IBM's Mills eyes software growth

IBM's Steve Mills

eWEEK: John Thompson was credited with turning the software business around at IBM and turning it into a profitable business. Would the proverbial "if it ain't broke, don't fix it" be an accurate depiction of how you're thinking about your new job?

Mills: Not exactly. John came in and did a number of things that needed to get done, and John arrived with Lou [Gerstner's] confidence, which was important. John very quickly sized up the core issues that we were dealing with and did a couple of things--the most important of which was to build a true field sales structure. This was something many of us had been lobbying for, for quite a few years, and hadn't been successful in moving the ball forward very far.

eWEEK: Is that because software was sold with the hardware?

Mills: Yes. We're still dealing with the legacy of the way software had been viewed in the company. Now we have 8,000 full-time, dedicated people that are paid on [selling] software. That's a profound change from where we had been prior to John's arrival, and I certainly would categorize that as his biggest overall contribution.

He also did a couple things to help round out the portfolio. One was to drive the Lotus [Development Corp.] acquisition, which many of us were involved in the decision-making on, but it was again Lou's confidence in John that was able to bring that one to closure, and subsequently the Tivoli [Systems Inc.] acquisition to round out the systems management portfolio, which was clearly lacking.

eWEEK: What's left to be done?

Mills: We've got to up the growth rates yet again. Beyond the direct force, which I'm looking to continue to grow, the other key thing we have to do is fill in more business partner and channel capability and add a much more robust telesales and teleweb capacity. The rate of growth that we're experiencing today is solid double digit, but it can go higher and, frankly, the challenge is going to be to increase the efficiency of our marketing activities and channel partnership relationships by doing a better job of brokering business to those partners.

eWEEK: Does this relate to some of the very high-profile business-to-business exchanges IBM is participating in with Ariba and several other partners?

Mills: It certainly relates to the kinds of partnerships we're forming with the Seibels, the i2s, the Aribas and partnerships we've formed with Web integrators. This past year we did actually more business related to non-IBM systems integration resources than around IBM Global Services. IGS is clearly our biggest systems integrator partner, but the external relationships we've formed are now driving more aggregate related revenue than the IGS relationship is.

eWEEK: IBM Software isn't exactly a household name. Obviously you're going to remain a business software company, but are you going to broaden out at all? Are consumers going to know more about IBM Software?

Mills: No. We have no plans to move to the consumer space. That's not our skill set. We're going to remain focused on essentially the middleware technologies and how to spread them into new areas. So you'll see us continuing to adapt the major brands like WebSphere, Domino, DB2 and Tivoli into new ways in which those products can be applied to different kinds of customers. We see a lot of markets out there where the skills and technologies we have can be extended.

eWEEK: What's the growth of business now and how much do you want to accelerate that growth rate?

Mills: Last year we grew at 13 percent [revenue growth] in the middleware portfolio, which makes up about 75 percent of IBM's software. The game plan we're on is not just match those numbers but over time get those numbers up higher. As I said, to do that I've got a lot of things to do, some around the direct sales force, but in particular around channel partners and relationships and teleweb and so on.

eWEEK: It doesn't sound like any eyebrow-raising radical shifts in strategy are in store.

Mills: Having filled out the portfolio over the last few years and begun to build momentum, our issues now have to do with improving on what we've already accomplished. I don't see this as a dramatic revamp because we're growing this thing at double digits. That includes a mainframe portfolio, which is a single-digit growth portfolio.

eWEEK: What holes if any are there in the portfolio? What kinds of companies might you be looking at to acquire?

Mills: Given that we're a middleware business and given the breadth of the portfolio today, the kinds of things we've been doing over the last couple years are likely to be what we continue to do, namely to look at specific point companies, companies that add some unique capability that adds to the portfolio we have. Those kinds of purchases are the things we'll be looking at over time and of course we'll continue to grow partnerships, since in many cases buying these companies doesn't make sense from some business aspect.

eWEEK: What are we going to see in the software company that's different under Steve Mills than it was under John M. Thompson?

Mills: Clearly you're going to see things that are predominantly the same. You'll continue to see a widening of the portfolio as I drive the team to leverage the middleware technologies to address more and more market segments. I've always been big on this incremental innovation on top of the core middleware. I think you'll see for some of the product areas speed up in rate and pace of delivery. That's always been a key issue of mine.