logical in terms of what the customer is doing," said Mills in an interview here late last month. "The buying patterns and interest and behaviors of customers is something you always have to be watchful of. And what were trying to do is to ensure that the appeal of our technologies, which is a statement of what the technology is, combined with how we bring it to market, matches the way that customers are thinking about their business problems and how they go through their evaluation processes for choosing technology."

Click here to read eWEEKs interview with Steve Mills.

Under Mills direction, the division has crafted more than 60 vertical product solutions; aligned itself more closely with other IBM groups such as IBM Global Services, as well as with sales and distribution groups for better vertical coordination; and launched the PartnerWorld Industry Networks program to enlist third-party participation in solution creation, among other things.

The initiative seems to be paying off. IBM officials here said the effort is responsible for bringing in thousands of new SMB (small- and midsize-business) customers—the kind that offer the greatest growth opportunities.

According to observers, IBM has a big head start on competitors.

"What makes IBMs approach particularly noteworthy—and particularly difficult for competitors to match—is IBMs ability to use the industry-specific knowledge that resides in the IBM Business Consulting Services group to guide the development of vertically oriented middleware components," said Dwight Davis, an analyst with Summit Strategies Inc., in Boston.

Mike Gilpin, an analyst with Forrester Research Inc., in Cambridge, Mass., agreed. "I think IBMs move to verticalize their middleware go-to-market strategy is among the earliest and most successful among the major general-purpose application platform vendors," Gilpin said.

Next Page: Competitors rely more on partners.