IBM and the App Business

Bill Burnham has an interesting blog on whether IBM should get into the application business or not.  He covers the issues IBM faces on the infrastructure front and speculates that IBM might just let its software margins wither:

On the other hand, IBM may simply fight a rear guard action and be content to gradually let its software growth and margins decline as software is not’t really its core business now anyway. From this perspective, IBM will accept gradually lower margins and growth in its software business as simply the price to pay for keeping its services and hardware businesses in the black. After all, IBM had its chance to get into the applications market by buying Peoplesoft, and instead of playing the white knight (which Peoplesoft clearly desperately wanted IBM to do), it just stood by and let Oracle acquire Peoplesoft without batting an eye.

I have thought about this issue a lot and I actually think IBM did a smart move by not buying PSFT's white Knight.  As tempting as this might have seemed to Steve Mills and his team, PSFT's license business is struggling and they are mainly staying afloat through their maintenance revenue stream.  The core ERP market has both the wrong software delivery model (behind the firewall, long implementation cycle, huge customization) as well as the wrong business strategy of trying to sell big bang enterprise licenses.  Both of which are not how consumers want to buy software.

I think the future comprises of composite apps built by combining web services and IBM should focus on building the infrastructure that powers that future.  They might also considering buying some one like Jboss and offering that as a low end app server and positioning Websphere as their high end middleware platform