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"The on-demand era is upon us. Are you ready?" That is the question executives at computing giant IBM are posing to customers as part of the company's recently launched 'ebusiness on demand' marketing push.

Ebusiness on demand, as defined by IBM chief executive Sam Palmisano, is the utopian state reached by an organisation "whose processes - integrated end-to-end across the company and with key partners, suppliers, and customers - respond with agility and speed to any customer demand, market opportunity, or competitive threat."

The idea is nothing new - in fact, it is a persistent theme in information technology. Suppliers have been talking about ultimate business flexibility since the 1960s when the IBM 360 mainframe first made it possible for the same computer to handle several applications.

Proponents of third and fourth generation languages, relational databases and object technology have made similar claims over the years. And now, today, integrated business suites, web services and business process management are all being heralded as the ultimate solution to fly-by-wire agility.

IBM has played a role in all of these technologies. But today, its message is not about any one of them in particular. The real key, it says, is to have a flexible but centralised way of integrating and controlling the whole systems architecture.

And the best way to do this, say IBM executives, is to buy all of the key components of the core IT systems software infrastructure - database, application server, development tools, integration broker and portal technology - from a single vendor, and preferably IBM. By doing so, says IBM, customers can be sure not only that the individual components of this software 'superstack' are tightly integrated, but also that management tools are available that span the whole product line-up.

The power of one

IT strategists at large corporations are not averse to buying most, or even all, of their big application suites from one supplier. In fact, the success in recent years of companies such as SAP, Oracle and PeopleSoft is partly due to their ability to provide one integrated application suite.

But buyers perhaps should be much more wary about purchasing all their underlying systems and tools from one supplier. There is a precedent for this: during the 1970s and 1980s, IBM established a reputation for locking customers into its product lines, making it expensive and difficult to switch to cheaper or better alternative products. The issue was at the centre of repeated anti-trust filings against the company.

This time round, IBM says that won't happen. "Forget account control. No-one has a pure IBM environment," says Kevin Malone, a senior software consultant at IBM. "This is more about giving customers the flexibility they require, while at the same time providing software products that can be implemented in a coherent manner," he adds.

Even so, no supplier - with the possible exception of Microsoft at the low end - has attempted to promote a unified platform message since IBM began to lose its grip on the corporate computing market in the 1980s. While rivals such as BEA Systems have a tightly integrated set of products, there are some elements - such as the database or the message broker - where it has no offering of its own.

For IBM, this is a bold and risky move, but one with enormous potential rewards. The combined markets of all the component products together are worth tens of billions of dollars a year, and IBM only has a leadership position in two or three of them. This is a possible opportunity for the company to re-establish architectural dominance.

Equally significantly - especially given the successes of Microsoft and Oracle - it is a declaration of confidence, if not aggression, from a company that, a decade ago, could not have dreamed of articulating such a message. Then, it was still reeling from a disastrous attempt to unite the technology industry, and its customers, behind a series of unified system software platforms.

All three of these botched initiatives - AD/Cycle for software development, SystemView for systems management, and OfficeVision, for managing all office applications, seriously damaged partner relationships and undermined its credibility with customers. Rivals such as Hewlett-Packard (HP), Microsoft and Oracle ruthlessly exploited these failures. Today, IBM is much more confident and more credible. Its biggest rivals, it points out, especially Microsoft, Sun, Oracle, and BEA, all lack key technical components. Others, such as HP and Computer Associates, have either been distracted by internal business issues or have decided to focus on point solutions or services.

IBM also claims a trump card: it is the only major IT company to combine a world-leading services business with the ability to source a complete range of its own core components.

Services will be a key battleground: big systems integrators, including HP, Accenture and Cap Gemini Ernst &Young can also be the source of one unified platform - even if, under the covers, their services-based offering uses technology from many different suppliers.

Simplicity push

IBM's gamble is that businesses want simplicity and control - not just of the application software, but of the whole infrastructure. A recent study by investment bank Morgan Stanley suggests they do: in a survey of 225 US CIOs, software simplification emerged as the top concern.

There are real benefits to customers in buying everything from one vendor, say analysts. "Every technology supplier an organisation buys from creates a stream of costs into that customer's business - costs associated with negotiation and relationship management, for example," points out Randy Heffner, vice president and research leader at Giga Information Group. By doing business with fewer suppliers, organisations will avoid unnecessary expense, he says.

This saving could be huge. According to IT market research company Gartner, the cost of integrating new systems with existing systems amounts, on average, to between 40% and 60% of the price of the software licence.

That cost benefit, if realised, might have to be offset against other considerations - such as the economic effects of being hostage to one big supplier. But equally, thinks Heffner of Giga, a vendor that has sold an organisation multiple products is likely to respond quicker to technical problems and offer the customer preferential price discounts.

A further benefit: for developers, a unified underlying platform brings consistency to application design and development projects. As a result, development projects might be faster, cheaper, and require fewer developers.

How unified?

Many of these benefits are more theoretical than actual - even though IBM executives cite examples of customers that have allegedly benefited. While unified applications are widely used in large organisations, the unified applications platform is new, and, arguably, incomplete.

Prospective IBM customers should treat claims of close integration with some scepticism, say analysts. Leadership across a number of elements of the so-called 'superstack' does not, they argue, always translate into tight integration. Some IBM software products, for example, do not necessarily work well with the core WebSphere application server unless extra programming work is done.

There are two reasons for this, both peculiar to IBM. First, many of the key components were (and still are being) acquired; and second, IBM's globally distributed development efforts have often produced products that are not completely compatible with each other.

"In many cases, IBM is working toward tighter integration, but the road maps for delivery stretch well into the future," says Heffner. He predicts that some customers will lose patience before those plans come to fruition, and will choose instead to buy a functionally narrower, but better-integrated, application superstack from one of IBM's rivals, such as BEA, Microsoft, Oracle or Sun.

Another complaint, Heffner reports, is that some IBM products have dependencies on other IBM products. "So a decision for one IBM product might require purchase of another product or two," he says.

This has not deterred customers from making significant investments in bundles of IBM software products, however.

US-based removals and shipping specialist the Bekins Company, for example, based three new applications - an online order status application, an online order and inventory management application, and a virtual marketplace for its third-party agents - entirely on IBM software products, including the WebSphere Application Server, the WebSphere Portal Server, WebSphere application development tools and the DB2 database.

According to a white paper written by market analyst company Patricia Seybold Group and available on the IBM web site, by consolidating on a single software architecture, Bekins "increased revenue by $75 million, reduced operating costs by $1 million, and [made] IT development savings of $100,000".

Platform perspectives

IBM might have a more comprehensive suite than its rivals, but it is not alone in its move towards integration. "By 2005," predicts Gartner analyst Massimo Pezzini, "leading application platform suite (APS) vendors will offer product integration via development tools, systems management and shared middleware, which is not possible in best-of-breed infrastructures.

By 2007, the APS market will be comparable in size to today's combined portal, application server and integration tools markets."

Each of the leading APSs is built around a common element - the application server - but each vendor is coming at the market from a different perspective. IBM is so convinced that customers will buy integrated bundles of systems software that it has spent more than $10 billion in the past decade building, and often buying, a full portfolio of products. The rate of acquisition has recently been increasing as it has sought leadership and faster revenue growth.

Most recently, this led to the $2.1 billion purchase of development tools supplier Rational Software in December 2002 (see Company Analysis). The acquisition of Rational, according to IBM executives, will enable the company to provide "a complete software development environment for companies that want to integrate business processes and software infrastructure across their operations". Rational's tools are considered by most developers to be better, and are more widely used, than IBM's own alternatives, some of which will now be phased out.

Other acquisitions in 2002 included identity management tools from Access360 and storage management software from Trellisoft, which will be integrated with IBM's Tivoli systems management suite; business process management specialist Holosofx and integration tools company Metamerge, which will be integrated into the WebSphere family; and records management specialist Tarian Software, which will be integrated into DB2. In 2001, IBM paid $1 billion for the database business of Informix, and $129 million for integration tools vendor CrossWorlds.

The shopping spree may not be over yet. Jeff Freyermuth, an analyst at AMR Research, predicts that IBM will fill gaps in its business intelligence and content management software line-ups. In business intelligence and analytics, he points to Business Objects, Cognos and Hyperion as possible acquisition candidates - all substantial and well-established companies. In content management, he believes all the big suppliers - including Documentum, FileNet, Interwoven, Stellent, OpenText and Vignette - can be considered potential acquisition targets.

Rival reaction

IBM's aggressive expansion has all its rivals worried. Application server specialist BEA Systems arguably has the most to lose as commoditisation of application server technology causes profit margins from such products to fall - as most analysts agree they inevitably will.

Although BEA has introduced integration and portal tools to its WebLogic software infrastructure toolset, most analysts believe BEA is not strong enough in related areas. The company hopes that new common administration and security across its WebLogic portfolio will improve that position.

Sun Microsystems has been very successful in bundling together its high-end hardware, its Solaris Unix operating system and its Sun ONE Studio 7 development tools. But between 1999 and 2001, internal wrangling within Sun's software division hampered development of its iPlanet Application Server, sending its market share plummeting.

Analysts are now split on Sun's prospects. Its strategy is now to sidestep increasing commoditisation of application servers by shifting to a broader set of software infrastructure. "By leveraging its strengths as a dominant Unix vendor with strong ISV [independent software vendor] support, Sun is well positioned to build a large installed base and win support from key ISVs for its software infrastructure," says Kevin McIsaac, analyst with the industry research company the Meta Group. But others are sceptical: Sun, with its strong reliance on proprietary Sparc chips and Solaris, may find it hard to win new customers outside its traditional base.