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IBM focuses on software

Discussion in 'Tech, Gadgets & Science Forum' started by JuaKali, Nov 20, 2008.

  1. JuaKali

    JuaKali JF-Expert Member

    Nov 20, 2008
    Joined: Nov 14, 2007
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    Dubai: Steve Mills seems somewhat bemused by the idea that International Business Machines, better known as IBM, is moving away from software development.

    Mills is, after all, IBM's executive vice-president for software and the person responsible for shaping the company's overall software strategy and directing its $13 billion (Dh47.7 billion) software business.

    During a recent trip to the UAE, he dismissed the idea that the company was focusing more on software services than on the software itself.

    "We've been very public and very clear on our strategy as it relates to software," he told Gulf News.

    "So as we talk to Wall Street every quarter and share with them our strategic roadmap, we talk about making software a larger part of IBM. Software today is 40 per cent of IBM's profits, and we're driving to make it an even larger per centage."

    According to Mills, the company would like to see its profits from software increase to nearly 50 per cent in 2010 and 2011. IBM currently has 33,000 people working on software products and he says the company will continue to actively pursue acquisitions of small, private companies who have software that can help IBM's portfolio.

    "We've been very active in acquiring software companies," he said. "Obviously, you wouldn't do that if you were de-emphasising software.

    "We've been buying anywhere from eight to a dozen software companies a year for the last eight years. During this decade, we've purposed some 70 software companies."

    To help its software business grow, IBM is even willing to give its software away for free, provided it helps chip away at one of its biggest competitors, Microsoft. About a year ago, IBM began releasing Lotus Symphony, a suite of business applications similar to Microsoft Office, as a free download from the web.

    The 'free' weapon

    "I compete with Microsoft everyday," Mills says. "That space is very competitive between the two companies. They're endlessly attacking us. We're endless attacking them and there is nothing more fun than to attack your competitor with 'free'."

    IBM has a long history with Microsoft, even being the first company to roll out Microsoft's DOS operating system in the 1980s, but after failing to compete with its own operating system, the company began supporting Linux as an alternative to Windows in 1998.

    Asked if he has any concerns that companies such as Adobe, who offer similar office applications online for free, would prevent IBM from gaining market share against Microsoft, Mills said he had none.

    "I have no concerns about anything that displaces Microsoft from any vendor. They have this monopoly. They have two monopolies. One is Windows and the other is Office ... so anybody who wants to take on either of those franchises is fine with me. Mother Nature does not like monopolies. Monopolies cause all kinds of problems in the market place."

    But taking sales away from Microsoft is a formid-able challenge. Mills estimates that Microsoft has 99 per cent of the market share in Office-type software, which represents about $30 billion of Micro-soft's revenues and Mills doesn't think anybody, unfortunately for IBM, is anxious to change their office software from one vendor to another.

    But currently, it's not Microsoft that has most companies concerned, but the global economic downturn, and Mills says no one knows how that will affect the market.

    'Crystal ball'

    "Anybody who has a crystal ball probably can get rich, but I'm not sure the crystal balls have worked very well in the last year or so," he says.

    Mills does say that historically, tech companies have tended to weather these downturns reasonably well. He said looking back at the history of recessions going back to the late 1960s, technology has actually been able to sustain a reasonable rate of growth in the face of economic downturn. One of the reasons, he says, is that IT is an efficiency tool.

    "You deploy it to save money. You deploy to reduce resource. You deploy it to get a particular job done, doing so faster with less money."

    He says the downturn will likely have less of an impact on IT sectors in the emerging markets, including the Middle East.

    "They have not deployed as much IT as a percentage of GDP and are likely to be sources of growth even in a down cycle," he said.