Technology News -
IBM Forms Customer-Services Software Company
(08/11/98, 7:32 a.m. ET)
By Reuters

NEW YORK -- IBM said it plans to announce Tuesday the creation of an independent software company aimed at the customer-services market, forming what will be the largest single player in a fast-growing business.

The new company, which has yet to be named, will develop out of Software Artistry, the customer-support software company IBM (company profile) acquired earlier this year, together with other customer-service and call-center phone operator systems from IBM.

IBM's new business will build integrated software with features for product marketing and sales, customer service and support, and which can be tied into a wide variety of existing corporate computer databases and phone operator call centers.

The new company, which is estimated to have sales of about $250 million, is in the business of what is known as customer-relationship management. This market is expected to grow up to 50 percent annually into a multibillion-dollar business within in a few years, analysts said they estimate.

"With this new independent company, we are committing the necessary resources and skills to lead in what we expect to be a very high-growth market," said Linda Sanford, general manager of IBM Global Industries, the umbrella under which the new company will exist.

IBM has already dedicated more than 500 people to the new company. The new company is expected to grow to more than 2,000 employees worldwide over the next 12 months, Armonk, N.Y.-based IBM said.

W. Scott Webber, former CEO of Software Artistry, will serve as CEO of the new company, reporting to a board of directors composed of IBM executives, including Sanford, but potentially also including outsiders to IBM.

Customer-relationship management refers to the ability of an organization to build up and hold onto a profitable base of customers.

The technology to accomplish this is in hot demand as competitiveness increasingly becomes measured less in terms of product-feature differentiation and more in terms of winning customer loyalty through improved services and support.

"Companies in all industries are fundamentally challenged to rethink the nature of their customer relationships as the forces of deregulation, globalization, and electronic business dramatically alter the competitive landscape," Webber said.

'Companies in all industries are fundamentally challenged to rethink the nature of their customer relationships as the forces of deregulation, globalization, and electronic business dramatically alter the competitive landscape.'
-- W. Scott Webber
formerly with Software Artistry

By setting the new customer-services business apart from IBM's central organization, IBM said it hopes to reduplicate the chemistry that has fueled the rapid growth of two existing stand-alone software companies in recent years.

These two businesses -- Lotus, which supplies desktop and networked software; and Tivoli, which makes systems-management software used to run complex computer systems -- were, like Software Artistry, also the result of IBM acquisitions.

From the outset, IBM opted to keep these other businesses autonomous from the parent organization in the hopes of preserving their aggressive origins as independent software suppliers.

The same holds true for the new customer-services business, Webber said.

Like the other companies, the new business is designed to reassure customers that they will be free to do business with IBM competitors and not be locked into buying IBM computers or other equipment to use the customer-services software.

IBM plans to operate the customer-services software company as an autonomous business unit based in Indianapolis, though sales, product development, and support locations would be located worldwide, he said.

The IBM company faces many rivals in a fragmented market, but no one competitor that now offers such complete customer-relationship management -- from initial sales contact to product fulfilment and ongoing support -- all linked to the necessary behind-the-scenes corporate phone and database systems.

Rivals to the old Software Artistry piece of the business include Siebel Systems, Vantive, and Clarify. Each sells software to companies for handling customer technical support and troubleshooting.

But the IBM system will also compete with customer-service software makers such as Pegasystems and Broadway & Seymour, whose products are used to set up and maintain customer accounts, analysts said.

Other possible competitors include makers of corporate call-center software used by corporate telephone-service operations. These include Genesys Telecom, Dialogic, and Natural Microsystems.

"They have competitors on multiple fronts, but they are probably the only company that combines large-scale professional services, software, and the computer-telephony integration capabilities into one unit," said Hugh Bishop, an industry analyst who tracks the market for Boston-based Aberdeen Group.

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