So what does IBM mean when they say they’re in the solutions business?

Ever since IBM exited the applications business, it has been steadily inching its way back up the value chain from pure infrastructure software. IBM has over the past few years unleashed a string of initiatives seeking to deliver, not only infrastructure software and the integration services to accompany them, but gradually more bits of software that deliver content aimed for the needs of specific scenarios in specific verticals. Naturally, with a highly diversified organization like IBM, there have been multiple initiatives with, of course, varying levels of success.

It started with the usual scenario among IT service providers seeking to derive reusable content from client engagements.  Then followed a series of acquisitions for capabilities targeted at vertical industries such as fixed asset management for capital-intensive sectors such as manufacturing or utilities; product information management for consumer product companies; commerce for B2B transactions; online marketing analytic capabilities, and so on. Then came the acquisition of Webify in 2007, where we thought this would lead to a new generation of SOA-based, composite vertical applications (disclosure: we were still drinking the SOA Kool-Aid at the time). At the time, IBM announced there would be Business Fabric SOA frameworks for telco, banking, and insurance, which left us waiting for the shoe to drop for more sectors. Well, that’s all they wrote.

Last year, IBM Software Group (SWG) reorganized into two uber organizations: Middleware under the lead of Robert Leblanc,  and Solutions under Mike Rhodin. Both presented at SWG’s 2011 analyst forum as to what the reorg meant. What was interesting was that for organizational purposes, this was a very ecumenical definition of Middleware: it included much of the familiar products from the Information Management, Tivoli, and Rational brand portfolios, and as such, was far more encompassing (e.g., it also included the data layer).

More to the point, once you get past middleware infrastructure, what’s left? At his presentation last year, Rhodin outlined five core areas: Business Analytics and Optimization; Smarter Commerce; Social Business; Smarter Cities; and Watson Solutions. And he outlined IBM’s staged process for developing new markets, expressed as incubation, where the missionary work is done; “make a market” where the product and market is formally defined and materialized; and scale a market, which is self-explanatory. Beyond, we still wondered what makes an IBM solution.

This year, Rhodin fleshed out the answer. To paraphrase, Rhodin said that “it’s not about creating 5000 new products, but creating new market segments.” Rhodin defined segments as markets that are large enough to have visible impact on a $100 billion corporation’s top line. Not $100 million markets, but instead, add a zero or two to it.

An example is Smarter Cities, which began with the customary reference customer engagements to define a solution space. IBM had some marquee urban infrastructure engagements with Washington DC, Singapore, Stockholm, and other cites, out of which came its Intelligent Operations Center. IBM is at an earlier stage with Watson Solutions with engagements at WellPoint (for approving procedures) and Memorial Sloan-Kettering Cancer Center (healthcare delivery) in fleshing out a Smart Healthcare solution.

Of these, Smarter Analytics (not to be confused with Smart Analytics System – even big companies sometimes run out of original brand names) is the most mature.

The good news is that we have a better idea of what IBM means when it says solutions – it’s not individual packaged products per se, but groups of related software products, services, and systems. And we know at very high level where IBM is going to focus its solutions efforts.

Plus ca change… IBM has always been about software, services, and systems – although in recent years the first two have taken front stage. The flip side is that some of these solutions areas are overly broad. Smarter Analytics is a catch-all covering the familiar areas of business intelligence and performance management (much of the Cognos portfolio), predictive analytics and analytical decision management (much of the SPSS portfolio), and analytic applications (Cognos products tailored to specific line organizations like sales, finance, and operations).

It hasn’t been in doubt that for IBM, solutions meant addressing the line of business rather than just IT. That’s certainly a logical strategy for IBM to spread its footprint within the Global 2000. The takeaway of getting a better definition of what IBM’s Solutions business is that it gives us the idea of the scale and acquisitions opportunities that they’re after.