IBM looks to cash in on software-as-a-service

Big Blue extends partner program to encourage app providers to rely on IBM for hosting, infrastructure technology.

IBM announced on Thursday new initiatives designed to capitalize on the burgeoning hosted application business.

The company has assembled financial incentives and technical resources to entice third-party software companies to choose IBM as their hosting company.

IBM's application hosting business, part of its Global Services division, crossed $1 billion mark in revenue in 2003 and is growing, according to company executives.

Over the past two years, IBM has stepped up efforts to sign on independent software providers (ISVs) that write packaged applications. IBM benefits by selling infrastructure software, hardware or related services to these partners.

The growing interest in hosted applications, or software as a service, among corporate customers has prompted IBM to focus its ISV program on hosting, said Buell Duncan, IBM's general manager of ISV and developer relations.

"There is a very high growth of new companies, which are backed by venture capitalists (and) are starting out as software-as-a-service companies," Duncan said. "Also, there are vendors like SAP that offered a traditional license that are moving to hosted offerings."

IBM will give system integrator and reseller partners a 10 percent referral fee on transactions that involve hosted applications from IBM's online directory of application partners, IBM executives said.

Big Blue will also make technical architects available to software companies for design expertise and will host technical workshops.

The tech giant also said it will make it easier for software-as-a-service companies to work with IBM sales people to close deals, according to IBM executives. IBM will extend these partner benefits to application providers that have chosen open-source software instead of IBM's own middleware line, Duncan said.

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