by Allan Krans, Senior Analyst
Software’s rising profile within IBM will continue as the leadership torch passes from Palmisano to Rometty
Over the course of Sam Palmisano’s nearly 10-year tenure at the helm of IBM, the company’s software business grew to be the most profitable segment as a percentage of revenue and a key enabler of IBM’s solutions approach to delivering technology to meet business needs. With Virginia Rometty’s appointment to the position of CEO, IBM is emphasizing the importance of packaging hardware, software and services businesses to provide customers end-to-end business solutions, targeting sales and marketing departments rather than IT.
This initiative of driving business results rather than powering IT departments continues to be reflected in IBM Software’s earnings results. Despite lower-than-anticipated corporate growth during 4Q11, IBM Software led all of IBM’s businesses in terms of year-to-year revenue growth. While IBM’s corporate revenue grew only 2% year-to-year, IBM Software revenue grew 8.7% to 7.6 billion in 4Q11, as all lines of business, excluding Lotus, recorded positive growth during the quarter. Leading growth once again for IBM was the WebSphere division, improving 21% year-to-year, as Smarter Commerce delivers value beyond IT departments. As IBM continues to pursue a business-solutions-selling approach, the importance of broad software capabilities in analytics and information management will grow.
IBM is marrying multiple initiatives to cross-pollinate growth
Rometty’s experience in leading IBM’s service business emphasizes the importance of not only individual products but the sum of IBM’s broad solutions working together. The goal of delivering integrated, end-to-end business solutions is not only a corporate goal of IBM’s but an initiative within IBM’s software business. Extending the applicability of its software business will help power both corporate and software initiatives in emerging markets, including cloud, mobility and Smarter Planet.
With the acquisition of DemandTec in 4Q11, IBM tied together two significant initiatives in Smarter Commerce and cloud. After investing to develop the cloud and Smarter Commerce initiatives separately, the acquisition of DemandTec merges the two, delivering greater value across Smarter Commerce and extending the accessibility through cloud delivery. In addition to cloud delivery, IBM is extending the availability of Smarter Commerce by embracing mobile applications as a vehicle to drive end-user adoption.
Acquisitions underlie IBM Software’s broader analytics initiatives
Following Rometty’s pledge to spend $20 billion in acquisitions by 2015, IBM closed 2012 with a series of software acquisitions. Acquisitions deliver baseline functionality and established business models to power IBM’s analytics portfolio. The acquisition of Netezza continues to deliver results for IBM, as the business grew 70% year-to-year during the quarter. Netezza’s balance of data management and business analytics, delivered through a preintegrated appliance is driving positive results across IBM’s customer base. The Netezza acquisition validates the importance of business analytics, as the solution won over 80% of proof-of-concept tests.
To continue building out its analytics capabilities, specifically in the Smarter Commerce portfolio, IBM wrapped up 2012 with a series of acquisitions in fourth quarter, including Green Hat, DemandTec, Curam Software and Emptoris. The acquisitions of DemandTec and Emptoris improve IBM’s Smarter Commerce portfolio, with DemandTec’s cloud-based, consumer buying behavior analytics complementing cloud delivery of Smarter Commerce portfolio while Emptoris’ supply chain management adds capabilities to the portfolio. Curam Software complements IBM’s Smarter Cities Technology Center in Dublin by providing insight and software solutions for social programs, including health & human services, workforce services and social security organizations.
Please feel free to use this content or call/email Allan Krans (603-929-1166) for additional commentary.
