IBM Corp has overhauled its Websphere pricing structure as it dresses up the middleware family to appeal to the as yet untapped medium-sized business market.
The IT giant recently announced a mid-market version of WebSphere Express family of Web application servers and associated e-business middleware. In a teleconference call with analysts and press last week, Rich Cohen, director of WebSphere Midrange & Industry Marketing for IBM Software Group, detailed IBM’s go-to-mid-market strategies for its WebSphere Express family and elaborated on a new pricing strategy designed to tempt small-medium-sized enterprises (SMEs).
IBM defines mid-market organizations as having between 100 and 1000 employees, and generating between $50m to $100m of revenues. There are around 400,000 of these types of organizations around the world, representing a $12bn opportunity for our e-business middleware software, said Cohen, pointing to internal IBM market research. This is a strategic market that IBM wants to succeed in with its WebSphere brand, he added. IBM hopes to match the success it has had with WebSphere in the large enterprise in the mid-market. But Cohen also acknowledges the unique requirements of the latter market. Mid-market organizations want to buy solutions not technology; while there is increased pressure to implement e-business systems, these companies are approaching the Internet very cautiously, he said. Cohen also highlighted the need to start small and grow incrementally, demonstrate quick ROI, and provide robust security as other critical requirements for mid-market businesses.
The WebSphere Express family comprises of four main product offerings: WebSphere Application Server Express, a low-footprint, out-of-the-box server that has an integrated runtime and development environment; WebSphere Express and WebSphere Portal Express Plus, the core portal framework (the Plus version adds collaboration capabilities); and WebSphere Business Connection Express, which leverages Web services technology to connect to partner systems. Users can download Web services for key industry processes; today IBM focuses on two sectors, but expects to add around five more in 2003.
Cohen also stressed the importance of local partners as a key route to market for the WebSphere Express family. An IBM study of worldwide buyer behavior shows that 65% of buyers buy solutions and middleware from partners; this year the figure is even higher – around 90%, said Cohen. He unveiled a special Express Partners Pack service bundle aimed at ISVs, systems integrators and solutions providers for $500 – which is normally valued at over $10,000.
However, Cohen also stressed that IBM would be careful to draw explicit boundaries between its e-business platform and its partner solutions. We are aware that many solutions partners may express concern over being marginalized as more and more platform providers move up the food chain, and deliver more and more of the value that their own applications deliver, said Cohen. But IBM does not intend to play in the applications space; rather we will continue to provide a secure platform to power our partners’ solutions and enhance their value net. IBM claims to have over 100 development partners and has set-up numerous development panels to define requirements for the WebSphere Express platform. Cohen also said that beta programs ensured that development stayed focused on key customer requirements.
IBM’s pricing strategy holds the key for widespread adoption. Cohen detailed a flexible pricing structure that would make WebSphere Express affordable to businesses of all sizes. Our pricing structure matches the needs of our partners; many of who price their solutions on a per-use and/or per-processor basis, Cohen said. This makes it easy to include WebSphere Express into their solution offerings, and allows organizations to grow incrementally by paying for what they need, when they need it, he added.
All the WebSphere components are priced separately – based on per-user of unlimited user options. For example, WebSphere Application Server starts at $25 per user. WebSphere Express is $77 per user and WebSphere Express Plus, which adds collaboration capabilities, starts at $122 per user. The WebSphere Business Connection Express component is priced differently – based on partner connections ($5,000 for up to 10 connections per server). The price comparison between WebSphere Express and Microsoft is wide; with IBM claiming that an inventory management application, supporting 60 defined users and allowing an unknown number of users with purchasing access over the Internet would cost $2,000 with WebSphere Express – compared to $5,800 for a Microsoft solution (this scenario assumes that the operating system is bought separately).
WebSphere currently runs on Windows 2000; but IBM will add support for Linux on Intel and iSeries in 2003. IBM’s iSeries is an especially important market for WebSphere Express; of the 490,000 systems worldwide (around 250,000 customers) that have deployed iSeries worldwide, around 90% of these are mid-market organizations.