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Big Blue sees green

IBM has launched a $200 million ad campaign for "e-business"--the package of e-commerce efforts in which the company is squarely invested.

5 min read
Big Blue is looking for lots of green in Internet commerce.

IBM (IBM) is wrapping its Net-oriented offerings into a pretty package, which it calls "e-business," a term that is becoming the central theme of nearly all of the company's marketing.

"Electronic commerce has to be part of somebody's business," noted David Marshak, vice president at Patricia Seybold Group. "That means integration with existing systems."

Marshak's take is pretty close to IBM's own definition of e-business, a concept so central to Big Blue that it is backing it with its biggest ad campaign ever--more than $200 million over the next year--according to Advertising Age.

That ad campaign also pulls in IBM subsidiary Lotus, which markets its Domino server both as an e-commerce merchant server and as a collaboration tool.

IBM's presence in the legacy computing systems of major corporations around the world is one of its great strengths in e-commerce, said Ted Julian of International Data Corporation.

"When talking about legacy system integration, you pretty quickly get down to IBM, and that's a significant asset for them," Julian said. "Even from a small user's perspective, IBM may come into play in terms of integrating your supply chain. You may not have IBM, but probably someone in your supply chain would."

That gets IBM on plenty of potential vendor lists, for customers big and small. As Big Blue's current TV ad campaign illustrates, the company is, for once, not shrugging off the small-business market.

Today IBM announced that its HomePage Creator service, which lets companies create and host a catalog-based Web site that can handle sales, is available for as little as $30 per month. Additional services expected early next year will raise the price range to $250 per month--still a competitive price.

Even IBM's hardware guys get into the e-business racket.

"We're trying to position the AS/400 as an important player in e-business," Bill Zeitler, general manager of IBM's mid-range division, told Reuters in August when new models were unveiled. Similarly, IBM workstations are touted as e-business machines.

IBM has astutely played off its hosting of some of the busiest sites on the Web: last year's Summer Olympic Games site, the Deep Blue chess match site, the U.S. Open tennis tournament site, and commerce sites for firms such as discount broker Charles Schwab.

"The challenge of IBM is to take that knowledge and be able to package that down to smaller companies," said Seybold analyst Marshak. Such mid-sized customers need software tools that build on IBM's experience with megasites, but also can adapt to a specific industry's need.

In fact, IBM is commercializing its Internet and e-commerce technologies along those lines. Its Internet division incubates technologies out of the research lab and begins marketing them commercially. But eventually, e-commerce offerings get handed off to a marketing unit dedicated to a specific industry--retail and distribution or banking and financial services, for example--or to a specific customer set, such as small business.

This week's announcement that IBM Global Services will offer consulting and software to get companies into e-commerce is a good case in point.

The only new capability in the announcement was a new Web version of IBM's electronic data interchange (EDI) services. But other offerings--e-commerce for retailers and banks, intranet and extranet services, e-business consulting to link legacy systems to the Net--get new muscle from IBM Global Services, which generates nearly a third of IBM's revenue.

"IBM is doing the best thing possible for its future fortunes in the Internet space--wrapping up all complementary Internet commerce products and services into one package," said Scott Smith, e-commerce analyst at Current Analysis.

"While I may have arguments with individual components, the idea they can put it in one big paper bag and take your business from non e-commerce to e-commerce all under one roof is very appealing for large companies," Smith added.

IBM's efforts in banking and finance, a major market for Big Blue, have been along similar lines.

It has been a major player behind the SET (Secure Electronic Transactions) protocol, created by IBM partner Mastercard and Visa to handle credit card sales securely over the Net. IBM is shipping a full complement of software to implement SET, including consumer software wallets for consumers, "cash register" software for merchants, and gateway software for banks and credit card processors.

Today IBM added electronic checks to its payment offerings, providing an electronic check server to BankBoston for a pilot project with the Department of Defense. (See related story)

In the payment area, Big Blue works closely with big banks. Integrion is IBM's joint venture with 18 major North American banks, which account for 75 percent of U.S. retail accounts, to create bank software to support home banking. Today Integrion and Intuit (INTU), the market leader in personal finance software, agreed to work together so Integrion banks can offer Intuit's Quicken software to customers for home banking.

But IBM is hardly alone in chasing the allure of Internet commerce. In addition to a host of e-commerce players with relatively narrow offerings--Netscape Communications, Open Market, CyberCash, USWeb, and the like--the big IT players are circling, too.

Hewlett-Packard, which swallowed payments firm VeriFone this year, is the likeliest challenger, particularly given HP's partnership with AT&T. In addition, outsourcing and consulting firms such as EDS and Andersen Consulting are lurking, too.

And not all IBM forays into e-commerce have succeeded. In June, it pulled the plug on World Avenue, an online mall that chairman Lou Gerstner had touted publicly. InfoSage, an IBM effort to sell digital content for its customers, likewise bit the dust in December because publishers thought Big Blue was competing with them.

But IBM learned from its InfoSage flop. After retooling its secure container technology for sending digital content over the Net, IBM reintroduced it recently as a product called CryptoLopes Live, which publishers can use to sell their own content.

The myriad IBM e-commerce efforts give the company a strategic advantage as a safe, one-stop solution for nervous CEOs eager to jump into e-commerce--but IDC's Julian noted that broad offerings have a downside, too.

"Do IBM point products stand on their own merits?" Julian asked. "Some customers outside IBM's core market may make point product decisions, say buy a merchant server and then get iCat to set up a catalog store. That's not necessarily a huge problem for IBM, but as people stitch together their own solutions, does IBM get shut out?"

If so, it's a relatively small competitive weakness, Seybold analyst Marshak suggested.

"Who else could provide the vast set of services: products, services, hostings. I don't think there's anybody else out there," he said. "Whether that turns into an advantage or a disadvantage is unclear. But I am very impressed with them over the last year."