START-UPS: IBM steps up hearts-and-minds campaign

23 Sep 2006 | News
A battle between IBM and Microsoft for the hearts and minds of tech start-ups took a new turn as IBM announced free technical-development help to promising VC-backed firms.

A battle between IBM and Microsoft for the hearts and minds of tech start-ups took a new turn, as IBM announced it will provide free technical-development help to promising venture-capital-backed firms.

The initiative provides for International Business Machines Corp. to offer free technology, development and marketing help through its more than 30 Innovation Centers around the world. IBM says it aims to speed up and cut the cost of product development for the little companies it selects.  

The announcement, from IBM’s Venture Capital Group, is the latest in an intensifying contest between it and rival Microsoft Corp. to embed their respective technologies in selected start-ups that they think will be future winners in the global tech market. Microsoft is pushing software and services based on its Windows, .Net and related systems, while IBM is advocating “open source” software based on Linux, Java and other systems.

For the multinationals, the programmes are a new variation on an old theme. For years, the world’s major tech companies – including Intel, Cisco, Siemens and Sony – have operated small venture-capital funds that invested in tech-startups that they thought particularly promising. In the last two years, however, Microsoft and IBM have begun using their VC operations to offer technology to the start-ups – sometimes in addition to cash, but increasingly in lieu of it. For instance, last June Microsoft announced it took a 10 per cent stake in a small London startup, Skinkers Ltd., in exchange for giving it technology from Microsoft labs to develop new online publishing services using so-called “push” technology. Microsoft valued the transaction at £2 million.

For the little companies, getting picked by either multinational can seem a pretty good deal. Not only do they get access to some hot technology, but they also become pilot fish swimming alongside the tech whales – benefiting from the marketing and sales billions of the giant. For instance, in its release announcing the new initiative, IBM quoted Yaacov Cohen, CEO of Mainsoft Corp., one such beneficiary: “Our collaboration with IBM has given us greater credibility to extend our cross-platform services beyond our traditional customer base.” Cohen was further quoted as praising IBM’s help in translating some of Mainstay’s products from the Microsoft .NET standard to the open-source J2EE system.

IBM’s Innovation Centers operate on a global scale, tailoring software and computer systems to individual business customers, or helping develop new ones; this year, IBM said, the centers have completed more than 4,000 projects for customers. At the centres, IBM said, the qualified start-ups can get free access to technical experts, to IBM systems to test out their new products, to free workshops, and free marketing help.

It said start-ups already working with IBM include Ranal Group of India, and Altair of China.

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