IBM Hosts Content and Telecom Partners

On the eve of the Olympics, in what might be IBM Corp.'s biggest integration challenge to date, Dennie Welsh, general manager of IBM Global Services and chairman of Integrated Systems Solutions Corp., spoke with Washington Technology about the integrator's telecom partnering strategy and its new content hosting ambitions.

WT: How will content hosting become part of IBM's Global Services business model?

WELSH: We are not in the business of generating a lot of content, and this is not our desire. We want to be an enabler or a hoster of content. For instance, we have long been a supplier of technology for the Olympics, but now we'll be the integrator as well. We've had the broadest and best energies of IBM behind this. Normally this would take twice as long. This will introduce a whole new way of doing business. It will [help] government because state and federal governments will be the next largest enterprises that will need systems to accommodate large numbers of people. This will bring major cost savings.

WT: What's the next step ? a division devoted to content hosting?

WELSH: It would be a suite of basic content hosting products where you can bring your ticketing capability or your customer services capability on site, or you can do it at our site. Small customers would want to do it at ours; large customers would like us to replicate it on their site. It's a matter of cost or economies of scale. We would do that on a defined basis where we are sure we can accommodate high traffic volumes.

WT: This would be the next step after World Wide Web sites?

WELSH: Yes. It's content hosting for electronic commerce for large scalable capabilities. We first learned of the [magnitude] of these projects by hosting [a] chess champion match. We never dreamed that many people would be calling in to watch chess. We quickly configured a lot of computers to handle the tremendous load of callers. We could foresee the possibility of having 80 million hits a day from the Olympics, but we think it will be 10 million. As there is more and more hype within the two weeks, we might expect two or three hits from certain users.

WT: Will you be announcing a number of media partners?

WELSH: We are working with several right now and we've been very cautious. We have five or six that we are hosting, but our focus is to [be] a silent partner. So when a user calls a help desk and an IBMer picks up the phone, he or she says, ?ABC company.'

WT: How will IBM Global Services compete inside the telecom services market?

WELSH: In some cases we carry our own voice [network], but today we use mostly alliances to carry voice [networks] and then integrate it. We will really move and shake in the world of data. We know there are many people who are... transmitting voice over the Internet. This was one other area where we [thought] we would have our own voice capability. However, we've decided to depend on business partners for voice while we focus on data and integrate voice.

We're focused on packaging data, routing data and integration of data with multimedia. We're able to provide capabilities from our data resources while we use [other carriers'] voice capability. Over time, we see data becoming preferred because voice [will be] integrated into the data stream in various ways, [which is how] the Internet is going today. We're not out to take voice away from the carrier. We want to partner with them and resell voice-integrated solutions.

WT: At one time, didn't you want to upgrade the IBM Global Network to carry voice?

WELSH: We wanted to be a large voice player worldwide. We could have been, but we realized there was... a tremendous opportunity for data. We could have invested a lot of money in voice [but] we would have been no better at it than the voice players.

WT: So the Internet market is really what you are targeting?

WELSH: Financially, as well as technically, we think we can be a leader here.

WT: How has the relationship with your telecom partners matured?

WELSH: We began our discussions 18 months ago. We're now in the process of completing negotiations. While doing this we have become a lot smarter. There has also been deregulation in the U.S. Before, the [regional Bell operating companies] negotiated with us to do some local things. Now they want to go into other countries. We can move a lot faster than them in those areas. They can use our capabilities and our Internet backbone, and we can use them to get to the smaller city that would not be prudent for us to invest in. This is very important because while we are focused on business applications... offices are moving to the home so fast [that] a business application is now an individual application. It's very important for us to leverage these relationships into the home.

WT: Certain analysts believe Electronic Data Systems Corp. engages the customer at a higher level than IBM. They tell us EDS wants to be in the boardroom, while IBM is still speaking with the MIS department. How would you respond?

WELSH: Our No. 1 concern is to listen to the customer and that doesn't just mean the CEO, it means the end user. We want to work with the CEOs, but we want to make a strong effort to understand the end user and how they are using the network. Not understanding the user is a mistake that we made in the past, and we don't expect to make that mistake again.

Today we're approximately twice the size of EDS around the world. We're positioned with about twice the business revenue [of] EDS, and we're growing very fast. We're the largest services and data communications company in the world.

EDS was at $12.7 billion last year; we were at $20.1 billion. While that included their [General Motors] business, our number does not include our internal IBM sales. So, size is very important ? we're in 159 countries and because of that we're focusing on our global reach and rank. This is a solutions technology company. The computer is not just a computer, it's a communication interface device and it's the chip you may need to put inside a customer's product to allow it to be serviced remotely from off-site.

We're not just a company that wants to sell you a computer. Instead, we'll be asking, ?Can we put one of our chips in your appliance so you will have a smart home?' or it may be a telecommunication device that was sold by a telecommunications company.

Although you may never hear IBM's name, we have reached into that market area so we are speaking of the real integration of all these businesses on a global basis. I have not spoken to a CEO in the last year who is not excited about being a global company because they can do it relatively easily.

With our global reach we can say to [the customer,] ?We have someone in the Czech republic who can start working with you Monday morning. They can... work inside the customer environment and [share] knowledge regarding such things as real estate locations.' We can then say, ?By the way, we would like you to sign a year contract to outsource your data processing.' Our core competency is IT, but we also have business transformation [skills] and knowledge of government and banking businesses. We will never be a banker, but we are very familiar with some of the issues involved in these different countries.

Finally, our No. 1 requirement is customer satisfaction and customer loyalty. We want to be responsive.