The behemoth is picking up fledgling, innovating firms through a structured system to provide solutions in diverse areas, and not miss the bus, again
At 6’2” Mike Riegel fills the conference room. Well, almost. Standing in the centre of the packed room on the first day of India’s first Smart Camp, he gives an account of IBM’s decade-long partnership with start-ups around the world.
Smart Camp is a relatively new event that will travel nine countries. The judges, or mentors, as IBM calls them, will select an India winner from five short-listed start-ups from among 230 applicants. The finals are in November, which gets the winner global publicity and access to IBM’s resources.
“Rely on mentors; ask questions rather than make statements; learn to make connection across business models,” he advises the entrepreneurs. “Question them to see if they anticipate things — competitive threats, and market changes; give coaching on what unique customer problem they are solving,” he suggests to the 25 mentors.
Riegel, a vice president who leads IBM’s global start-up programme, might be saying the same lines for the nth time, but he makes it sound earnest, even fresh. After all, greening the planet is Big Blue’s dominant theme for the next-generation of customer solutions. “That’s our whole company strategy; we’ve articulated it to our shareholders,” says Riegel.
As a result, IBM’s start-up programme, which was quietly started in the dotcom boom of 1999-2000 to sell products to the bootstrapping companies, is now being taken to the next level, complete with global branding and marketing. And this is serious business as IBM gets a third of its $100 billion revenue (it doesn’t give individual earnings for start-ups) from its partners that include start-ups, independent software vendors (ISVs), re-sellers and system integrators.
IBM understands that in solving some of the grand challenges of energy, health care, retail, transportation, water, cities, and communications, it’ll have to transform those industries. “And we can’t do that all by ourselves,” says Riegel.
A look at the India Smart Camp winner elaborates what IBM’s plan is. ConnectM Technology Solutions is an energy management company that collects data wirelessly and applies analytics to provide ‘intelligent’ solutions for utilities. “While we are into data collection, IBM is into data management. Our coming together is like left hand meeting right hand,” says its Chief Executive Murali Ramalingam. And if IBM wants, it can take ConnectM’s installed base to its own customers.
Why a Structured Programme Now?
In all these years, the number of start-ups IBM has swooped on has increased from about 20 to 1,500. However, it was only last year that the company launched its Global Entrepreneur Initiative (GEI), a structured programme to attract zero- to five-year-old companies that, if found to be a good fit in IBM’s offerings, would find the Armonk-giant acting as their perfect launch platform, filling gaps in technology, if any, and connecting with the end user.
Unlike earlier partnerships, where start-ups largely leapt out of the portfolios of 120-odd venture capitalists that IBM works with globally, GEI looks at their ideas, rather than their revenue.
GEI was launched in five countries, including India, and now IBM is going back to those regions conducting Smart Camps. The initiative will be launched in four more countries this year, starting with Mexico next month.
One of the objectives of the initiative is to make IBM a more accessible brand among young companies. “In the previous programme, we saw the pain of small companies and how much they endured to get to the right person within IBM,” says Mauricio Sucasas, director, ISV and developer relations, growth market unit, and a 23-year IBM veteran. He believes GEI is about leveraging the diversity that IBM harbours. “Through this programme we want to get on early in the process of filling a gap in the eco-system.”
Filling the gap would amount to ensuring start-ups get technology and brand building support, VC and customer attention.
IBM doesn’t want to play catch-up as it had to do in 1999. Back then, recalls Riegel, IBM was not a ‘cool’ company like high fliers AOL and Sun Microsystems. “We were a little late in the dotcom revolution,” he notes. His team was formed to fix that; to figure out what the dotcoms, the flip flops-and-jeans clad generation of entrepreneurs needed that the ‘blue suit-clad’ IBMers had missed out. And thus began IBM’s journey of identifying innovation hot-spots across the world.
“As we sold to those dotcoms, we made a note of the zip codes. It became abundant which cities in the world were important for innovation,” he says. IBM focused on those locations, set up 40 innovation labs, and is now ensuring that it has the right skills, programmes and institutions in those cities to tap these innovators.
Each hotspot, such as Bangalore, Tel Aviv or Dublin, focuses on niche areas. If a Bangalore lab digs its heels into telematics, analytics and infrastructure management, Tel Aviv dives into storage, speech recognition and telecommunication. If an Indian start-up (or even an ISV) partner needs the Tel Aviv lab’s expertise or sales force to help, IBM ensures it is available.
Over time, says Riegel, there’s been a dramatic change in the appetite among start-ups for scaling up. Back then, there were lots of ideas that were not well refined. Today, because of scarce funding, start-ups spend much more time reiterating their business model as a small team before they decide to scale up. “Once they scale, they become interested in IBM because we make enterprise class hardware and software,” says Riegel. At this stage, one ought to have operations that do not fail; outages are not acceptable now, as they were in 2000. “Now people have much appreciation for enterprise class technology, even for startups.”
Infographic: Sameer Pawar
(This story appears in the 03 June, 2011 issue of Forbes India. To visit our Archives, click here.)