CAN IBM'S SOFTWARE STRATEGY SAVE THE DAY?

We've been getting a lot of queries from influential business reporters about IBM's apparent strategic missteps recently. These journalists and business analysts seem to share the view that IBM's professional services business is in trouble (too much competition from Indian outsourcing) and that IBM's hardware biz is under margin pressure, despite the fact that the company got out of the commodity PC business in the nick of time.

The saving grace, according to these analysts, appears to be IBM's software business, where the company seems, surprisingly to many, to be holding its own.

Could it be that IBM's software business  is benefiting from customer-led innovation?

Customer-Led Acquisitions? IBM has grown its software portfolio through acquisition. What's perhaps a bit different about IBM's acquisition strategy from that of other firms is that many of these acquisitions were customer-led. When IBM acquired SoftSwitch, Lotus, Tivoli, Bowstreet, iPhrase, and, most recently, FileNet, the company did so in response to customer demand.

The IBM customers who were using these firms' products explicitly asked IBM to acquire these companies  in order to make their jobs easier. Specifically, the companies listed above are all firms that IBM acquired because customers said they loved their products and wanted to integrate them into their IBM systems so they would no longer have to fight internal battles in order to keep using these products.

Peer-Production?  IBM has a very aggressive open source strategy. The company invests talent in and supports Linux, Eclipse, Mozilla and countless open source software development projects. This builds good will among the most influential members of the software community--the developers and architects who evaluate and recommend applications and platforms.