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IBM's new arm reaches for ISPs

IBM is expanding its partner program to include the ISPs it considers crucial to helping the firm to expand its e-business push to small and midsized businesses.

IBM is expanding its partner program to include the Internet service providers it considers crucial to helping the firm to expand its e-business push to small and midsized businesses.

The new IBM ISP Industry Unit, an arm of IBM's Global Industries group, will sell IBM hardware, software, and computer services to ISPs, who in turn offer customers services including Web access, email and messaging, and e-commerce applications.

In a press conference held this morning, IBM detailed its plans to aggressively market products and services on all of their platforms to ISPs, which are expected to generate revenue of $37 billion in the United States by 2003, according to Framingham, Massachusetts-based industry research firm International Data Corporation.

Jim Corgel, general manager of the new unit, said it will focus on meeting the increasingly complex needs of ISPs--who must now cater to both the average consumer looking to get online or build a Web site, as well as the business-to-business customer demanding e-commerce applications.

"As ISPs move up this value chain there becomes a logical shift in the marketplace," Corgel said. As that shift occurs, ISPs will benefit from partnering with IBM because the company has the staff and expertise that ISPs may lack, supports open platforms--including the Unix-like Linux operating system and the Apache freely-distributed Web server--and is developing the latest e-commerce technology, the company said.

In recent months IBM has moved to build momentum for its Web-based application development, which includes widespread Java support as well as a new line of Web application server software. IBM recently announced broad support for Linux, and said the company will be developing applications for ISPs to run on Linux.

Additionally, IBM said it will provide ISPs with Unix and Windows NT-based servers such as the RS/6000 and Netfinity.

However, the market IBM is targeting, which includes about 4,000 smaller ISPs with 10,000 or fewer customers, may not buy what Big Blue is offering, said George Peabody, analyst at Boston-based Aberdeen Group.

"Those ISPs don't even think about IBM," he said. "The small ISP is so busy keeping up with [getting people connected] that that whole idea of providing e-commerce solutions isn't even on their screen."

Besides, he said, many smaller players are already turning to other vendors.

"A lot of them go to what runs on Sun or what runs on NT," he said. "Sun is far more identified with the Internet and Unix."

However IBM is smart to start targeting new business from ISPs and their customers the same way the firm would go after the manufacturing or finance industry, said Sam Albert, an independent IT analyst based in Scarsdale, New York.

"How do you get to a million customers who are too small and don't think of IBM as the vendor of choice?" he said. "One way is through business partners. The other is through ISPs."

Matthew Kovar, analyst at Boston-based Yankee Group, said IBM's strategy is similar to what Sun Microsystems and Hewlett-Packard are trying to do "to create bundles of solutions that go beyond the Web page." Those bundles include merchant server applications, back-end systems integration, and inventory control.

"IBM is meeting an insatiable demand from the ISPs that want this e-commerce solution set," he said.

ISPs will be able to sign up for the business partners program on the IBM Web site starting May 3.

The company has structured the program to include three levels of partnership, including "member," "advanced," and "premium," ratings, based on certification, skills, and revenues generated for IBM. IBM currently has 45,000 business partners who already resell the companies hardware, software, and services.

About 18,000 IBM partners are with its Lotus Development subsidiary.

Reuters contributed to this report.