IBM Market Intelligence © 2007 IBM Corporation

IBM Market Intelligence

© 2007 IBM Corporation

1H07 WPLC Marketplace Assessment Carol Galvin SWG Market IntelligenceGary Doane, SWG Market Intelligence Joshua Pines, WPLC Marketing Innovations Antony Satyadas, WPLC Marketing Innovations

May 8, 2007


© 2007 IBM Corporation2 WPLC 1H07 MPA

Executive Summary

WPLC Market Overview

– Market Trends

– Market Opportunity

– Competitive Trends

– Buyer Behavior

– SMB Specific Section

Contents



WPLC is competing in a market undergoing “hyper-disruption” Catalyst for much of the disruption is Web 2.0, impacting not just Social Computing but all of Catalyst for much of the disruption is Web 2.0, impacting not just Social Computing but all of

Lotus and WebSphere Portal offeringsLotus and WebSphere Portal offerings– Rich end user experience is a “must-have expectation” and appearing “cool” is more important than ever before– SaaS is finally gaining momentum and should reach the “tipping point” this year– Adoption of consumer-centric and social computing capabilities is underway– Emerging demand for mash-up capabilities is taking off

Competitors are gearing up to exploit current market disruption to their advantageCompetitors are gearing up to exploit current market disruption to their advantage– Microsoft is capitalizing on its desktop and document centric monopoly to extend the SharePoint footprint– Google is leading the charge with its foray into collaboration applications– Oracle is emerging with its new WebCenter strategy– Adobe is exploiting its brand equity with end users to expand complete enterprise collaboration platform

Technology convergence and new methods of implementation are driving traditional vendors Technology convergence and new methods of implementation are driving traditional vendors into new ecosystemsinto new ecosystems

– Blurring lines between ICE and standalone e-mail as vendors add new capabilities– Rise of unified communications making partnerships with new types of partners imperative– Portal is bifurcating to infrastructure and applications

Customer dynamics are in fluxCustomer dynamics are in flux– Shifting span of control from IT to business leaders and end users is expected to intensify– Younger workers are driving new technology expectations in the workplace– SMB “long-tail” demand will begin to influence software delivery in the enterprise

Market TrendsMacro Trends

Competitive TrendsConclusionsConclusions RecommendationsRecommendations

Market OpportunityBuyer Behavior



Executive Summary


– Market Trends



– Buyer Behavior


Contents



Key mega-trends impacting WPLC market

SOCIAL NETWORKSTechnology & services that create unique profiles, map out relationships & leverage personal connections

Mega-trends

Micro-environment

Socio-Economic Political /

Legal

InformationTechnology

SuppliersCustomers

Distributors

Competitors

Emerging Markets & Technology

Energy & Ecology

Industry

Mega-trends

Micro-environment


Legal


SuppliersCustomers

Distributors

Competitors


Energy & Ecology

Industry

NEXT ERA OF THE DIGITAL AGENew business model for R&D and software development that enables companies to best match their demand for innovation with worldwide sources of talent and capital.

GLOBALIZATION AND SHIFTING SKILLS Global economies are increasingly interdependent & developing regions are playing a bigger role in providing highly skilled labor.

VIRTUAL WORLDS Forrester defines the X Internet as connecting information systems to physical assets, products and devices.

BUSINESS PROCESS EFFICIENCYShift of focus toward leveraging siloed processes/applications

EXTREME COMPETITIONQuickening pace of globalization creates both new markets and new competitors

PRIVACY, SHARED ACCESS, AND SURVEILLANCEIncreasingly, legislation on privacy (mostly US), data access and surveillance will lead to need for new access/database controls, federated identity and expanded storage/retrieval.

FINANCIAL & PROCESS INTEGRITYIncreased Regulatory compliance will force reforms in business to ensure process integrity and financial accuracy

LIBERALIZATION OF GLOBAL FINANCE AND TRADEOn-going liberalization of global finance and trade, with associated regulatory aspects, will drive need for increased security and catalyze IT management outside the data center.

MULTI-GENERATIONAL WORKFORCE As older generations exit the workforce, younger – very different ones (Gen Y/X) with distinct needs & behaviors enter

EMERGING POCKETS OF GROWTH Among emerging geographies, there are faster growing regions & pockets of even more rapid economic growth

SUSTAINABILITYEnergy-producing resources, the backbone of economic growth, show signs of supply weakness (e.g. move virtual offices)

ECOLOGYConsumer and corporate behaviors, and government policies, are shifting due to the cost of energy, ‘social conscience’ trends and economic importance of energy

SECURITY THREATSThreats at many levels: from theft of personal identity & safety to security of critical national infrastructures such as energy, banking systems, transportation, public health and food/water supply

TAXATION AND SPENDINGTaxation will shift focus to digital value-add and, along with spending initiatives, will continue to change behavior of businesses and population

CONSUMERIZATION OF ITA shift is underway whereby technology is now trickling up to the enterprise from consumers..



Mega-trends

Micro-environment


Legal


SuppliersCustomers

Distributors

Competitors


Energy & Ecology

Industry

Mega-trends

Micro-environment


Legal


SuppliersCustomers

Distributors

Competitors


Energy & Ecology

Industry

Emerging technology trends

Smart Dashboards & “Info-Portals”Smart Dashboards & “Info-Portals” Information Solutions Smarter dashboards analyze process performance,

ID bottlenecks. Search and BI converge – more natural language Integration with MDM and Business Activity

Monitoring Can act as hub for publishing reports, forms,

business documents, brochures and even EDI by utilizing XML

Can support Governance, Risk and Compliance initiatives by adding rules, reporting and improving quality of information.

Smart Dashboards & “Info-Portals”Smart Dashboards & “Info-Portals” Information Solutions Smarter dashboards analyze process performance,

ID bottlenecks. Search and BI converge – more natural language Integration with MDM and Business Activity

Monitoring Can act as hub for publishing reports, forms,

business documents, brochures and even EDI by utilizing XML

Can support Governance, Risk and Compliance initiatives by adding rules, reporting and improving quality of information.

Disruptive User InterfacesDisruptive User Interfaces Virtual worlds

Attract mainstream interest Can be used for spatial analysis, simulation,

customer interaction, training and team building. Standards, security, usability are key issues.

Consumerization of IT More consumer influence on tech than ever before Work and home life blur Millennials enter the workforce.

3D / graphic designers now considered part of development team

Disruptive User InterfacesDisruptive User Interfaces Virtual worlds

Attract mainstream interest Can be used for spatial analysis, simulation,

customer interaction, training and team building. Standards, security, usability are key issues.

Consumerization of IT More consumer influence on tech than ever before Work and home life blur Millennials enter the workforce.

3D / graphic designers now considered part of development team

SaaS / HaaS / BaaS / Web-as-platform SaaS / HaaS / BaaS / Web-as-platform Fueled by Web 2.0, SaaS becoming valid choice Web-only ecosystems from SaaS vendors

accelerate web-as-platform SaaS and Web 2.0 indicate likelihood for adoption

of SOA, and may be deployed with “hardware as a service” appliances (HaaS).

Hybrid models evolving with software on-site and storage off-site

SaaS / HaaS / BaaS / Web-as-platform SaaS / HaaS / BaaS / Web-as-platform Fueled by Web 2.0, SaaS becoming valid choice Web-only ecosystems from SaaS vendors

accelerate web-as-platform SaaS and Web 2.0 indicate likelihood for adoption

of SOA, and may be deployed with “hardware as a service” appliances (HaaS).

Hybrid models evolving with software on-site and storage off-site

Evolution to “Web 3.0”Evolution to “Web 3.0” Sometimes known as the Semantic Web Will attempt to provide contextual information using:

User-tagged contentSemantically analyzed informationReal time artificial intelligence.

Another vision: users will not only consume and produce content, but also:

AggregateProcessVisually interpret

Evolution to “Web 3.0”Evolution to “Web 3.0” Sometimes known as the Semantic Web Will attempt to provide contextual information using:

User-tagged contentSemantically analyzed informationReal time artificial intelligence.

Another vision: users will not only consume and produce content, but also:

AggregateProcessVisually interpret



Executive Summary


– Market Trends



– Buyer Behavior


Contents



US IT decision makers are focusing investments on web-based and authoring solutions to help solve real-time business monitoring and mobile workforce needs – but global economic issues will determine rate/pace of spending

Socio-economic issues and mgt. conservatism could put a damper

on IT spending

Industry-specific solutions are key

Source: IDC, The Next Big Things: IT Budget Outlook 2007,Doc #TB20061102, Oct 2006



Analysts on WPLC Market Opportunity

Portal– “A preliminary look at the worldwide enterprise portal software (EPS) license and maintenance

revenue for 2006 provides an estimate of $896 million, with worldwide revenue projected to reach $1.4 billion in 2011.” (IDC, Worldwide Enterprise Portal Software 2007–2011 Forecast: Early Projections Show Steady Growth Ahead, Doc #206212, March 2007)

– “Business process automation is the top driver for this investment, while Web 2.0 capabilities such as business networking applications and wikis are also high on the list of capabilities that respondents plan to add to their portals in the next 24 months. Continued investment in portal infrastructure is driven by the benefits organizations have experienced to date and the desire to refine the portal to deliver additional services.” (IDC, Worldwide Enterprise Portal Software 2007–2011 Forecast: Early Projections Show Steady Growth Ahead, Doc #206212, March 2007)

Integrated Collaborative Environments– IDC predicts that the worldwide market for Integrated Collaborative Environments is $2,537M in

worldwide revenue in 2007 and will grow to $2,801M by 2010. (IDC, Worldwide Collaborative Applications 2007–2011 Forecast: A First Look at the Numbers, Doc #206167, March, 2007)

Team Collaboration– IDC predicts that the worldwide market for Team Collaborative Applications is $496M in worldwide

revenue in 2007 and will grow to $573M by 2010. (IDC, Worldwide Collaborative Applications 2007–2011 Forecast: A First Look at the Numbers, Doc #206167, March, 2007)

Web Conferencing Applications– IDC predicts that the worldwide market for Conferencing Applications is $1,057M in worldwide

revenue in 2007 and will grow to $1,442M by 2010. (IDC, Worldwide Collaborative Applications 2007–2011 Forecast: A First Look at the Numbers, Doc #206167, March, 2007)



Executive Summary


– Market Trends



– Buyer Behavior


Contents



WPLC competitors have diverse strategies depending on their collaborative “entry point”

Will appear at forefront of consumer/enterprise convergence, driving both SaaS and Social Software With new launches—Live, Office, Windows—in 2007, marketing spend expected to be very heavy (est. $1B) Partnership expansion efforts—especially unified communications and portfolio delivery Expanding SharePoint empire: business intelligence, reporting, forms, compliance and maybe social software

Strategy is to lock-in customers via tight integration of apps/middleware (Project Fusion) Increased competition in 2007/08, building on business solution strength and bolstered by SI and hardware

acquisitions and/or partnerships

Dramatic growth strategy focused on mid-market (esp. outside EMEA)—will try to capitalize on Duet--and SaaS Co-selling Microsoft Duet and Adobe LiveCycle creates a strong footprint in Netweaver accounts. Has maintained application market share leadership but growth has slowed overall; now trying carrot and stick strategy – 5% penalty for staying on

R/3, “free” use of Netweaver with mySAP In LE, role as standalone Portal competitor has faded; now presents surround opportunity for WebSphere Portal

Has so far navigated its bifurcated portal strategy to ease customer concerns, but analysts have doubts Messaging still focused primarily on BPM and SOA but has shown willingness to address nextgen technologies Strong portal capabilities still unaccompanied by traditional collaborative tools

Has accelerated move to broaden collaborative software platform, focused via industry-specific solutions Primarily advertising-driven revenue model, but so what? Significant lead in driving new software business models and will act as bellwether for Web 2.0 market efforts

Enterprise collaborative portfolio now addressing most of WPLC space benefits from strong consumer brand Greatly expanded relationship between web conferencing tool and Acrobat. Continuing strong threat in Forms Rich client offering could present challenge via huge Adobe developer base and strong web push to reach others

Entry: Fin Apps

Entry: O/S-SharePoint

Entry: App Svr

Entry: Search ubiquity

Entry: Fin Apps/DB

Entry: Publishing tools



The “Google” effect is beginning to take shapeBoth the Google brand and concept have begun to resonate with customers

Enterprises are adopting web-based software

Google as a brand for business is getting attention

Source: IDC, IT Market Outlook 2007: Evolution of the IT Buyer Doc #DR2007_BBSM, Feb 2007



IBM is a market share leader across much of the Lotus portfolio

Category IBM Products IBM Position (source)

Enterprise e-Mail Lotus Notes and Domino

#2 in worldwide revenue for Integrated Collaborative Environments in 2005 (IDC, Worldwide Integrated Collaborative Environments 2006–2010 Forecast and 2005 Vendor Shares: No Sign of Global Warming Affecting the ICE Market, Doc #202617, June 2006)

#2 in worldwide total software revenue for e-mail/Calendaring in 2005(Gartner, Market Share: Enterprise E-Mail and Calendaring, Worldwide, 2003-2005, Eid, June 2006)

Portal WebSphere Portal, Workplace Web Content Management

#1 in worldwide revenue for Portal Software in 2005 (Gartner, Market Share: AIM and Portal Software, Worldwide, 2005, Correia/Biscotti, June 2006)

#1 in worldwide revenue for Portal Software in 2005 (IDC, Worldwide Enterprise Portal Software 2006–2010 Forecast Update and 2005 Vendor Shares: When Less Is More, Doc #202688, July 2006)

Positioned in the Leaders’ Quadrant in 2006 Magic Quadrant for Horizontal Portal Products (Gartner, Magic Quadrant for Horizontal Portal Products, 2006,David Gootzit, Gene Phifer, Ray Valdes, 16 May 2006)

“Promising” in 2007 MarketScope for Web Content Management (Gartner, MarketScope for Web Content Management, 2007, Latham, Jan 2007)

Standalone Team Collaboration

Lotus QuickPlace, Lotus Quickr

#4 in worldwide revenue for Standalone Team Collaborative Applications in 2005 (IDC, Worldwide Standalone and Embedded Team Collaborative Applications 2005 Vendor Shares: Team Activities Are Everywhere, Doc #202856, August 2006)

IM / Web Conf / Unified Comms

Lotus Sametime #2 in worldwide revenue for Enterprise Instant Messaging in 2005 (IDC, Worldwide Enterprise Instant Messaging Applications and Management Products 2006–2010 Forecast and 2005 Vendor Shares: IM Is on Its Way into the Workplace, Doc #203848, Oct 2006)

Positioned in the Challengers’ Quadrant in 2006 Gartner Magic Quadrant for Unified Communications (Gartner, Magic Quadrant for Unified Communications, 2006 Bern Elliot, Steve Blood, Drew Kraus, 2 June 2006)

Solutions - Compliance

Workplace for Business Controls and Reporting

Positioned in the Challengers’ Quadrant in 2007 Magic Quadrant for Finance Governance, Risk and Compliance Management Software, 2007 (Gartner, Magic Quadrant for Finance Governance, Risk and Compliance Management Software, 2007, French Caldwell, Tom Eid, 1 February 2007)

Solutions - e-Learning

Lotus Learning Management System

Positioned between Visionaries’ and Niche quadrants in the 2006 Gartner Magic Quadrant for e-Learning Suites (Gartner, Magic Quadrant for E-Learning Suites, 2006, Waldir Arevolo De Azevedo Filho, Lou Latham, 29 September 2006)

#4 in worldwide e-Learning Suites total software revenue in 2005(Gartner, Market Share: E-Learning Suites and Management Systems Software, Worldwide, 2003-2005, 11 December 2006, Tom Eid)

The MarketScope is copyrighted 2007 by Gartner, Inc. and is reused with permission. The MarketScope is an evaluation of a marketplace at and for a specific time period. It depicts Gartner's analysis of how certain vendors measure against criteria for that marketplace, as defined by Gartner. Gartner does not endorse any vendor, product or service depicted in the MarketScope, and does not advise technology users to select only those vendors with the highest rating. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.The Gartner Magic Quadrants are copyrighted 2006 and 2007 by Gartner, Inc., and are reused with permission. The Magic Quadrant is a graphical representation of a marketplace at and for a specific time period. It depicts Gartner’s analysis of how certain vendors measure against criteria for that marketplace, as defined by Gartner. Gartner does not endorse any vendor, product or service depicted in the Magic Quadrant, and does not advise technology users to select only those vendors placed in the “Leaders” quadrant. The Magic Quadrant is intended solely as a research tool, and is not meant to be a specific guide to action. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.



Executive Summary


– Market Trends



– Buyer Behavior


Contents



Collaboration platforms and client interfaces must accommodate needs and requirements of emerging Gen X/Y decision makers

A new generation of decision-makers demands always-ready, personalized IT solutions

New user interface and collaboration technologies take center stage

– Most younger worker—and some older ones—will embrace:

• Personalization

• Search

• Content Management

• E-discovery

– Increased rates of end-user mobility will promote widespread use of

• Portals

• Wireless

• Collaboration

• Social networking solutions for business



IDC: Web 2.0 applications are starting to gain some traction-- especially those apps available through Lotus Connections

Source:/Notes:

N= 138 IT and LOB respondents at U.S. organizationsMultiple responses acceptedIDC AppStats, Q1 07, Preliminary and partial survey resultsSource: IDC, Web 2.0 Applications: Distinction or Distraction for Business?, Doc #205729, Feb 2007

Which of the following capabilities do you currently use at your organization?

15%

15%

13%

12%

11%

10%

5%

19%

0%Don't know

None

External blogs

Shared bookmarking

Wikis

Business/Social networking applications

Mashups

Online communities

Internal blogs



McKinsey: Interest in Web 2.0 highest in Retail, Hi-Tech and Telco, India/AP most likely region



27%

6%

6%

7%

8%

8%

9%

17%

11%

No business value

Security concerns

Corporate governanceissues

Lack of commercial tools

Lack of IT oversight into process

Not on radar/too new

Lack of infrastructure to support

Other

Don't know

Why aren’t you using mashups/composite applications?

US end users are driving demand for mash-ups as well as their promise of improving business processes

Many firms just don’t know enough about the value of mash-ups to consider using them

Need to strongly promote the business value of mash-ups, such as how they improve information context, application usability, reduce integration time and costs, in order to foment wider demand

Source: IDC, Web 2.0 Applications: Distinction or Distraction for Business?, February 14, 2007, Kathy Quirk, Mark Levitt

N = 24 IT and LOB respondents at U.S. organizationsMultiple Responses AcceptedIDC AppStats, Q1 07, Preliminary and partial survey results

24%

21%

17%

17%

16%

4%

Improved business

processes

User demand

Improved application

usability

Improved information

context

Reducing integration

time/costs

Other

What’s driving your use of mashups/composite applications?

N = 114 IT and LOB respondents at U.S. organizationsMultiple Responses AcceptedIDC AppStats, Q1 07, Preliminary and partial survey results



McKinsey: Business value and internal collaboration are keyRelationship between mash-ups and business value still unclear



SaaS is not just for SMBs according to industry analysts and consultants

Small (<99employees)

Medium(100–9,999employees)

0% 10% 20% 30% 40%

Neitherpurchased nor

reviewing

Reviewing

Purchased

Large(10,000+employees)

Source: IDC, Software on Demand Reality Check, Doc #201767, May 2006

(% of respondents)

Use and Consideration of SaaS

McKinsey reports that in a 2005 survey, 38 percent of the senior IT executives interviewed said that they planned to buy software as a service. In its 2006 survey, that number rose to 61 percent

SMBs will spend $2.44 billion in 2007, up some 17 percent from 2006 spending levels. Among the biggest SMB buyers of SaaS: the U.S. ($1 billion), Germany ($179 million) and Japan, Britain and France (a

combined $318 million)

CRM has been the most popular SaaS investment, showing growth of 22 percent in 2006. (AMI

2006



Over half of the projects supported by collaboration/portal software are application-related with BPM in highest demand followed by CRM, Collaboration, Education, Industry-specific projects

67% 59% 53%76%

18% 29%20%

17%15% 12%

27%7%

ICEs_MsgApp TCAs_Conf_Auth_Other Mobile Portal

Application IT Management Infrastructure

Note: DnB Weight (YTD)

Project type by type of software purchased

15% 12% 12%18%

10%6%

8% 2%

8%10%

6% 8%

5%4%

2%0%

10%9% 3%

6%

2%3% 6%

4%

4% 5% 2%6%


BPM CRM Education ERP Collab R&D Ind. Specific

Applications supported by software purchased



Collaboration purchases are a team decision whereas portals are clearly much more IT driven either alone or in partnership

1%

22% 24%14%

10%

39% 41%44% 63%

5% 2%1%

10%6% 6%7%

1%10% 12% 22%

6%6% 8% 6% 9%

6%7%12%


LOB Only C-Level Only IT Only LOB & C-Level LOB & IT C-Level & IT LOB, C-Level & IT

61%67%

78% 80%

60% 59% 56%

37%


IT Driven

Non-IT Driven

Project Initiator IT vs. Non-IT by software type

Detailed key project initiator by software type

LOB and C-level management are much more involved in collaboration purchase decisions

whereas IT is the major driver with portals and mobility

Non-IT (LOB, C-Level alone) involved about 30% of the time

except in mobile & portal decisions



27% 20% 14%

61%

63% 67%57%

37%

10% 13%29%

2%


Custom programmed Some custom programming Minimal / no programming

Almost two-thirds of portal application projects require customization as compared to about 20% for projects using collaboration and 14% using mobile software

Level of Customization in Application Projects by Product (3QYTD)

*TBD as Data is AvailableNote: Volumetric Weight

**Caution: Small sample size



Primary solution provider by software type

32% 37% 31% 26%

58%

13%15%

16%16%

7%

3%4%

4%2%

6%

5%1% 8%

2%

5%

6%5%

9%

3%

21%

15%16%

12%

11%

1%

12%16% 8%

5%

0%

4%1%

5%

10%

1%3%

1% 1%

7%

0%7% 3% 5%18%

1%

Total ICEs_MsgApp TCAs_Conf_Auth_Other Mobile Portal

Lg. SI Reg. SI VAR Reseller ISV Developer Outsource HW ASP None

Large or regional systems integrators are most often the primary solution provider across the portfolio -- much more frequently for portals

ICE buyers prefer SIs, Developers and Outsourcers

Collaboration buyers favor SIs, Developers

Mobile uses third parties the least

Portal overwhelmingly favors Large SIs and ISVs



Executive Summary


– Market Trends



– Buyer Behavior


Contents


© 2007 IBM Corporation26 WPLC 1H07 MPA26

Numerous hot technologies are primed to make an impact on SMBs

VoIP

Can deliver cost savings

Can unlock new features and services:

videoconferencing

unified communications

fixed-mobile convergence

Wizards

HP and Microsoft rolling out integrated, pre-packaged infrastructure and management shows value of integrated, automated, wizard-driven SMB solutions

Software appliances

An emerging alternative delivery strategy to SaaS for the SMB market.

A self-contained product with limited function

Web services

Greatly improved how businesses share data among partners

Must-have for SMBs.

Web 2.0

SMBs use Wikis, Search, RSS, and Blogs to both sell their products and services as well as purchase IT products and services.

Wireless

Helps SMBs by giving them greater access to their employees.

SMBs consider wireless essential to their businesses.



The SMB Long-tail represents a huge un-tapped $150B opportunity for IT vendors

SMB IT spending is growing much faster than that in large enterprises

– Emerging markets are mostly SMB heavy

SMB firms have challenging demands

– Low cost

– Obvious high business value

– Simplicity in deployment and use

Using the Web as a platform to tap the potential in SMB via much more simplified offerings would add another $150B or more in annual, new IT market opportunity.

Source: IDC, Hyperdisruption and the Redefinition of Enterprise IT, Doc #DR2007_GSFG, Feb 2007



The SMB Long-tail represents a huge un-tapped $150B opportunity for IT vendors and it is the entry point into emerging markets

Hundreds of thousands of large enterprises spend an average of over $2 million per year on IT.

Millions of medium businesses spend $140,000 per year

Tens of millions of small businesses spend $2,000 per year

Difficult to profitably get IT to the long tail of SMBs. But SMBs account for 60% or more of global GDP, and about 70% of total worldwide employment.

Using the Web as a platform to tap the potential in SMB would add another $150B or more in annual, new IT market opportunity.

Emerging regions are SMB heavy

Source: IDC, Worldwide SMB Technology Spending by Region:Update 2007, Doc #205112, Jan 2007



Collaboration, mobile and portals have similar demand in US across enterprise size and industry sector, however ICE is favored much more by LEs, Portals most in Health, least in Distribution

Collaboration Products

LE MB

Integrated Collaborative Environments (ICEs) 33% 23%

Messaging Applications 26% 25%

Team Collaborative Applications (TCAs) 26% 27%

Conferencing Applications 24% 19%

Other Collaborative Apps/ Social Networking SW 7% 11%

Authoring Software 18% 26%

Mobile Middleware and Infrastructure Software 21% 25%

Enterprise Portal 7% 7%

Industry Sectors

LE MB

Communications 8% 8%

Computer/Professional Services 8% 7%

Distribution 25% 31%

Finance 11% 7%

Health/Public 25% 22%

Industrial 23% 25%

Distribution Among Collaborative Projects by Company Size (3Q YTD 2006)

9% 7% 6% 2%

8% 7% 6% 13%

27% 31% 34% 21%

10% 7% 5%

4%

20% 23% 20%32%

26% 25% 29% 28%


Communications Computer/Professional Services Distribution Finance Health/Public Industrial

Projects by Industry Sector and Company Size (3Q YTD 2006)

Portals is highest in Health, least for Distribution

Messaging, collaboration and mobile are about in equal use across industry sectors

Portals is highest in Health, least for Distribution

Messaging, collaboration and mobile are about in equal use across industry sectors

Distribution of Collaborative Products by Industry Sector (3Q YTD 2006)



The top business need driving 2007 IT investments in MM is the desire to improve operating efficiencies and reduce costs

Mid-Market companies are also investing to improve information collection/use, customer satisfaction and security/resiliency

60%

51%

48%

44%

41%

34%

32%

31%

30%

27%

24%

16%

38%

Improve operating efficiencies/reduce costs

Improve information collection, integration, use

Improve customer service/satisfaction

Protect vital information

Ensure business resiliency

Better understand & utilize customer information

Improve collaboration with partners, customers

Develop/introduce new products or services

Enhance management of multiple locations

Manage supply chains more efficiently

Improve ability to meet regulatory requirements

Expand into new geographies or markets

Effectively manage merger(s)/acquisition(s)

% Rating a Significant Need Driving 2007 IT Spending

IT and LOB priorities are very similar, but IT executives are more likely to prioritize business continuity (45% vs. 35%)



The most commonly cited MM triggers of increasing IT spend are the need for faster business speed and regular buying cycles

Other common spending triggers are security needs, leveraging IT to support business objectives, and introducing new technologies

55%

52%

48%

45%

43%

39%

38%

36%

36%

35%

31%

30%

28%

24%

18%

13%

40%

Need to increase speed of business

Regular cycle of major system upgrades/replacements

Need to better protect information

Leveraging IT to help many business objectives

Introduction of new technologies

Need multi-site communication

IT is becoming a higher priority

More employees

Need to meet regulatory requirements

Increasingly mobile workforce

Entering new markets and/or product categories

Need customer online access

Improving flexibility by partner/supplier integration

Significant growth in revenues

Growth through more profitable linkages to customers

Change of management in last 6 months

Mergers/acquisition in last 6 months

MM firms expecting large IT budget growth (50%+) in 2007 are more likely than those with small growth (< 10%) to report the following triggers for their rising IT budgets:

Need to increase business speed Entering new markets/product categories Significant revenue growth Recent change in management

% Selecting



Mid market firms in the U.S. are most interested in applications-based collaboration and portal software purchases

49%

34%

17%

0% 10% 20% 30% 40% 50% 60%

Application

IT Management

Infrastructure

9%

4%

9%

4%

3%

3%

11%

0% 2% 4% 6% 8% 10% 12%

Education and Training

ERP

Groupware/Collaborative

Logistics

Research and Development

Industry Specific Applications

BPM

Mid market firms bought collaboration and portal software almost half the time to support applications

For those application-specific projects, business performance management, collaborative and education applications were the most frequent

Applications supported by software purchased

Project type for which software was purchased



Non-IT is involved over half of the time in U.S. mid market firms when initiating decisions regarding collaboration, portal and mobile software

8%

20%43%

2%6%

14%7%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

LOB only

C-level only

IT only

LOB & C-level

LOB & IT

C-level & IT

LOB, C-level & IT

Project Initiator – Mid Market



Primary solution provider: Mid market companies

30%35%

5%3%

4%9%

6%8%

0%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Most mid market firms purchase collaboration, portal and mobile software from regional or large systems integrators .

Large SIRegional SI

VAR

ResellerISV

Developer

OutsourcerHW Vendor

ASP



Word of mouth marketing is key given the influence of colleagues and peers as major information sources -- attention to demo downloads should be noted

46%

29%

28%

28%

32%

24%

25%

24%

12%

9%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Colleagues/Peers

Vendor Information

Customer References

Search Engines

Demo Downloads

Industry Analysts

Industry Events/Conferences

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For more information contact

IBM Market Intelligence:

Carol Galvin: 617-693-2688, Carol Galvin/Cambridge/IBM

Gary Doane: 877-468-0319, Gary Doane/Raleigh/IBM

WPLC Marketing Innovations:

Joshua Pines: Joshua M Pines/Somers/IBM

Antony Satyadas: 617-693-4498, Antony Satyadas/Cambridge/IBM