--- title: Can IBM Thrive In A World Where The Average Deal Size is 2c? date: 2005-11-12T00:16:28Z modified: 2005-11-12T00:16:28Z permalink: "https://redmonk.com/jgovernor/can-ibm-thrive-in-a-world-where-the-average-deal-size-is-2c/" type: post status: publish excerpt: "" wpid: 396 categories: - Uncategorized timestamp: 2005-11-12T00:16:28Z tags: - Uncategorized --- “On this Web 2.0 highway, there are three exits: [Microsoft](http://finance.yahoo.com/q/bc?s=MSFT), [Yahoo](http://finance.yahoo.com/q/bc?s=YHOO) and [Google](http://finance.yahoo.com/q/bc?s=GOOG).” > [Om Malik’s Blog](http://gigaom.com/2005/11/10/web-20-exit-what-is-that/). Om makes a great point. So what is IBM going to do about it? The company itself would probably argue that it is already moving ahead with a Web 2.0 strategy – pointing to, for example, recent communications efforts around the notion of collaborative processing. Big Blue ran an event last week on social software, which is certainly a step in the right direction. It seems to me though that the “sea-change” laid out this week by [Bill Gates and Ray Ozzie](http://www.hypercamp.org/2005/11/09#a43) has some obvious implications for open source software ecosystems generally and software ecosystems generally. If you’re a publicly traded company and you don’t make money licensing software, how will you make up the shortfall in revenues? OSS aside, if its not economical to host salesforce.com because it doesn’t offer enough customisation and services opportunities to make money, how can IBM really thrive in a software as a service economy? Targeted advertising is one possible answer to the revenue drop conundrum, but making money from an ad-model requires a volume service hosting network. Check out this blog from [Srimana Mitra](http://sramanamitra.com/blog/168) about the potential business model economics involved, though and why Microsoft may be better positioned than it is given credit for. > Imagine, you are BMW, and you want to advertise to a very targeted audience of consumers with a certain household income level. Who else is in a better position to give you access to this super precisely segmented data about people’s income levels than major corporations? > > Let’s say, GE cuts a deal with BMW, and lets them advertise to the 10,000 employees in the annual income range $100,000 – $500,000. What form would this advertising take? > > It could be, that for this set of employees, as soon as they open up Microsoft Office or Outlook, BMWs ad is placed on their desktop. As a result, instead of GE paying Microsoft for the corporate license of MS Office, BMW ends up subsidizing the application. IBM deserves some credit for its On Demand vision and execution so far, but it may need to tweak the granularity in terms of its vision of the profound changes facing many industries. The move to greater service orientation is as much about lightweight mashups as business process reengineering (I use “BPR” in full awareness of all the baggage it carries). Googlemaps+craiglists=a change in property buying behaviours and information chains. Not a McKinsey consultant in sight. Never mind “component-business modelling” and outsourcing to Bangalore, the question is: can IBM thrive in a world where the [average deal size is 2 cents](https://adwords.google.com/select/)? In case you’re wondering why I am writing about IBM when everyone else is pointing to Microsoft itself, the answer is, well, its a blog thing, and a RedMonk thing. Its a blog thing because I am trying to hit a point that other people haven’t, and its a RedMonk thing because its all about the ecosystem.