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IBM Aggressively Targets Mid-Size Manufacturers Sign Up to receive Daily News Alerts in your E-mail Inbox
Posted on Tuesday, October 11, 2005 5:33:00 PM |
IBM yesterday rolled out 22 new offerings under its Express Portfolio banner, a family of finely-tuned product lifecycle management and supply chain management packages for mid-sized companies.
The latest round of products, designed for industrial manufacturing, life sciences, health care and retail companies, couple IBM hardware, software and services with applications from third-party partners. Yesterday's announcement included a new family of servers, called System p5, reengineered specifically with the needs of medium-sized businesses in mind, and a financing model that allows manufactures to opt for a payment plan rather than lump sum licensing. (Click here for details on a flexible payment model applied to IBM's new supply chain optimization service for smaller manufactures.)
While Express Portfolio debuted in 2002, the latest salvo is IBM's most comprehensive revamp made to the product line to date. Over the past few years, IBM has concentrated its efforts around the needs of mid-size businesses, which the Armonk, NY company defines as companies with between 100-and-1,000 employees.
This space represents a $360 billion market opportunity, which company officials said IBM is already exploiting. As evidence, they pointed to small- and medium-sized business (SMB) revenue growth of 10% in the first half of this year.
"That particular portion of the market is growing fast, much faster than large enterprises," said Elaine Case, IBM's director of small and medium sized businesses, in an interview with Managing Automation. But these companies don't have the resources to keep up.
The average mid-sized manufacturer's IT department is staffed with between 4-to-15 people and has an average IT budget of between $200,000-to-$800,000 per year, she said.
According to an internal IBM study, 65% of mid-market customers think business solutions are designed, developed and priced for large enterprises. As a result, "these customers don't have the offerings from a business point-of-view that they need to make the leaps in growth that we think they can make," Case said.
IBM is positioning itself to be a catalyst of SMB change. Over the last few years it has created specific offerings for smaller companies by reengineering existing point solutions -- servers, databases and connectivity software -- to be easy-to-install, easy-to-manage, and most importantly, easy-to-own.
For example, a new PLM package was revamped to meet the business requirements of smaller industrial machining companies. IBM Product Lifecycle Management Express for Machining includes the IBM IntelliStation workstation tuned for CATIA, IBM's product development software, but it is wrapped with templates to make it easy to integrate, Case said. (Click here to read about a similar approach taken by UGS.)
Pricing for the produict starts as low as $55 per month. "This area has traditionally been very high end," Case noted. "We are the first company to literally redesign [such an] offering for the mid-market."
Redesigning does not mean taking a huge complex system and dummying it down. Rather, IBM has development teams that meet criteria such as getting a product installed in eight minutes and 11 clicks.
And it has to be priced right. The total cost of a solution may be $10,000, but customers have the option to pay a monthly fee for hardware and software operated in house or for an application service hosted by IBM.
The new Express Portfolio offerings, meanwhile, include redesigned servers. IBM's System p5 servers have been upgraded with a 64-bit, 1.65GHz IBM POWER5 processor running Unix or Linux, an entry-level open source operating system, starting as low as $3,750 (or $98.25/month for 36 months).
Some of the technology-specific offerings bundled for various vertical industries include security, diagnostics, RFID, and backup and recovery software and services. To fill out its offerings, IBM has aligned itself with partners.
"Every single one of these offerings has strict channel enablement deliverables," Case said. "That means most of the offerings are sold or services are provided around them from business partners. IBM provides to those partners specific information about every offering -- what industry, what target customers, what particular configuration, etc."
Using channel and application partners is a good strategy for IBM which increasingly will bump up against companies like SAP, which is also tailoring offerings to SMBs.
"IBM recognizes the opportunity and that they have to take advantage of it or other companies will be there," said Ray Boggs, vice president of small and medium business research at International Data Corp., a market research firm in Framingham, MA. "IBM is seeing SAP coming down and lowering prices with All-In-One business solutions, but IBM has strong channel relationships with companies already serving the mid-market. So the idea was to get out there with a broad range of capabilities and solutions, delivering some that cut across verticals and some horizontal."
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