IBM and the Seeds of Revolution

Big Blue seeks to establish a presence in emerging markets.
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IBM

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hit on two hot-tech topics: China and open standards.

On Monday, Big Blue announced the creation of a venture-capital advisory council and offered developers in emerging markets free workshops that presumably will help them create applications more expeditiously.

IBM is initially bringing together seven venture capitalists to develop closer ties to the start-up world. The Armonk, N.Y.-based company is hoping to gain more insight into cutting-edge technologies and access to new business partners; the VCs are hoping to give their start-ups greater access to IBM's technical expertise and enormous sales muscle.

"Our customers are hungry for the best and brightest new solutions to accompany our middleware and lower-level components," says Drew Clark, director of strategy at IBM's Venture Capital Group in Menlo Park, Calif. "The venture capital firms themselves are really a lens for IBM to look into the world of start-ups."

Rather than investing directly in start-ups as do other companies such as

Intel

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and

Microsoft

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, IBM has focused more on developing partnerships with start-ups and investing in venture capital funds.

A relationship with IBM, however, is more important than Big Blue's investment in a fund, says Lip-Bu Tan, chairman of Walden International and a member of IBM's new VC advisory council.

"A lot of those small application-software companies have a hard time getting major accounts as a start-up company," he explains. "But a partnership with IBM Global Services will open the door and give them credibility."

IBM created the VC advisory council with both emerging markets and open standards in mind.

Walden, for instance, has been active in China and Hong Kong since 1994; and Tan, Walden's founder, helped pioneer the U.S. venture capital concept in Asia. Several of Walden's portfolio companies, meanwhile, are focusing on open standards, including

SugarCRM

and

Funambol

.

Another member of the IBM VC advisory council, Richard Frank, CEO of Darby Overseas Investments, is a former managing director of the World Bank and a sort of "dean of VCs in Latin America," notes Clark.

Other VC firms that have agreed to join the council include

Draper Fisher Jurvetson

,

Hummer Winblad

,

3i

and

U.S. Venture Partners

.

Meanwhile, IBM also plans to directly help developers in emerging markets -- specifically China, India, Russia and Brazil -- create applications based on open standards by vastly expanding the classes it offers them.

Instead of having to wait weeks and then traveling to attend classes at IBM's "innovation centers," the company is offering free virtual mentoring classes within a matter of hours, taught in real time by IBM architects in developers' native languages, explains Mark Hanny, IBM's vice president of independent software vendor and developer relations.

The move is focused on helping to accelerate the development of applications based on open technologies such as Linux.

Not surprisingly, that could translate to more sales for IBM, whose hardware and software products often serve as the foundation for such applications. Last quarter, IBM sales in China, Russia and India grew 23%.