IBM Moves Ahead In Smart Computing, But Still Has Ways To Go

Andrew Bartels
Vice President, Principal Analyst
July 10, 2009

IBM threw a big event in New York City on Thursday, October 1, and Friday, October 2, to publicize its Smarter Cities initiative, part of its Smarter Planet marketing message. The event featured an impressive list of politicians (Mayor Bloomberg, NY Governor Patterson, governors from Vermont and North Carolina) and CEOs (CEOs from ABB, Verizon, American Electric Power, etc.). I was part of the crowd of hundreds of attendees and IBMers on Friday, and my colleague Doug Washburn attended on Thursday.

It would be easy to dismiss this as part of hype machinery that IBM is running to build awareness of and create customers for its Smarter Planet initiative and the emerging offerings that it is creating under that rubric. But I think there is more going on here. What IBM is really doing is creating a vision – or more precisely, half a dozen visions – of how a new generation of technology can help address some critical challenges facing the planet. Visions of course can easily become hype. But as several speakers noted, visions are also a necessary first step in any transformation process, building awareness of what can be different at the end that will inspire people to start the journey. And IBM to its credit put concrete examples behind the proposals.

Here is what IBM is doing right:

  • Focusing on key social and economic problems facing many countries around the world. Cities and national governments face challenges of providing healthcare more efficiently, improving the quality and delivery of education, managing greater and greater volumes of people travel and goods transportation, providing public safety and security in the face of increased threats of terrorism and persistence of crime, and encouraging energy conservation and alternative energies to counter global warming. These are the problems that IBM's Smarter Cities initiative focused on.
  • Identifying ways that new technology solutions can address these problems. IBM has begun to describe and document that ways that new awareness techniques like embedded sensors and capture of real-time data on the location and movement of objects, people, and energy, plus more advanced analytics, can be applied as part of solutions for governments and infrastructure providers like utilities.
  • Starting to build solutions for vertical industries with these problems. Classic horizontal technologies still represent the vast majority of IT purchases and will provide the foundation stones for these new technology solutions. But we think most of the future growth in the IT market will come from highly verticalized solutions. IBM's organization of its Smarter Cities presentations shows that it understands this prospect.

These actions are putting IBM way ahead of most other vendors in building the case for business and government investment in what we at Forrester are calling (coincidentally) “smart computing” technologies. But IBM still has work to do to translate its early lead into actual business success.

  1. Show the pay-offs. The presentations at the New York Smarter Cities event were strong in vision and soft benefits like helping reduce CO2 emissions. However, the case studies with concrete dollars-and-cents benefits were less concrete. While IBM does have some examples of how health care providers, transportation departments, utilities, policy departments, and school districts are realizing tangible savings, it will need to show many more examples of financial and public benefits if it is going to get these generally slow moving institutions to buy what it is offering.
  2. Create the needed solutions. So far, IBM has some experiments and pilots in helping clients in local governments, utilities, health care, and education assemble many of the elements of what they need to make their operations more effective. But in many ways IBM is at the same stage as the early ERP systems in 1990 and 1991. It is still working with individual clients to try to pull together the pieces of what are admittedly complex solutions. It is also building what it calls software frameworks for different industries. But IBM is still learning what works and doesn't work, what is needed vs. what is available, and what it would provide and what partners would contribute. So, IBM still has work to do to create replicable solutions.
  3. Make its solutions software-and-hardware products, not consulting projects. IBM for the past decade has been moving from being a product vendor to a services vendor. But now it has to start moving the other way. It won't make economic sense for thousands of utilities to implement smart grid and smart meter systems as individual, custom-built service solutions; they will need offerings that are much more like turn-key products at a fraction of the cost of a customized service solution, albeit with extensive configuration options to meet their requirements. Same thing for health care systems, urban transportation management systems, etc. Will IBM have the discipline to resist the temptation to keep building high-cost (and high-revenue) custom consulting solutions for individual clients, and instead create the core industry-focused offerings that could be sold as lower-cost (and lower revenues) semi-packaged products to dozens or hundreds of clients?

Will IBM be the first vendor to get Smart Computing right, or will other vendors get there first? Let me know what you think. Thanks.


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