Albert's Analysis

IBM, AT&T Team Up on Small Businesses

IBM makes no secret of its effort to reach the global economy's small businesses--those with 100 or fewer employees. Indeed, in the last year the New York-based industry leader has been widely promoting its efforts, and connecting strategically with its resellers and business partners to realize that goal. (In fact, everywhere you look, others--e.g. American Express, the regional Bells, Chase and other banks etc.--are all targeting this huge opportunity.)

So IBM's announcement last month of a newly formed alliance with AT&T (the largest U.S. telecommunications company) to jointly create end-to-end e-business solutions for small businesses, follows a pattern that's already in place. Yet it moves it a notch higher. With this alliance, IBM will package its small business solutions software, Start Now, along with an AS/400, RS/6000 or Netfinity Server (customer's choice), and business partner customization services. AT&T, in turn, will provide Internet connectivity through its Managed Internet Access Service. Together, the two companies will support an integrated distribution channel.

In past columns I've mentioned growth statistics of the small and medium business markets, but I think it's worth repeating because the numbers are staggering. According to Cahners In-Stat (Newtown, Mass.), a market research firm, IT spending by small businesses could reach $87 billion by the year 2002--up from $39 billion (impressive in its own right) in 1998. Equally significant, according to the research--a larger percentage of small businesses (44 percent) use e-commerce than do large businesses (36 percent); an ongoing paradigm shift that reveals huge potential for IBM.

The IBM/AT&T alliance is one of IBM's many ventures providing turnkey solutions for small companies that will (hopefully) grow and expand. By providing those smaller customers with Web sites, electronic product and service catalogs, and e-commerce capabilities, IBM is taking a calculated risk that these smaller enterprises will take off. Hopefully when they do, Big Blue will become the trusted go-to guy yet again. It seems to make sense.

Jim Corgel, general manager of Internet Service Provider Industry for IBM Global Industries, says that "vendor confidence" comes into play with an alliance such as this. The name recognition of IBM and AT&T (arguably the leaders in their respective industries) helps the big players, and at the same time, gives a friendly boost to channel distributors, who can feature implied endorsements from their brand name suppliers.

Another part of the goal here is to simplify, or demystify, the process of transacting business online--especially for companies just starting to flex their e-commerce muscles. Internet technologies are complex even to those in the industry, so to package end-to-end solutions with training materials and 24x7 technical help makes plain common sense.

Taking a broader look, the IBM/AT&T alliance fits into IBM's goal to further expand its small and medium business program--a global, umbrella program that focuses on relationship building with customers, and creating a sort of "virtual small business community" that includes customers, resellers, sales force, and Big Blue itself.

Specifically, this new pact is one piece of a larger marketing program called Partner World, designed to provide e-business solutions to small and medium IBM customers, and at the same time, open doors for its business partners by bundling customizations services with the package. (Start Now software includes 160 hours of business partner services for installation and customization.)

So let's say you're a small business owner with a computer network and a PC server. You have some degree of computer expertise on your staff, and you plan to expand your business. IBM and AT&T are looking your way. In our increasingly service-based economy, I see their alliance as a logical move. And it shows us something more--that two titans of industry can join forces not competitively, but cooperatively. (Yes, in 1989, I called it "co-opetition.") We've seen such examples before, and now, with Internet Fever in full force, I'm sure there are more to come.

IBM, this was a smart strategic move. Let's see how your "execution" plays out and what happens next. We'll be watching!