IBM Launches New Internet Business

ARMONK, N.Y. -- IBM Corp. is mustering all the strength of its $20 billion integration services unit to catapult the company into the center of the booming Internet marketplace.

Content hosting, a complex mix of entertainment content and real-time connectivity, would be IBM's greatest foray yet into the Internet marketplace. The strategy will likely help the company steal some thunder from the market's louder developer competitors such as Microsoft Corp. of Redmond, Wash., and Netscape Communications Corp. of Mountain View, Calif.

"The thing that frustrates me more than anything these days is that people still look at us like we're a hardware developer, and yet our service organization has more than $20 billion in annual revenue," said Welsh, who expects the opportunities of content hosting to add handsomely to the integrator's revenue stream.

Next month, the world will get to see just what IBM's content hosting capabilities are about when the company unveils a large-scale integration project for the 1996 Olympics in Atlanta.

From IBM's point of view, it doesn't mean creating a World Wide Web page or a chat room, but integrating electronic commerce inside a real-time environment.

The Olympic project includes selling 12 million to 13 million tickets over the Internet, showing game information and results in real-time, and providing background on athletes and sports.

"It will be the largest content hosting of anything that has been imagined," said Welsh, who expects between 10 million and 30 million Internet users to dial into the service.

"Internet doesn't mean anything until it's put together with a solution," said Allie Young, an analyst with Dataquest Corp. "This project is pulling together all the pieces and showcasing it to a global audience. It's a phenomenal feat for a systems integrator."

Welsh concurred. "If we can accomplish this -- and we certainly think we can, we are testing the heck out of it -- then this will become a major business that no one else will have anything close to," said Welsh, who is equally excited by IBM's announcement last week that new software would make its Lotus groupware product Internet-compatible. More Notes were sold between April and June of 1996 than at any other time in the product's six-year history, a fact IBM attributes to Welsh's burgeoning service organization.

Asked whether the integrator had seen its Notes services group grow, Welsh responded, "It's like sending a rocket off at Cape Canaveral. We initially set our target at several hundred people and now it's up near a thousand." Welsh said that adding greater Internet compatibility to the groupware would only multiply the popularity of Notes and Notes services.

But Notes Internet enhancements are only part of a larger, across-the-board IBM product standards overhaul.

"This was a very conscious effort which took a fair amount of re-engineering," said Welsh, noting it has so far only been implemented for the first part of 1996. "If we had changed the Lotus product only, we would not be successful," he added.

Companies that don't take such measures, Welsh said, are likely to go out of business. "Clearly, all our software at IBM we want to make Internet- and intranet-capable. I think everyone that does not interface with that [Internet protocol] environment is not going to be there long term."

Other giants from Electronic Data Systems Corp., Plano, Texas, and MCI Communications Corp., Washington, D.C., are also making Internet compatibility a business priority.

Notes' new compatibility is already receiving accolades from different industry players. Globalink, Fairfax, Va., which creates international translation software for the Web, is using the newly enhanced Notes software to register customers.

While registration would take 60 days through mail, it takes a few minutes over a Web site. In addition, registering over the Web gives Globalink a database of customers. "Basically the programmability and Internet capabilities of Notes made it the ideal solution for us," said Brian Garr, director of information systems at Globalink.

Notes is marketed to almost every niche business. Financial companies, such as Banc One Financial Card Services, Columbus, Ohio, are using Notes to let customers search for information over the Web. "Traditionally, we managed a very paper-, time- and resource-intensive environment," said Bill Sheley, Banc One Financial Card Services vice president. "It integrates us with our customers for an exceptionally low investment -- a PC, modem and Web browser. And it provides the high level of security we need."

That's only the beginning. Over the next year, IBM plans to roll out a succession of Internet products including Web servers, clients and other technologies that use Notes. Welsh said he agrees with the idea that the Internet will eventually replace client/server.

IBM's whole Internet strategy, especially with Notes, is a departure from its previous plans. The blueprint changed about a year ago, said Welsh, when IBM decided it needed alliances in telecom and Internet business rather than doing everything itself.

In many cases, such as with some of the large telcos, IBM is a silent partner. In the past year, telecommunications has jumped from being among IBM's top 10 customer segments to one of the top four.

"We are doing alliances where we focus on the logical and let our partners focus on the physical network," said Welsh. Right now, IBM is still providing much of the physical capabilities -- lines and routers and such -- to telco partners for Internet connection. Welsh said once the phone companies are ready to take that part over, IBM will focus only on the "logical," -- the networking part.