In a continuing effort to expand its developer base, IBM is tapping venture capital firms to find hot new companies in emerging technology areas to support IBMs middleware platform.
The Armonk, N.Y., company is touting its middleware platform—comprising the WebSphere application server, DB2 database and Tivoli systems management software—as the smart alternative to Microsoft Corp.s .Net platform for ISVs.
IBM is not investing in the new companies and is not in the business of funding ISVs, officials said. But those that partner with IBM are reaping the benefits.
"The main benefit for us is the access to all the hardware technology," said Richard Schoen, president of RJS Software Systems Inc., an IBM partner in Minneapolis. "IBM is providing access to the porting center for testing, as well as downloading, access to WebSphere tools and really anything in the IBM software product line."
IBM has been holding VC (venture capital) roundtables to seek out innovations. The latest roundtable was held at Stanford University, in Palo Alto, Calif., late last month and featured members of the VC community such as Ann Winblad, a partner at Hummer Winblad Venture Partners, said Buell Duncan, general manager of ISV and developer relations for IBMs Software Group.
Duncan said IBM sees VC as a ripe field for signing up ISVs in what IBM calls emerging business opportunity areas, such as Linux, pervasive computing and business process management. "The VC community represents a wealth of knowledge about evolving trends, breakthrough technologies and growth markets," he said.
Last year, IBM brought in more than 750 new ISVs via its connections with the VC community, more than double what the company acquired in 2003, Duncan said. IBM has been cultivating its relationship with the VC community for four years but is now moving aggressively with a concentrated worldwide effort to find top-notch ISVs that will standardize on the IBM middleware platform.
"I think IBM in many ways is the ultimate partner for high-tech startups," said Paul Holland, general partner at Foundation Capital, a Menlo Park, Calif., venture firm.
Early last year, IBM announced a $1 billion investment in ISV programs through its PartnerWorld Industry Networks initiative. Since its launch in March, more than 2,000 software vendors have joined the network, Duncan said. "[In 2005,] we expect that number to grow to more than 5,000 ISVs, and well expand the program to add industries and branch into emerging markets such as China, Brazil, India and Eastern Europe," Duncan said.
"They have a growing initiative," said Holland. "Their venture relations group has been active and reaching out. A number of our companies are beginning to see IBM as a viable partner." Foundation Capital has introduced IBM to several of its portfolio companies, some of which have become partners, including Talaris Corp., a Web services platform maker; Ketera Technologies Inc., an e-commerce platform provider; and TuVox Inc., a call center automation software vendor.
"The IBM middleware platform is solid," Holland said. "The draw is the brand reputation, mass [and] reach, and the ability for an ISV to tap into the IBM customer base is unparalleled."
In contrast, "Microsoft can be more problematic," Holland said. "In specific instances, Microsoft is fantastic. But in other instances, Microsoft can be problematic in that they produce applications that could be competitive" with ISV offerings.