IBM Makes A Play for Microsoft's Customers

By Sara Kehaulani Goo
Washington Post Staff Writer
Thursday, March 30, 2006

International Business Machines Corp. said it will roll out an aggressive strategy today to lure business customers away from rival Microsoft Corp., offering bounties of up to $20,000 to sales partners who can persuade companies to make the switch.

The move is aimed at securing more of the $2.5 billion market for corporate e-mail systems and servers in which the two firms compete. Earlier this month, Microsoft launched a "People Ready" marketing campaign and told its business partners that IBM had become too much of a "services" company that was not focused on catering to the software needs of its commercial clients.

IBM counters that its Linux system has grown 230 percent over the past year and is finding a big appetite among business clients eager to upgrade and migrate out of Microsoft's proprietary system. Unlike Microsoft's Exchange and Windows systems, IBM's Linux programs are interoperable with software developed by other firms. Even companies that keep Microsoft's Outlook e-mail software can switch to IBM's Domino server that operates it.

A Microsoft spokeswoman pointed out that the company is planning to debut a new version of Microsoft Office later this fall and said its software offerings are more useful to business customers because they are integrated into a seamless platform.

Peter O'Kelly, an industry analyst with the Burton Group in Boston, said the move shows a much more aggressive side of IBM on a product that hasn't always been its highest priority. Now, he said, the market is about evenly split between the two firms, but upstarts are grabbing market share as well.

"This is the kind of game that Microsoft has usually played," O'Kelly said. "I don't recall another instance of putting a specific dollar amount with a bounty on it. It goes beyond a marketing program where they are putting a significant investment behind it. This is very effective to say, 'Here's a cash incentive to do something.' It will get your attention."

The plan seeks to use IBM's 100 business partners who work with companies' IT divisions as its de facto sales force. IBM will reward each business partner $20 per individual e-mail account, up to $20,000, for every company that stops using Microsoft's Exchange server and Outlook e-mail system and begins using IBM's Linux-based Lotus Notes e-mail system and Domino server system.

"It's a pretty simple formula," said Scott Handy, who runs IBM's Linux business. He said the incentive aims to build on IBM's 200 percent growth in the past year for its Linux products and on the company's effort to take advantage of companies ready to upgrade or switch. "We wanted to make partners aware of this opportunity to make sure they were incentivized to develop skills on Linux," he said.

Indeed, an official at IBM business partner Greyduck Technology Inc., a Minnesota IT consulting and customization firm, said the incentive sounded good. "We appreciate the extra help," said Chief Operating Officer Tom Hillebrand. "We always like incentives from IBM."

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