By Brian Kilcourse, Managing Partner
7/22/2008
One can contend that IBM never got out of the POS “solution” business, but to legacy 4690 users that train left the station a long time ago. By the early ‘90’s, IBM had a commanding position in the POS market with “soup to nuts” offerings, with perhaps 70% of tier-1 retailers running one of three IBM applications (GSA: General Sales, CSA: Chain Sales, or SA: Supermarket). Companies such as Target, Wal-Mart, Walgreens, CVS, Macy’s, The Gap, and many others standardized their in-store technology environments around the will-not-die platform. Then in the Lou Gerstner era, the company decided to get out of applications and into hardware and services. The company’s focus became “how many boxes can we sell?” According to one IBM veteran of the day, “the leadership at the time viewed development as a large expense that took a long time – and you could never satisfy the customers.”
Not that IBM did a hard-stop: the company made an abortive attempt at an OS/2-based application called StorePlace, which begat ACE (which was actually completed by IBM partner MGV and is still sold by IBM to supermarkets). On the other hand, GSA and CSA users waited anxiously for IBM partner El Corte Ingles to deliver StoreFlow by the end of the 20th Century, only to watch the whole thing disappear in the opening months of this century over disagreement about who would modify and grow the application (El Corte Ingles kept control of the code). It seemed to some observers that IBM had truly snatched defeat from the jaws of POS victory.
However, IBM continues to invest in the 4690 platform itself, and continues to develop and refine retail-ready hardware such as the SurePOS platform. The question is, what about the new-generation business applications?
Fast Forward to 2008….
Recent announcements by IBM bring the company’s strategy for POS into clearer focus. For example, in June, 2008 IBM and Epicor announced a partnership “to deliver a comprehensive, integrated retail system management product for specialty and department store retailers.” Earlier this year, IBM announced arrangements with StoreNext to focus on regional chains and also with StoreNext’s parent-company Retalix to focus on petroleum and convenience retailers.
That IBM is working with partners to deliver business applications isn’t news. What is interesting is that these announcements clarify the company’s long term strategy. In a conversation last week with Juhi Jotwani, IBM’s Vice President - Marketing and Strategy, Retail Store Solutions, the technology executive said, “Perhaps the pendulum did swing too far towards a focus on services, where applications were just assets that drove services revenue. Now what we are doing is looking at applications to round out the solutions for the customer. We have an ‘in-country’ strategy, working with ISV’s who have synergies with us and who have some kind of a technical advantage.”
In that context, the Epicor and Retailix deals are in sync with other recent announcements, such as one about a recent agreement between Shawman and IBM as part of the company’s “Express Advantage” program in India. In that program, IBM's software systems and technology and service groups will address security, business, recovery and energy efficiency needs of mid-sized firms, while partners such as Shawman provide the business application (Shawman has also agreed to exclusively support IBM’s SurePOS 500 platform). According to Ms. Jotwani, the Shawman arrangement underlines the reason for not developing IBM-branded applications: “One solution that works in the U.S. is not going to work everywhere, and with our share of the global market becoming bigger, we had to not just ride the GSA & ACE wave, but embrace partners around the world in different geographies that have particular applications relevant to the segments that we’re targeting.”
A Three Pronged Approach
Obviously, IBM continues to push hardware sales. As we noted in a June ‘08 Retail Paradox column, Juhi Jotwani stated that IBM’s message is first, that retailers can have a POS platform that can withstand the rigors of the store environment for years, and secondly, that it can also be an ecologically responsible decision. IBM is leveraging this message the world over as the company focuses on growing its retail presence in emerging markets. With IBM’s “retail-ready and green” message, the company believes it can move a lot of hardware.
Secondly, IBM has been turning its attention directly at the “mid-tiered” space. As recent RSR studies have pointed out, SMB (“small and medium business”) retailers in particular are ripe for technology investment. One RSR study, The Future of Application Delivery in Retail, flatly states that “mid-tiered retailers represent the greatest opportunity in the next two years for solutions providers and outsourcers.” IBM clearly sees the opportunity. According to Juhi, “a lot of mid-tier retailers have hyper-growth strategies. Many of them want to enter China, for instance. Their vision for going global aligns well with IBM- we can help them. A key to the global mid-market is understanding that they don’t want to call a 1-800 number for support; they want someone to drive up on a motorcycle or in a car when they need somebody. So although we’re in 150 countries, we’re investing heavily in our business partner network to offer that level of support. ”
The third area of focus is system management. According to Ms. Jotwani, “we are looking to by-country ISV’s to integrate with our remote management offering because that’s a huge technical advantage that we offer.” For example, IBM has worked with Retalix to interface the partner’s business application to its remote management agent (RMA). Remote management is the “glue” that the technology giant hopes will be the binding agent for IBM-favorable platform decisions. The company has been developing RMA for several years, and the management agent currently works for both Linux and Windows platforms as an alternative to a full-blown Tivoli enterprise system management implementation (Tivoli in fact has its own POS management agent for those customers that have the enterprise management suite installed). IBM figures that this system management option will be particularly attractive to mid-tiers retailers.
But What About The 4690?
Maybe it would be surprising for someone new to retail technology that many of the design tenets of the 4680/90 platform (for example, dual controllers) are now regarded as minimum requirements for any viable POS platform – but they are. Not that the 4680/90 was ever actually “finished” by IBM. As a matter of fact, by the mid-90’s many of the original architects of that system had spun off to form their own companies and “complete” the platform’s functionality with bolt-ons that have proven very popular with retailers and have kept the 4690 platform “alive.” One such example, StoreGazer, offered by EDJ of Raleigh, NC., addresses the same system management issues that RMA is focused on (EDJ was founded by Dave Courtney, in partnership with other key members of the 4680 development team of the 1980’s).
Ironically, these IBM graduates now find themselves in potential competition with the alma mater. IBM has announced that RMA will support that platform as well; a new version of 4690 (version 6, expected by the end of this year) with enable the RMA agent to reside on a 4690 controller. It will be interesting to see how long it takes IBM to offer the same functionality that bolt-ons like StoreGazer have offered for years.
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