Big Blue's big plan

Having succeeded in taking a huge chunk of its business on-line, IBM is moving ahead with partner strategy to tap into the lucrative market of e-enablement.
Written by Laura Lorek, Contributor

Big Blue plans an even bigger push on the Web.

IBM's online operations already handle most of the company's product offerings, including Aptiva consumer PCs, some ThinkPad notebook computers, printers, monitors, servers, storage devices, workstations and other products such as software for building electronic commerce sites on the Web.

IBM is second only to Intel on the Interactive 500 and is currently doing some $17 billion worth of business over the Web.

But the company doesn't just want to sell its own products online; it wants to help others realize the success it's had online.

IBM in March formed a strategic alliance with business-to-business firms Ariba and i2 Technologies to provide a wide range of services to companies trying to take their business online. Ariba and i2 provide specialized software to set up online exchanges that many hope will drastically decrease the cost of doing business. IBM also took undisclosed stakes in both companies.

Rather than spend money to be come an exchange facilitator, IBM chose to partner companies that specialize in creating exchanges, says Ed Kilroy, the general manager of electronic commerce for IBM's software solutions business.

It's a lucrative market to tap into. Research companies have estimated the B2B market will reach between $2.7 trillion and $7.3 trillion by 2004, up from about $131 billion in 1999.

IBM's alliance with Ariba and i2 allows the companies to quickly establish marketplaces and manage their supply chain from the time the order is placed to its fulfillment. The companies also provide payment and auction services.

IBM is also making a bigger play for the small-business customer. The company offers a wide range of e-commerce technologies aimed at small businesses from Web authoring and graphic design software to services, Kilroy says. IBM's strategy is to offer entrepreneurs and small businesses everything they need to quickly create a presence on the Internet and engage in e-commerce.

And IBM could use a boost. The company has noticed a slowdown this year in overall business. For the nine months ended Sept. 30, IBM's total revenue fell 1 percent to $62.78 billion. The company's net income applicable to common stock decreased 4 percent to $5.41 billion. Revenue reflected reduced hardware and enterprise investment revenue, and net income reflected reduced gross margins and higher expenses.

But IBM's increasing push into electronic business looks promising for the company's future growth. Hardware and software are big sellers over the Web. And today, hardware represents 42 percent of IBM's overall sales, while software comprises nearly 15 percent.

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