IBM's Corgel: Software as a service is coming

As general manager in charge of e-Business Hosting Services for IBM's mammoth Global Services group, IBM veteran Jim Corgel has had the perfect perch from which to see the building interest among corporate IT shops to have software delivered as a service. Corgel is convinced the trend is in its early days and will grow to become commonplace in terms of how corporate users obtain key applications and larger solutions.

And he is not the only one at IBM who has noticed. His boss, IBM Chairman Sam Palmisano, in his letter to shareholders in the company's annual report pegged application hosting as one of the company's three or four most strategically important areas. Since 2001, Corgel's team has turned the company's application and infrastructure hosting business into a $1 billion business by the end of 2003. Corgel sat down with InfoWorld Editor At large Ed Scannell to discuss his views on this trend and what sort of opportunity it represents for the company and its network of business partners.

IW: How quickly are corporate users catching on to the idea of software as a service?

Corgel:Well the vast majority of our business comes from users who need to get an application up and running fast, and must have it be secure and reliable. Once they have that in place they can branch off into all the attributes of software as a service. Based on feedback from users we are pretty excited about the prospect of it here. If you look at the chairman's letter in our annual report, he talks about some key business areas and mentioned our (Web and application hosting) market as a strategic area.

IW: Do you see the success of Salesforce.com as a certain validation of your strategy?

Corgel:I think Salesforce.com is just one validation point of the software-as-a-service opportunity. If you recall, IBM announced last fall a partnership with Siebel for CRM On Demand. And now Siebel is into it with both feet. Software.com has been referenced a lot by the market and is obviously a player. There is a growing cadre of change agents that are out there, particularly aimed at the upper end of the mid-market, telling users that they do not have to hire a lot of people, invest a lot up front, or be encumbered by licenses charges for software. You can just sit down with a service provider like IBM and an application provider like an Intacct or Demand Tech and get what you need delivered as a service.

IW:  For large ISVs like Siebel, for example, what opportunity do they see in software as a service compared to the traditional software licensing model?

Corgel:We see software as a service giving companies like Siebel and SAP another way to provide business value for their customers, particularly SMBs. When a customer can get Siebel at $70 per user per month, that is quick time to business value, a very attractive proposition, compared with the alternative of large up-front investments in owning and managing IT infrastructure, and longer time to deployment.

IW: What categories of software are you making available as a service?