When it comes to e-commerce software, IBM’s WebSphere still reigns supreme. With market share of about 20 percent, the software giant has successfully fended off competition from feisty software integrators.
However, as e-commerce spending increases, market forces are shifting dramatically. Even though high-tech spending has been generally stagnant, the benefits of e-commerce installations continue to drive sales of both business-to-business and business-to-consumer solutions. Such strong growth amid economic turmoil has inspired major industry players, including Microsoft, to set their sites on the e-commerce software market.
Competitive pressure from all sides has prompted major changes to IBM’s WebSphere line of e-commerce products. And in a sign that may indicate the overall market’s future direction, Big Blue has placed a bet on the mid-market by launching a scaled-down version of WebSphere with a more affordable price tag. What is IBM’s big-picture plan for this much-vaunted software?
The Quest To Integrate
From its inception, WebSphere was intended to integrate e-commerce into the enterprise, Brian Adler, IBM WebSphere Commerce program director, told the E-Commerce Times. Now, years later, the market is at last seeing the benefits of this strategy, he added.
“E-commerce is not something that should be treated as a separate world unto itself,” Adler said. “Businesses are finally realizing that the online channel is not an isolated silo. It has to be integrated with the rest of the business. That’s where we see a huge competitive advantage.”
The WebSphere Commerce 5.5 release, which became available last month, allows companies to deeply customize the e-commerce experience. They can create a “market segment of one,” Adler said, by setting up parameters for each customer relationship. For example, a business-to-business customer might access a customized Web page listing products at his or her company’s negotiated rates and payment methods.
“It’s all part of making a company easier to do business with,” Adler said. “Plus, it drives costs out of the seller’s business, resulting in increased customer satisfaction and reduced costs at the same time.”
The SMB Sweet Spot
With its starting price of US$80,000 per processor, WebSphere Commerce clearly stands above and beyond the means of many growing e-commerce concerns. However, IBM recently announced a scaled-down version of the product, which is set for release in late September.
Dubbed WebSphere Commerce Express, the solution includes a production and staging server, database, developer license, maintenance and upgrade protection, and technical support.
At $20,000 per processor, the Express version was priced to compete with Microsoft Commerce Server Standard, which costs about $7,000. IBM executives are quick to point out that a complete package — including a server, database and developer license — drives up the price of Microsoft’s offering to more than $26,000.
“Express makes it possible to get deployed very quickly,” Adler said. “We took steps to make integrations [with other software systems] very easy, if not out-of-the-box. Our customers can be up and ready to be creating and customizing a store site in as little as an hour.”
Taking Plug-and-Play to the Next Level?
The Express version of WebSphere may be a good fit for departments within large companies as well as for the mid-market, Wintergreen Research president Susan Eustis told the E-Commerce Times.
“I think you’re going to see IBM take the plug-and-play functionality they’ve developed for mid-sized markets and expand that to departmental environments as well,” Eustis said. “In the near future, you’ll also see them do even more integration of a very diverse product set.”
Eustis estimated Big Blue increased its e-commerce software market share from 18 percent to 21 percent during the first half of 2003.
In fact, the company has continued to expand its market share during the last eight quarters, while most integration-focused vendors have suffered, Gartner research director Jess Thompson told the E-Commerce Times.
“The economic climate has caused a very large number of purchasers of Web technology to opt for viability over functionality,” Thompson said. “I don’t think [IBM will] move much beyond 20 percent market share through 2006, as measured by software license revenues.”
Integrating from the Inside Out
While WebSphere’s marketing pitch may be focused on integration of clients’ systems, the software has much-needed work to do on its own internal integration, Thompson noted.
“As the solution currently stands, its components are not really much more integrated than the fact that they come in the same box,” he said. “IBM is destined to change that. But right now, there’s a lot of functionality that is very poorly integrated.”
This may create problems as IBM works to crack the SMB market, where companies typically lack large IT budgets, he added.
“Given IBM’s spotty track record in getting their complex set of technology deployed in large organizations, there could be tough challenges at smaller ones [with less] sophisticated IT staff,” Thompson said.
New Challenges from Old Standards
As integration firms struggle and small competitors disappear, IBM faces a new challenge from companies like Microsoft and SAP, which view e-commerce software as an attractive new market for cross-selling their services.
“At some point in future, I think many of those companies will have valid offerings in this space,” Jeff Kukowski, vice president of marketing and product management at Cyclone Commerce, told the E-Commerce Times. Cyclone develops systems for B2B collaboration that help companies connect with trading partners and streamline supply chain management. The firm also supplies technology to IBM.
As IBM begins work to develop its own trading partner technology, Kukowski said he anticipates the entry of many new competitors into this highly technical space. One key to success will be the ability to work seamlessly with numerous platforms, security protocols and other technologies, he added.
“IBM created the software market. They do a lot of things very well. But they can’t do everything very well. And that’s why there are independent vendors that have popped up everywhere to solve specific problems,” Kukowski said. “It’s definitely a hot market, and it’s heating up more. We welcome new entrants. We think they can help solve more of the problem.”