When millions of Web surfers logged on to the U.S. Tennis Assn.'s official Web site to check out U.S. Open highlights in early September, they had IBM and Dev Mukherjee to thank. The USTA hired Big Blue to manage the site during the month-long event and to manage and monitor its traffic -- for a healthy fee. During the rest of year, when the USTA site is quiet, the tennis group manages its own Web needs.
That's precisely the kind of business that Mukherjee wants to build. His official title is vice-president for strategy at Big Blue's international global services unit. But his main role is mastermind of IBM's "e-Business on Demand" initiative. It's an ambitious plan to rent software and hardware access on an as-needed basis via the Internet to companies fed up with maintaining their own expensive and underused info-tech infrastructures.
Sound familiar? It should. During the Web boom, dozens of companies claiming to be application service providers (ASPs) announced that they would run accounting or sales software at data centers and rent access to these functions to customers who didn't want to pony up for costly servers and software licenses.
SWITCH IT ON. Most ASPs died ugly deaths, as IT managers balked at handing over the keys to their kingdoms -- not to mention critical data -- to companies with no track record, little experience in their specific business sector, and insufficient capital.
The initial failures of the little guys hasn't halted the tide of IT outsourcing, however. IBM and rivals such as Electronic Data Systems (EDS
) and Computer Sciences Corp. (CSC
) have expanded their efforts to provide outsourced IT functions for big companies, such as U.S. Airways (served by EDS) and the American Stock Exchange (an IBM client).
Mukherjee is pushing for broader, more complex -- and harder to pull off -- projects. His vision is that any company will be able to get e-business help over the Net as easily as it arranges service from any other utility, such as the gas, water, or power company.
WELL POSITIONED. Even that analogy is a bit simplistic, as Mukherjee is offering extremely granular service -- even down to hourly rentals -- of everything that is IT, from server access to supply-chain-management software. Ideally, customers will get access to these much faster and with less hassle than, say, getting a new phone line. "You can get basic infrastructure like data storage or applications like e-mail or even entire business processes like payroll or e-procurement," says Mukherjee.
If this approach takes hold, it should allow IBM's customers to convert IT spending from a high fixed cost to an a la carte -- and lower -- variable cost, while providing IBM higher margins.
EDS also offers pay-as-you-go computing, but IBM seems especially well-positioned to pull off something this radical: Only Big Blue enjoys the combination of a massive research arm, huge in-house commercial software and hardware development, global services, and expertise across a wide array of sectors.
PIECE OF CAKE? Mukherjee says his unit's revenue is growing in the low double digits annually, and IBM has some big early clients in Dow Chemical and American Express. How easy it will be to routinely get customers up and running quickly over the Net on systems that traditionally have required days or months of integration time remains to be seen.
Still, Mukherjee claims that the new open standards for data transmission over the Net, built around XML (for extensible markup language), will make integration a piece of cake. If that turns out to be true, Big Blue may end up with a big chunk of this nascent market. By Alex Salkever, Technology editor for BusinessWeek Online