Middleware Inc.Middleware Inc.

IBM's investment in middleware is paying off in the form of deals such as a $157 million, seven-year contract to revamp the IT infrastructure at Fireman's Fund Insurance Co. As part of the arrangement, IBM is building a Web-services-based system that will let the company more easily exchange information with its independent sales agents. "Our existing infrastructure wasn't suited to supporting our effort to become a more customer-focused organization," says CIO Fred Matteson, who wants agents to be able to log on to a portal to draw data directly from Fireman's Fund's business systems. That will let them and other partners more quickly respond to customer needs, such as billing questions, as well as generate quotes. "Adjusters, underwriters, and agents will all be able to access the same system based on their needs," Matteson says.

IBM's Business Consulting and Global Services organizations are key channels through which the company will drive software sales, so, not surprisingly, Mills coordinates closely with his counterparts in those groups. That includes identifying the major applications and standards pertinent to an industry and building APIs to support them into the middleware. It's an approach that bore fruit with Fireman's Fund. IBM's business-consulting gurus mapped out an architecture specifically designed for the insurance industry that's based on WebSphere. BEA Systems Inc. "will happily come and sell you WebLogic, or Microsoft will sell you .Net, but what we need is the connection of the technology to our business problems," Matteson says.

Analysts caution, though, that not all of IBM's customers are ready to undertake services-oriented architectures, having just gone through major tech upgrades in the late 1990s. IT systems "weren't built for SOAs and Web services, but they're running" major business applications, Gartner analyst Correia says. IBM needs to provide an upgrade path if it wants customers to move from its previous integration technologies to its latest offerings. "How do I get to [the newer] WebSphere Business Integration without tearing out all my code?" Correia asks.

MarineMax Inc., a recreational boat dealer, is among those eager to move its infrastructure forward. It purchased WebSphere Commerce Express to connect to Brunswick Corp., its biggest supplier. Now MarineMax is contemplating a switch from Microsoft's Windows Server 2003 to Linux with the goal of using IBM middleware to fulfill many of its computing needs. "At the operating-system level, we may be better off having a real light footprint," says Brett McGill, VP for IT at the $700 million-a-year company. The goal is to use a services-oriented architecture to automate processes that integrate MarineMax with suppliers, helping improve customer service while keeping inventory low.

A big part of IBM's strategy to develop skills and acceptance around its technologies involves seeding the market with open-source products. The hope: that the codes, protocols, and standards used in open source are sufficiently similar to those found in IBM's high-end commercial products--and sufficiently dissimilar to Windows--that a new cadre of IT professionals will emerge capable of working in AIX and WebSphere environments. Building that expertise carries weight in the community of independent software vendors, which is key to IBM's efforts to grow its middleware business. The top 100 independent software vendors accounted for more than $15 billion in total company revenue last year. "Assuming there's a community revolving around that code," Mills says, "then there are skill sets that build up around that code. In IT, people like easily accessible skills."

Thousands of developers have begun using the Eclipse tools since IBM released them under an open-source license, stimulating interest in Java, on which IBM bases many of its products. That "wouldn't have happened if we went the pure commercial route" with Eclipse, says Danny Sabbah, general manager of IBM's Rational development tools unit, who led the Eclipse project at IBM before taking on his current role.

So IBM can get people to download open source--but can it get them to pay? The vendor believes there's a growing business in selling support, services, and technology to users. That's what was behind last month's acquisition of Gluecode Software, a provider of subscription support services and software based on the Apache Geronimo application-server project.

IBM anticipates that when smaller companies that have embraced open source grow larger, they'll migrate to its commercial products, stepping up from Apache middleware to WebSphere, for example. "When [businesses] start making real money, then they want real support, real scalability, and real long-term viability," Sabbah says. "If they're going to base their business on something, they want a joint commercial dependency they can scream and yell at."

Challengers to IBM's middleware push include BEA, Microsoft, and SAP. BEA CEO Alfred Chuang says IBM's offerings amount to a hodgepodge of parts bolted on through acquisitions. "None of it comes from the same company, so there can be integration issues, which IBM tries to solve by up-selling you a services contract," Chuang says. Earlier this month, BEA introduced its AquaLogic line of middleware, featuring an internally developed enterprise service bus that provides a framework for managing a host of business-software functions.

Cendant Car Rental Group, which operates the Avis and Budget brands, opted for BEA's WebLogic offerings over IBM middleware. "We like the fact that BEA is agnostic and they come right out and say that publicly, so you can hold them to it," says John Turato, VP for technology at Cendant, which is making its online reservation system available via Web services to partners.

Mills argues that IBM has a more laserlike focus on middleware than BEA or Microsoft. "We're not doing [middleware] as a side interest to enhance some other part of the company," he says, nor is the company distracted by aspirations to be a player in the applications market. IBM, he says, "is in the middleware business." And make no mistake--he means business, not open-source utopia.

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