IBM’s Web 2.0 Sales Pitch: We’re Safer

“Under the radar” has taken on a new meaning for Giora Hadar, knowledge architect at the Federal Aviation Administration (FAA) . That phrase no longer just classifies a low-flying plane; it also describes the grassroots efforts by employees (often younger ones) to bring consumer applications like wikis into work to collaborate on critical projects. These technologies present an unavoidable conundrum for Hadar, and the agency responsible for U.S. air traffic control. “Obviously we need to collaborate,” he says. “But security is paramount.”

It’s a predicament that Hadar shares with many large organizations that are now struggling with how to adopt technologies spawned from Web 2.0—including end-user applications that promote openness, user-friendliness and collaboration. End users gravitate to consumer Web 2.0 tools, commonly available for free online, because they’re often the most innovative, thanks to developers who listen to online user feedback and respond quickly. That’s one reason that the Web, rather than corporations or incumbent software vendors, has in many ways become people’s IT department both at home and in the workplace.

With that in mind, Hadar tackled his Web 2.0 dilemma by turning to what may seem an unlikely candidate: IBM. “They now offer all kinds of collaborative environments like you’d see in the consumer space,” he explains. “But they’ve designed these applications with security built in from the get-go, so that appeals to us.”

That’s precisely the sentiment that IBM hopes will appeal to thousands of other organizations as the incumbent tech giant competes with Google and myriad startups for Web 2.0 application sales. During the past year, IBM has introduced a slew of collaborative apps to help IT departments meet the demands of rogue users—that is, people who bring in technologies like Web apps that they view as essential to their jobs, but which IT has failed to provide. In February, IBM announced its Connections software, promising to bring some critical Web 2.0 technologies such as blogs and bookmarking into the enterprise. About a month later, it invited analysts, consultants and members of the media to a lab event in Cambridge, Mass., where VPs demonstrated the goods.

To date, IBM’s efforts in the Web 2.0 arena may have been overshadowed by the media’s obsession with the Google versus Microsoft debate, which has been portrayed as a classic clash of the titans between the “Do No Evil” company of new and the empire of old, analysts say. The excitement around social networking sites like MySpace and Facebook may have also dulled the efforts of the less flashy Big Blue.

Still, the ultimate arbiter of IBM’s success in the Web 2.0 arena won’t be pundits. It will be enterprises like the FAA. And corporate IT seems to welcome IBM’s presence in this game: According to Forrester Research, 61 percent of IT decision makers surveyed at Fortune 500 companies say they’d prefer a suite of Web 2.0-like technologies provided by an incumbent vendor.

Security Worries Persist

The preference for the security and stability of an IBM compared to, say, a startup vendor, creates a niche market for IBM software in large enterprises, analysts say. IT policies at those organizations tend to be more security-centric and don’t encourage much employee freedom for choosing applications. “They’re pretty leery of Web 2.0 technology,” says Oliver Young, a Forrester analyst. “They view it as another way for intellectual property to sneak out the back door.”

The Web has also forced IBM to re-evaluate its software business model. For years, software companies like IBM had a pretty steady one-stop-shop approach to delivering applications: They’d install expensive software suites accompanied by the servers to host them, the staff to maintain them and the consultants to clean up any messes. Now, thanks to vendors like Google and Salesforce.com, which host their offerings from afar and let companies access their software merely by clicking on a Web browser, cheaper options have become not only more viable, but also, in some cases, functionally just as capable and more user-friendly.

IBM, like Microsoft and Oracle, has fought back by claiming that companies can’t get the same types of rich functionality and security from hosted applications as from on-premise products. “They’re hammering away and saying things like Google Apps are consumer grade and not scalable,” says Josh Holbrook, an analyst with Yankee Group. “They’ve created a pretty strong message around that, but that message doesn’t necessarily mean reality.”

Some security experts say vendors like IBM might still hold an edge. Chris Eng, director of security services at Veracode, which provides a service that rates the security of software packages for enterprise IT customers, says Web 2.0 applications often lack security because they incorporate multiple third-party application programming interfaces (APIs) and data sources to build rich content and maximize functionality. “That’s especially true with consumer-centric websites, where usability is the primary concern,” Eng says.

Web 2.0 applications also tend to expose more server-side interfaces that developers failed to secure, Eng says. “Enterprise applications, while susceptible to the same mistakes, are often designed with security in mind,” he says.

The FAA’s Audit Problem

The long-term security story of Web 2.0 will be playing out for several years. In the meantime, enterprises like the FAA have to find Web 2.0 software that end users and IT can live with in order to solve business problems.

One example: The FAA needed a better solution for the auditing process after a disaster, Hadar says. To submit purchases via an expense report during normal times at the FAA, employees must undergo a rigorous approval process. But in times of emergency, disaster recovery workers must act quickly to buy supplies like generators, ladders, or scaffolding to rebuild damaged FAA sites. “They use a credit card, rather than go through the normal process,” Hadar says.

But after the disaster, an auditor from agencies like the Government Accountability Office or the inspector general needs to collect documents and receipts that detail every penny spent. “Whenever this happened, [employees] had to look around and find where they’d put all the receipts, e-mails, trip reports and instant-messaging logs,” Hadar says. “It was spread all over creation.”

That’s when it occurred to Hadar that an application in IBM’ s Lotus Connections software, called Activities, might be useful. Activities behaves like a couple of Web 2.0 document management apps, such as 37signals’ Basecamp. It operates as a user-friendly repository for groups to share and collaborate on a given project, a refreshing departure from more complex, traditional document management systems (which Hadar says disaster recovery workers certainly wouldn’t want to wade through during a time of crisis).

With Activities, all 200 FAA disaster recovery employees can upload their IMs, e-mails, invoices and other documents detailing how much was spent. (After the disaster, hard-copy receipts can be scanned in back at FAA headquarters.) “If there is a hurricane this month or next month, when someone comes to investigate, we can hand them the Activity folder and say, have at it,” Hadar says.

The Activities feature in Lotus Connections shows how IBM approaches Web 2.0 in the enterprise. A Web 2.0 application usually means a hosted offering accessed purely through a Web browser. But Connections for the most part is software that lives on-premise and allows administrators like Hadar to control access. (It can be accessed on a Web browser, securely behind the firewall.)

“It’s really more about the spirit of the technologies,” Yankee Group’s Holbrook says of IBM’s collaboration tools. “They [IBM’s tools] are very collaborative and give the end users a little bit more control over how they communicate with their colleagues, but they are on premise and server-based behind the firewall.”

That decision to stick with the traditional install model stems from IBM listening to C-level customers, says Bruce Morse, IBM’s vice president of unified communications and collaboration. “In the enterprise customer base, there is a strong demand and desire within the CIO organizations to have control for security reasons to operate the software on premise,” he says.

Software as a service (SaaS) has generated a lot of traction with small and midsize businesses (SMBs) and will continue to grow in the future, Morse says, but he doesn’t see IBM’s current model for delivering software going away anytime soon. “I see SaaS growing in importance but I don’t see it, by any stretch, becoming the dominant model for the large enterprise,” he adds.

Smaller SaaS startups have one big disadvantage compared to IBM, analysts say. “CIOs look at these smaller vendors and ask, will they be around in two to three years?” says Forrester’s Young. “Somebodylike IBM has a lot of stability.”

IBM’s New Challenges

But can IBM really get in the spirit of Web 2.0? Critics say IBM targets existing large enterprise customers rather than newer, more progressive companies. This puts IBM in the position of being beholden to the clients that pay it the most money, as opposed to consumer-based software where the voice of the masses wins with regards to software modifications.

“With consumer apps, you have millions of users and they’re all equals,” says Stowe Boyd, who runs a consultancy, The Messengers, and pens a blog on Web 2.0 issues. “It’s democratic. It’s not really about what specific enterprises pay the most money.”

IBM bristles at that notion, adding that it has good traction with SMBs. Nevertheless, IBM’s Morse says large enterprises carry a decent amount of clout because they are more anxious to be first adopters. “I don’t see our software specifically designed or targeted at large companies,” he says. “But clearly, a lot of our innovation and capabilities that we are delivering to market are driven by leading-edge customers who are in many cases large corporations looking for competitive advantage.”

In some ways, it’s IBM’s larger enterprise customers that seem to be living more in the past than Big Blue itself. “What I hear from the big iron vendors is that IT asks them very often, ‘How do I turn that off?'” says Yankee Group’s Holbrook. “Meaning, there’s so much functionality in there that gives end users control, and IT is trying to find a way to ratchet back on it.” Through dashboards, IBM software allows IT to regulate access more than would be possible with consumer Web apps.

But as a younger generation of IT leaders, who grew up with consumer IT both in their personal and professional lives, step into managerial roles, they may be able to visualize running their business atop a Web browser rather than a rich desktop.

“When a new visionary comes in, there’s a rethinking of IT where these questions are raised,” Boyd says. Another challenge: Some users think of IBM software in the same way they do pricey and complex products from Oracle and SAP. Yet despite its touting of security and rich functionality, IBM also acknowledges that in a Web 2.0 world, user-friendliness sometimes trumps complex functions that nobody uses or wants to use. “Developers love to show off features,” says Rod Smith, VP of emerging Internet technologies at IBM. “It’s just in our DNA. But if it’s not serving a purpose and preventing ease of use, I tell them to take it out.”

Ease of use is a primary technology goal for Jennifer Ahn, director at the Film Foundation, a nonprofit group that preserves film and encourages educational programs in cinema. The foundation has been working on a project called the “Story of Movies,” an educational curriculum being developed for middle school students by archivists, writers, editors and producers.

This group, as one might imagine, has no interest in any kind of bloated software. “We’re not all that technologically savvy,” Ahn says.

IBM’s Activities software, she says, allowed her collaborators (spread all over the country) to work with one another on key segments of the curriculum. “Before, people would make changes to one draft but wouldn’t be working off the most recent draft,” she says. “We were getting a little lost.” Ahn says they’ve had such good success with Activities that the foundation may consider using the Dogear function of Connections (IBM’s answer to bookmarking).

IBM doesn’t dismiss all the challenges it faces. It acknowledges, for instance, its lack of presence in the consumer space puts it at a disadvantage when it comes to software innovation because it misses out on millions of potential (and willing) guinea pigs who love to play with free software. “We don’t attract a consumer population as our primary constituent,” says IBM’s Morse. “To be fair, we probably lose some input that we’d get.”

Who’s Afraid of Change?

On the Web, IBM has been taking strides to address that weakness, says Forrester’s Young, who noted that IBM released Many Eyes, a Web-based visualization tool that lets users view data interactively, including in tag clouds.

IBM’s brand doesn’t speak loudly on the Many Eyes site (it’s on the bottom corner rather than the top), perhaps in acknowledgment that “IBM” doesn’t hold the same allure for consumers as more playful tech names that have emerged during the past few years.

Morse says IBM has learned—and continues to learn—from the consumer-based (now turning enterprise) software vendors like Google that have changed the game in so many ways. “They do bring an entirely new business model and it’s good for the industry,” he says. “It forces us to step back and ask if there are different models in which people want to conduct business.”

IBM’s willingness to change with the times shouldn’t be entirely surprising, says Boyd. “IBM has cut its legacy obsessions to greater extent than Microsoft,” he says. “They gave up on OS2 and they gave up on PCs. They said let’s cut our losses.”

The real key, says the Yankee Group’s Holbrook, will be if IBM can learn to communicate effectively with not only corporate IT departments, but also other business units—the areas of business that flock to Web 2.0 apps to give them what their cranky colleagues in IT have denied them for years.

“As more progressive CIOs come on board, they will view business units as constituents,” he says. “[IBM] will need to be more receptive to meeting their needs rather than just the needs of IT.”

Right now, early adopters of IBM’s Web 2.0 tools are making their way slowly. The FAA’s Hadar doesn’t know if or when the agency will roll out IBM Connections enterprisewide: The disaster recovery team is serving as the test bed, and it’s been a weak hurricane season so far. But he says embracing these types of technologies is critical for the future because if his users (especially the younger ones) don’t have it, they’ll go out and get it. Discourage them too much, and they’ll go work someplace else, he says.

“I am aware of several small groups within the agency who are using wikis even though they are not currently available as an enterprise application,” he says. “These people have networking and collaboration in their DNA. As an agency, we need to think about how we cater to them.”