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Subject: Re: MUST READING: Big Blue's strategy: Blow 'em all off the road
Date: Wed Sep 18 00:29:52 1996
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In message <51ko5e$3kau@news-s01.ny.us.ibm.net> - baxte17@ibm.net      [Kevin J Baxter]16 Sep 1996 23:34:06 GMT writes:

Source: http://www.news.com
   Business Week 
   
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                            THE NEW I-WAY HOG: IBM
                                       
   
   
  Big Blue's strategy: Blow 'em all off the road
  
   
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    Business Week: September 16, 1996
    Department: Information Processing: ELECTRONIC COMMERCE
    
   For IBM, running the computer systems at the Olympics was supposed to
   be a great opportunity to showcase the computer giant's budding
   Internet skills. IBM's Atlanta performance did generate headlines
   around the world--only they were for a glitch-ridden system that
   couldn't get scores or accurate statistics to news organizations on
   time.
   
   That is just what IBM didn't need. While the browser battle between
   Netscape Communications Corp. and Microsoft Corp. was grabbing all the
   headlines, IBM had spent a year quietly working on products and
   strategies to make good on Chairman Louis V. Gerstner Jr.'s promise of
   making the company a leader in network computing. ``People view the
   Internet as a two-horse race between Netscape and Microsoft,'' says
   John McCarthy, an analyst with market researcher Forrester Research
   Inc. The Olympics were supposed to showcase IBM's growing Web
   abilities and help it elbow into that two-way race.
   
   Ironically, despite the headlines, the Olympic system may already be
   helping IBM prove its Web bona fides. The scoring system was just one
   of 10 projects that IBM was responsible for as the technology
   coordinator for the Olympics. All the others worked with hardly a
   hitch.
   
   IBM's Internet setup in Atlanta, in fact, was one of the most
   ambitious Web sites ever built. On each of the 17 days of the
   Olympics, an average of 10.6 million people stopped by, and on Aug. 1,
   17 million sports fans logged in--twice the number of subscribers to
   America Online, CompuServe, and Prodigy Services combined. IBM
   computers served up the equivalent of 2 million printed pages of
   scores and stats per day. Meanwhile, 47 digital cameras scattered
   around the games captured nearly 10 million images and fed them over
   the Net at a rate of 21,000 per hour. Another IBM system sold 100,000
   tickets and souvenirs online, raising more than $5 million for the
   Olympics.
   
   
   WALL STREET BRIEFING. These systems impressed the pros. ``It was very
   leading-edge and pretty courageous,'' says Francis J. Erbrick, chief
   information officer for United Parcel Service Inc. ``They proved that
   they had the capacity to pull it off.'' Even Eric E. Schmidt, chief
   technology officer of rival Sun Microsystems Inc., says he was
   impressed: ``The Web stuff was well done.''
   
   The next event: a series of Web product introductions beginning Sept.
   4 and continuing all fall. First up will be a scheme for electronic
   commerce, including setups for customers in such markets as energy,
   retailing, and banking. On Sept. 6, IBM brass will brief Wall Street
   on their cyberspace progress, including details about the massive work
   under way to employ Sun's popular Java software (page 100). The
   company will also roll out software for building Web sites and online
   catalogs and plans to market an under-$700 ``Web PC'' for corporate
   customers. And on Sept. 9, IBM is expected to announce its plan to
   fund--along with 18 banks--a home-banking system.
   
   Getting all these projects off the ground is part of Gerstner's
   strategy for the $72 billion giant to catch the networking wave and
   boost growth, which at an estimated 7% in 1996 still lags the overall
   computer industry. The worldwide information-technology
   business--including hardware, software, and services--will grow 10% a
   year, to $1.238 trillion, by the year 2000, according to IBM. About
   half of that growth--$404 billion, IBM reckons--will come from network
   computing products and services.
   
   To grab its share of that growth, the company is making big
   investments. A new division is creating Internet products, and a
   quarter of IBM's $5.5 billion research and development budget is now
   earmarked for network-related projects. IBM has also funded new
   business units aimed at helping companies analyze mainframe databases
   over the Internet and helping media companies put content onto the
   Web. Meanwhile, IBM's Lotus Development Corp. subsidiary has been
   ordered to reorient its Notes groupware for the Net.
   
   In addition, IBM has funded dozens of internal Java-related projects
   and is backing a venture fund for Java startups as well as a new
   company started by Netscape called Navio Communications Inc. that will
   develop Internet software for Net PCs and consumer products. Says
   Schmidt: ``There's no question these guys are moving faster than they
   ever have in the past.''
   
   Much of this effort is aimed at exploiting IBM's unique edge over
   other Web wannabes: its lock on the mainframes that still hold the
   most vital information for the world's biggest companies. Merrill
   Lynch & Co. analyst Bruce D. Smith figures that 70% of the world's
   corporate data is stored in IBM computers. ``Not everything is going
   to migrate off the mainframe,'' says Smith. And to make sure customers
   have the horsepower, on Sept. 10, IBM will unveil a new generation of
   powerful mainframes.
   
   IBM's plan is to use the Web to unlock that mainframe data for new
   electronic commerce applications as well as intranets, internal
   corporate nets that use the Web format. ``The marriage of Internet
   technologies with the classic information technology world is where
   IBM could have huge leadership,'' says Irving Wladawsky-Berger, chief
   Internet strategist and general manager of IBM's Somers (N.Y.)
   Internet Div.
   
   Take what IBM has done at American Airlines Inc. The only way it could
   sell tickets online was to let customers reach into the SABRE
   mainframe-based reservation system. IBM software made that possible,
   says John Samuel, a managing director for American. Because the setup
   is cheaper to run than taking reservations over the phone, the airline
   is passing savings to online customers: Each Wednesday it posts fare
   specials for the upcoming weekend--only available online. So far,
   170,000 people have signed up for the service. ``This is an economic
   way of distributing our product,'' says Samuel.
   
   SCOREKEEPING. IBM's homegrown Internet software efforts include
   something called Web Object Manager (WOM). Developed by IBM
   researchers, WOM is a key technical underpinning for electronic
   commerce because it can keep track of hundreds of tasks or
   transactions. At the Olympics, for example, WOM was used to create Web
   pages that linked to other systems where scores and results were
   constantly updated. That way, as new scores came in, the Web page
   didn't need to be updated, only the other computers with the data.
   
   To build a market for WOM and other IBM technology, the company is
   following the lead of Web upstarts. IBM will let researchers download
   new software technology free from a special alphaWorks Web site--the
   way Netscape launched its popular browser. First offerings will
   include some WOM technology as well as a program called Bamba for
   delivering audio over the Net. ``We have this whole new sense of
   anything we invest in: You flood the market in any way you can because
   everything moves so fast,'' says William A. Etherington, general
   manager of IBM's industry-specific sales units.
   
   By far, IBM's biggest bet is on electronic commerce. Efforts range
   from a virtual mall to an online procurement system that is being
   tested at Eastman Kodak Co. and NationsBank Corp. Meanwhile,
   developers are helping craft electronic commerce setups for specific
   industries. There's a system being tested that links car dealerships
   to banks to provide near-instant loan processing. In the energy field,
   IBM is building a network to link oil companies and allow them to
   share data.
   
   NEW WALLET. This fall, IBM will cut the ribbon on World Avenue, its
   virtual mall. Merchants in the mall will be able to list their
   merchandise in a single database. Type in your age and hobbies, and
   the system will zero in on the appropriate wares available in the
   mall, regardless of retailer. ``Adding some convenient factors like
   that will help this take off,'' says Les Duncan, vice-president of
   Express, a unit of The Limited Inc. ``Just putting a catalog online
   isn't very exciting.'' Based on early tests, Express figures it will
   get enough traffic to break even in six months. IBM charges $30,000 to
   set up shop and $2,500-a-month ``rent,'' and collects a 5% fee on all
   transactions. So far, only three retailers have signed on, but IBM
   says it's confident it will have 20 companies before the mall goes
   live in October.
   
   Another IBM ingredient for E-commerce is software to protect against
   online fraud and theft. How? With an ``electronic wallet'' using the
   Secure Electronic Transaction (SET) standard and so-called certificate
   of authority software to verify the identity of participants in a
   transaction. The wallet--a piece of software--will be available
   through the Internet or from banks offering Visa and MasterCard credit
   cards. At online retailers that accept the electronic wallet,
   consumers will be able to shop and have payments automatically put on
   their credit cards.
   
   How quickly will any of these initiatives pay off--and help IBM
   achieve Gerstner's growth goals? ``You don't get rich here in a year
   or two. Our thinking allows for a five-year payback on investment,''
   says Mark N. Greene, an IBM vice-president. By then, IBM may stand for
   Internet Business Machines.
   
   By Ira Sager in Somers, N.Y., with Nicole Harris in Atlanta
   
   
   
   
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   Copyright 1996 The McGraw-Hill Companies. All rights reserved.
   
   This page was updated by the Webmaster on September 9, 1996
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"At the present rate of technological development, even the
future is obsolete."
                     Bob Levy
                     Enterprise Systems Journal
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