Tivoli systems was on track to be a shining star in IBM's portfolio of acquisitions. But the lustre has dulled to merely a distant memory.
The developer of software for monitoring enterprise IT systems has suffered a streak of woes, including a massive brain drain and competition from agile newcomers that have eaten into its market share, say industry executives and analysts.
The same wailing can be heard throughout large systems-management firms. During the 1990s, those companies held the key for helping companies manage their IT systems. That lock on the market is over.
Snowball effect
In trying to manage large enterprises, the software grew so complex that many companies used only a fraction of what they bought, making it hard to justify the expense. And to make matters worse, they had to hire additional IT staff to run it. "We've seen companies implement one-tenth of what they buy," says Lee Schulz, Eastern region sales manager at Logical, a solutions provider. "Customers get lost in the complexity and discipline of it and implement only very fundamental components."
Industry executives say the behemoth solutions approach is outdated. What's selling now are point solutions wrapped in plug-in modules, which are eating away at the market share once held by Tivoli, Computer Associates and Hewlett-Packard.
"The enterprise framework systems-management play by Tivoli, Platinum Technology and Computer Associates' Unicenter is dead," says Ed Taylor, CEO of Collective Technologies, a managed-service provider.
Given that scenario, the clock is ticking for Tivoli, which IBM bought in 1996 for US$743 million. How bad is it? Bad enough that IBM chairman Lou Gerstner singled out the subsidiary for contributing to the declining Q4 revenues. Overall, IBM software revenues fell, in stark contrast with the strong growth the company posted in its hardware, financing and Global Services divisions.
Tivoli's public scolding is a hint that if things do not improve, IBM may fold the company into its software group. "It was a very public rebuke. I'm sure the [Tivoli] executives were aware they had a problem, and IBM wanted to underline the message," says Rich Ptak, VP at the Hurwitz Group.
"There are rumors that IBM wants Tivoli back inside," Ptak says.
