IBM's Solution for Today's

According to IBM's own literature, “If your company is part of the net generation, IBM wants to be your ‘big blue buddy.’”

So now “your father's IBM” wants to be “YOUR” IBM. Can IBM deliver on this new IT challenge?

There's a new market emerging, and it's attempting to be captured by IBM's Global Net Generation Business—more familiarly known as NetGen. It's emergence as a business unit within IBM reflects on the company's serious intent to increase sales to net generation companies, and to recognize these high-tech, “new economy” companies. Further drawing IBM away from its long-ago days as solely a commercial hardware provider, NetGen seeks to entrench IBM's place as an Internet solutions provider.

What is NetGen? The term refers to an IBM global initiative – spanning across divisions and across some 90,000 business partners – to help Internet Service Providers (ISPs,) Web hosting companies, portals, Application Service Providers (ASPs,) and emerging dotcoms become established and profitable; in short, to meet the unique needs of this newest force in the economy.

IBM plans to deliver this support by providing education, networking, B2B alliances, financing, and other opportunities that give these companies a jump-start; in other words, provide roadmaps to success. IBM has identified 39 “urban marketplaces”—cities or regions around the world that show the greatest promise for a high concentration of NetGen businesses. We can name some of these regions intuitively—Silicon Valley, New York, Boston, Dallas, London, and Hong Kong, to name a few.

In these cities and others, IBM is building teams to market, sell and service new, NetGen-focused programs and offerings. They include: The IBM Incubator Series for start-ups, which provides customized support for the benefit of incubators and their portfolio companies; ASP Prime and Hosting Advantage for ASPs, and ISPs, which help guide software developers who seek to ASP- or ISP-enable their applications; QuickLaunch for e-business ventures, which couples IBM hardware and software with business partner services for dotcoms; and Going Global, which provides education about globalizing a business for the portfolio companies of venture capital partners.

These new initiatives seem to make sense. According to IBM's research, a typical net generation company spends about 10 times more on IT than a non-Internet company of the same size. Collectively, net generation companies spent nearly $40 billion worldwide in 1999 on IT services. And IBM estimates that amount could triple by 2003. As more and more companies move to Internet-based business processes, IBM sees this – understandably – as a unique opportunity to be captured.

Peter O'Sullivan, vice president of marketing for IBM Global Net Generation Business, told me “It is our headlights into the new and emerging technologies and business models that these NetGen companies are building on.” He also notes the benefits for Big Blue: “It also gives IBM the opportunity to get in at the ground level as these companies form the new economy.”

We all know of the biggest, and most successful, net generation companies, such as AOL and AT&T (ISPs,) Yahoo (portal,) and Amazon, e-Bay and e-Trade (consumer web businesses.) But there are scores of others, and their numbers grow by the day. Most are small, independent, and don't yet have brand identity. Others began as ISPs, and hope to add additional services and applications.

Driven by the “results now” expectations of venture capitalists, customers, the media and the public, most emerging Internet-based companies feel pressure to succeed in real time. The more common story, however, is of a slower path to sustainable profits, even for the most ambitious start-up.

Says O'Sullivan, “It's no longer just about getting to market first. It's about building a sustainable business. IBM has the technology that start-ups can use to build that business.”

To date, IBM has about 1,000 net generation customers worldwide. I have no doubt that, as net generation companies continue to grow in number, IBM's own growth will be dependent to more than keep pace. This analyst, for one, intends to stay abreast of this “space” as the landscape changes. We'll be watching all players as they vie for a leadership role. Hope you watch with us.