Enterprise vs. Consumer: IBM’s false distinction
Published 3 years, 3 months ago, Tuesday, May 22nd, 2007James Govenor of RedMonk observes that the tide is changing in the software industry. Where many have viewed Web 2.0 as simply eye candy or a different class of applications for consumers, James cuts right to the heart and soberly declares that IBM is on the path to loosing a software battle much like they lost the PC hardware battle. I concur.
At IBM, we systemically divide “consumer” and “enterprise”. Our entire culture, everything from sales (pricing of services, hardware, and software and incentive structure) to services to product group to research, focuses on what IBM claims they know best…the enterprise. And we’ve been very successful. But there is no way we are ready for an ecomony where micropayments are king. 2 cents a transaction? Sales won’t touch an engagment unless it is in the millions.
But what about emerging economies? I don’t mean emerging countries. I’m talking about Web 2.0. Om Malik is quoted saying “On this Web 2.0 highway, there are three exits: Microsoft, Yahoo, and Google.” Where is IBM? Well, have we completely positioned ourselves out of the consumer business? Are there enough experts or thought leaders in this space at IBM to make a splash?
If Web 2.0 means anything to me it is that consumers are demanding convergence. IBM may get paid by enterprise customers, but who pays IBM’s customers? In a time where IBM’s customers’ customers are demanding a digital lifestyle to follow them wherever they go, IBM seems to be raising barriers of entry to new customers and potential community members. Increasing complexity for the sake of complexity to win over service agreements.
Further, with the lure of next-gen frameworks such as Django and Rails, smaller shops are more effective. This may be a blip on IBM’s radar right now, but what really matters is what what is the favored tools of college kids. I’ve heard many call this class of developers and their tools “toys”.
True, nobody got fired for buying IBM, but in this emerging economy, will we be in position to be bought?
View Comments to “Enterprise vs. Consumer: IBM’s false distinction”
- 1 Pingback on May 29th, 2007 at 9:48 pm
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Brandon,
Excellent observations. Sometime ago, I wrote a piece outlining my take on Web 2.0. Here is an excerpt from the post:
… The final phase of a technological revolution is what she calls the “golden age” or “synergy phase” where she talks about a set of techno-economic factors that come together to change all relevant business models in a fundamental way. …
What we are witnessing is the beginnings of a revolution in business models based on the maturity of the web.
There are a set of companies (called the internet companies or Web 2.0 companies or consumer companies) that are leading the way in this revolution and then there are the established companies who are standing by and watching helplessly because they are simply too vested in their current models to make fundamental changes. If history is any precedent, this revolution will likely play out over 2-3 decades. During that period, we will continually see new companies rise and create a storm in different parts of the business landscape; the established companies will embrace each other (because they are all too vested and can only deal with each other) in a slow but sure death spiral …
The link I provided in the post above is incorrect – please use this link instead.
Shankar! Good to hear from you…
Your post breaks it down quite nicely. In fact, your wrap up of why Web 2.0 is such a source of confusion reminds me of irony of Big SOA. The term was initially created to bring understanding to an maturing pattern but has since been hijacked to mean anything a major vendor sells. Likewise, new offerings will not only “enable SOA” but also “enable Web 2.0″.
Brandon,
I just came across this post, and although it was made a while ago, I’d like to make a response. I think you were hinting that IBM lost the PC battle because of its lack of interest and/or understanding in the consumer space.
IBM “lost” the “PC battle” by losing the OS battle. The OS and the CPU are the only two essential components in the PC that haven’t been commoditized. The other components are relatively standard, and as such, not able to compete on function. This leads to competition on cost structure and price, which is not a characteristic of an attractive market. You may argue that they allowed this to happen by opening the architecture in the first place, but remember that this open architecture is what got people creating third party hardware for the IBM platform, which meant there was a lot of stuff available for that platform, which meant that software developers wrote for IBM as a higher priority than other platforms, which lead people to buy IBM and compatible based on available complementary assets like software and hardware. IBM tried to save themselves the BIOS through copyrights, but it turns out that legal protection like that is too easy to engineer around. Since IBM didn’t control either of the non-commodity pieces, it wisely chose to cash out of that business.
I think the reason that IBM hasn’t targeted consumers today is twofold.
First, we’re set up as an integrated enterprise provider. All of our systems and infrastructure (support, etc.) is set up to serve these customers. To serve other customers, we’d have to set up duplicate systems across the board, which is in some ways the same as starting a new company. The question becomes, do we get a better return by creating a fourth leg of the business (SW, HW, Services, and consumers?) or by strengthening our core competencies through acquisitions and R&D?
Second, many of our customers, as you say, serve the consumer. If we start serving consumers, we are essentially competing with many of our customers. It doesn’t make sense to compete with people who are paying us millions of dollars, when we’re competing for business in the form of, as you say, microcharges. I think that there are some cases where we could provide microcharge-type services to enterprise, and do well there, but I think extending that logic to encompass the masses is not in IBM’s best interest. I think this second point helps answer the question I posed at the end of my first point.
Marc