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IBM deal looks to ensure service with a smile

The computing giant announces an agreement with a software maker that it says will better help companies serve their customers via the Web.

IBM announced today an agreement with a software maker that it says will better help companies serve their customers via the Web.

As previously reported, Big Blue has formed a partnership with Kana Communications to integrate Kana's software with IBM's hardware, middleware and services and to jointly market and sell the combined products.

News of the deal sent Kana shares on a positive ride. In early afternoon trading, shares of the company advanced $5.25, or about 16 percent, to $37.75. Kana, which impressed the Street in its initial public offering last September, has hit a 52-week high of $175.50 and a low of $22.78.

Kana, a customer relationship management (CRM) software maker, offers applications that help companies manage their overwhelming amounts of email and assist with customer service.

With its recent $4.2 billion acquisition of Silknet Software, Kana has bolstered its products to include software that manages customer service requests via the Web, wireless-based applications, email, phone and fax; it also helps manage online transactions between companies and their partners.

"This (deal) helps validate Kana's importance in the marketplace as a significant player," said AMR Research analyst Peggy Menconi. "It (also) gives Kana access to IBM's vast customer base."

Redwood City, Calif.-based Kana competes against rivals such as Epiphany and eGain Communications in the growing market for online CRM software. CRM applications manage and automate a company's sales force, marketing needs and customer relationships.

For IBM, the deal marks one of several partnerships it has formed to capture more business in the lucrative CRM market. Other companies, including Oracle, Cisco Systems and Lucent Technologies, have also made efforts to capitalize on the market by either sealing partnerships with CRM software makers or developing products in-house.

IBM recently teamed with to provide small businesses with hardware, computer support and software for Web-based operations. Salesforce, founded by ex-Oracle executive Marc Benioff, offers services that allow salespeople to track leads and account information online.

In November of last year, IBM expanded its partnership with market leader Siebel Systems to jointly sell, market and support Siebel's suite of front-office software.

"We view the total CRM market, including applications, software and services, to be about $62 billion this year," said Stephanie Hahn, general manager of IBM's CRM unit. "There's clearly a very large opportunity for IBM to grow revenues in this fast-growing market."

Hahn said the company intends to form similar alliances with other CRM players in the near future.

Under the IBM-Kana agreement, IBM Global Services, which is Big Blue's consulting arm, has formed an international team within its CRM practice dedicated to supporting the integration and training for Kana's software.

Kana software will support a range of IBM products including its Netfinity server, DB2 Universal Database, MQ series messaging middleware, WebSphere e-commerce suite and the WebSphere application server. The two companies said they will also continue to work on additional joint support for hardware and middleware such as IBM's mail analyzer, computer telephony integration products and complete support of the AS/400e servers.

Joint products from IBM and Kana are slated to become available by the end of the year.