International Business Machines Corp. IBM -0.15% is taking aim at a market where the technology goliath is more like the new kid on the block.
In a shift for a company that typically deals with the world's largest corporations and governments, IBM will ramp up its efforts to sell so-called cloud computing services to midsize businesses. The Armonk, N.Y.-based company has lined up partners to resell its services and is helping software companies adapt their products to IBM's machines.
The move, to be disclosed on Wednesday, puts it in more direct competition with Amazon.com Inc. AMZN -0.92% and Salesforce.com Inc. CRM -0.94% Both have been successful in the mid-market and are expanding their offerings to the larger corporations that make up IBM's customer base.
IBM hopes its industry knowledge and broad technology offerings will help it win a big share of the market and that a bunch of little deals could add up to new and sizable revenue. But IBM isn't even on the radar for many midsize companies, which IBM defines as those with fewer than 1,000 employees, and it will be a challenge for its vaunted sales force to push these much smaller deals.
Spencer Rascoff, chief executive of Internet-based real estate company Zillow Inc., Z -6.67% is a typical client for companies that rent computer power or provide software over the Internet, both cloud services. The midsize public company with nearly 500 employees and $66 million in 2011 sales said it has rented computing power from Amazon.com to run massive calculations from time to time.
When asked if he would purchase such service from IBM, Mr. Rascoff said, "I didn't even know they were in that business."
Technology research firm Gartner estimates sales of cloud computing services will reach about $58 billion this year, up from about $50 billion in 2011.
The phrase "cloud computing" is a catchall term that describes a host of technologies, including renting computer power and providing business software online to help companies manage their customers.
IBM identifies cloud computing as one of four major revenue-growth areas, including emerging markets, data-crunching analytics software and urban technology systems. But the company lags some of its rivals.
Amazon.com is considered the leader in the market for renting compute power, while Salesforce.com is the top seller of customer management software over the Internet, say analysts. But both companies have been using those power bases to expand into new cloud markets that serve larger customers.
"We haven't seen IBM deliver on their vision," Salesforce.com CEO Marc Benioff said. Mr. Benioff said at the company's recent conference he got questions about cloud computing efforts from Amazon.com, Google and smaller companies but not one question about IBM's efforts. "IBM doesn't own the technology like they did in the last wave," he said. Amazon.com declined to comment.
Andy Monshaw, IBM's general manager in charge of small and medium sized businesses, said the cheaper cost of cloud computing will let the company reach a bigger base of smaller customers.
The company is working through partners to extend its reach. Charles Phillips, a former top Oracle Corp. ORCL -2.87% executive, is now CEO of business software maker Infor Global Solutions, which is working with IBM on the effort. He said the company has been providing financing and marketing support.
Web application developer and IBM partner Highland Solutions said about 10% of its several hundred clients run their software on IBM cloud technology. Jon Berbaum, director of client engagement at the company, said: "We see it as a really viable alternative."
Separately on Tuesday, IBM's board of directors named current CEO Virginia M. Rometty chairman of the board, effective Oct. 1. Ms. Rometty succeeds IBM's previous CEO and current chairman Samuel J. Palmisano, who will become Senior Adviser to the company until he retires on Dec. 1.
In a shift for a company that typically deals with the world's largest corporations and governments, IBM will ramp up its efforts to sell so-called cloud computing services to midsize businesses. The Armonk, N.Y.-based company has lined up partners to resell its services and is helping software companies adapt their products to IBM's machines.
The move, to be disclosed on Wednesday, puts it in more direct competition with Amazon.com Inc. AMZN -0.92% and Salesforce.com Inc. CRM -0.94% Both have been successful in the mid-market and are expanding their offerings to the larger corporations that make up IBM's customer base.
IBM hopes its industry knowledge and broad technology offerings will help it win a big share of the market and that a bunch of little deals could add up to new and sizable revenue. But IBM isn't even on the radar for many midsize companies, which IBM defines as those with fewer than 1,000 employees, and it will be a challenge for its vaunted sales force to push these much smaller deals.
Spencer Rascoff, chief executive of Internet-based real estate company Zillow Inc., Z -6.67% is a typical client for companies that rent computer power or provide software over the Internet, both cloud services. The midsize public company with nearly 500 employees and $66 million in 2011 sales said it has rented computing power from Amazon.com to run massive calculations from time to time.
When asked if he would purchase such service from IBM, Mr. Rascoff said, "I didn't even know they were in that business."
Technology research firm Gartner estimates sales of cloud computing services will reach about $58 billion this year, up from about $50 billion in 2011.
The phrase "cloud computing" is a catchall term that describes a host of technologies, including renting computer power and providing business software online to help companies manage their customers.
IBM identifies cloud computing as one of four major revenue-growth areas, including emerging markets, data-crunching analytics software and urban technology systems. But the company lags some of its rivals.
Amazon.com is considered the leader in the market for renting compute power, while Salesforce.com is the top seller of customer management software over the Internet, say analysts. But both companies have been using those power bases to expand into new cloud markets that serve larger customers.
"We haven't seen IBM deliver on their vision," Salesforce.com CEO Marc Benioff said. Mr. Benioff said at the company's recent conference he got questions about cloud computing efforts from Amazon.com, Google and smaller companies but not one question about IBM's efforts. "IBM doesn't own the technology like they did in the last wave," he said. Amazon.com declined to comment.
Andy Monshaw, IBM's general manager in charge of small and medium sized businesses, said the cheaper cost of cloud computing will let the company reach a bigger base of smaller customers.
The company is working through partners to extend its reach. Charles Phillips, a former top Oracle Corp. ORCL -2.87% executive, is now CEO of business software maker Infor Global Solutions, which is working with IBM on the effort. He said the company has been providing financing and marketing support.
Web application developer and IBM partner Highland Solutions said about 10% of its several hundred clients run their software on IBM cloud technology. Jon Berbaum, director of client engagement at the company, said: "We see it as a really viable alternative."
Separately on Tuesday, IBM's board of directors named current CEO Virginia M. Rometty chairman of the board, effective Oct. 1. Ms. Rometty succeeds IBM's previous CEO and current chairman Samuel J. Palmisano, who will become Senior Adviser to the company until he retires on Dec. 1.
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