IBM's Centers for Innovation -- Internet professional services ventures run by the company's Global Services consulting division -- are addressing many of their needs from Web hosting, design and development to other consultative services. Advertising Age Reporter Tobi Elkin spoke with Abby Kohnstamm, senior VP-marketing for IBM, about the centers and the company's thinking about its Web role.
Advertising Age: How would you characterize IBM's marketing and outreach to dot-com companies?
Abby Kohnstamm: They're really a unique kind of customer for several reasons. First of all, most of them are forming themselves as kind of virtual companies. So, a lot of them don't have a lot of core assets and they're very open to outsourcing a lot of things that we provide.
Another difference is that they spend disproportionately to their size on [information technology] because they're Internet-based. They have heavy transaction and data storage requirements, so they buy a lot of servers. They use a lot of data-mining because there are no store fronts, so they're really managing customer relationships based on business intelligence . . . They grow incredibly quickly. That's why we have a dedicated focus, to get in with them on the ground floor.
AA: What can IBM bring to neophyte dot-coms?
Ms. Kohnstamm: Speed is everything in this market. They start very quickly, they flame out very quickly and realize that it's not as easy as everybody said. And then they kind of realize that they probably need a company that really understands enterprise scale computing.
AA: IBM's investing in a lot of start-ups through venture capital firms. Companies such as VerticalNet, Tradex Technologies and BuyMedia.com.
Ms. Kohnstamm: Mostly really, in some cases, to understand the technologies that we can bring, because many of these companies that are going public and growing like crazy are actually technology providers, software companies . . . Also to understand the business models that they're creating, so while we hope we may benefit in part from some of the market cap expansion, that's not the primary driver. . . . [It's] to be in on the early floor with a lot of these companies.
AA: So that IBM can turn them into customers?
Ms. Kohnstamm: Yes, and to give them marketing power, help them build their applications so that as they grow, they have the ability to grow without having to redo everything. . . . A lot of them have more money than they know what to do with, but the other thing that we're finding is what they really desperately need is marketing, technical, and consulting help. . . . I think the role that we're increasingly playing with a lot of them is that they find themselves running really reasonably decent size businesses and they often don't have the internal expertise to carry out what customers will expect from them.
AA: Is that where the Centers for Innovation come in?
Ms. Kohnstamm: Yes, although large companies will use them as well, or the dot-com companies within large companies.
AA: IBM runs these Web consulting shops in Atlanta, New York, Los Angeles, and Boston, which also design Web sites for IBM's various sponsorships -- like the Grammy's, Olympics, and the U.S. Open.
Ms. Kohnstamm: The e-business innovations centers are one place where these companies will be able to come and we will have the capability of taking everyone from basic strategy and business consulting all the way through to actual implementation. We will also partner with other entities in those centers. So, for example, there are a number of interactive advertising agencies that are excellent in design, but they don't want to get into application development, systems integration, Web hosting and a lot of the things we do. So we will bring many of these companies in and approach a customer with an end-to-end solution but it may not all be IBM resourced.
AA: How many centers are planned?
Ms. Kohnstamm: The plans are to go to eight.
AA: In what way are they competing with interactive ad shops?
Ms. Kohnstamm: To do a real business solution where real business is conducted, where you're really running a commerce capability and run your whole supply chain management system . . . these are not inconsequential efforts, as we know ourselves internally! Most agencies are not geared to do that.
AA: But it would appear that IBM is doing more than that, offering brand services, Web ad creation, everything from soup to nuts.
Ms. Kohnstamm: In most cases, we're not trying to replicate what [interactive ad shops] do, we're trying to partner. There will occasionally be a customer who says, "I want IBM to do every single thing," and "I only want to deal with one person."
AA: What's an example of that?
Ms. Kohnstamm: Macy's was one. For many of our sports sites we've done everything. I think the more common thing is that there is a creative resource in the mix somewhere, or someone who just does pure strategy consulting, but then there are the six other steps from idea to implementation.
AA: So, in most cases, you're saying that IBM isn't replicating the work of interactive ad agencies?
Ms. Kohnstamm: Right. Our focus on attracting skills and hiring is not centered on that. We have some very good resources, but I think we don't feel we need to do every single piece and this market is exploding so fast, actually, there's more than enough business to go around. And if you really talk to most of these interactive agencies that some people call Web integrators, they really don't have the capacity, most of them, to handle hundreds of customers. And if they have some misfires, it can really hurt their reputation.