BUSINESS WEEK ONLINE Transcript of Oct. 3, 1996, conference IBM TAKES ON THE INTERNET Giant IBM is pitching to join Netscape and Microsoft as a force on the Internet (see the Sept. 16 Business Week story, "The New I-Way Hog: IBM"). So BW's guest on Oct. 3 was Dr. Irving Wladawsky-Berger, general manager of IBM's Internet Div. and its chief Net strategist. He was online with the author of the BW story, Computers Editor Ira Sager. The moderator was Bob Arnold, editor of BW Online and senior editor of the magazine. OnlineHost: Copyright 1996 America Online, Inc. OnlineHost: Material entered into AOL by persons other than those identified as Business Week's employees or authorized representatives, acting on behalf of Business Week, is material for which Business Week assumes no responsibility. OnlineHost: Welcome to Business Week Online! Tonight we talk about how IBM aims to conquer the Internet, with Dr. Irving Wladawsky-Berger (IrvingWB), general manager of Big Blue's Internet Div. and architect of its Net strategy. He's online with Ira Sager (Isager), BW computers editor and author of a Sept. 16 BW story about what IBM has already accomplished on the Net -- and its ambitious plans for the future. BobABW: Hi, Dr. W. Hi, Ira, and welcome to all of you on AOL tonight. Your moderator is Bob Arnold, editor of BW Online IrvingWB: Hello, happy to be here. Isager: Hello. BobABW: Ira, would you do us the honor of tossing the first question? Isager: Irving, a general question. How do you see the Internet changing the way we work? IrvingWB: I think it is going to make it much easier for us to collaborate and interact, as well as getting access to information. The chat group we are in the middle of is a very good example. BobABW: JStolly has the first audience question. Question: Dr. Berger, what is IBM's position on the "browser war" between Netscape and Microsoft? IrvingWB: I think that it will subside after a while. The real action is in applications. The browser is just another technology -- a very important one, but just one of many. Isager: The Internet promises to deliver endless information to our fingertips, but what new skill will people have to develop to take advantage of the Net? IrvingWB: I think the action is in how we use information. We will get much more used to communicating and interacting and working together as a group, like we are doing now. Also, we will learn how to do "research" -- that is, go searching for what we are looking for, because if we are good at research, we will find lots and lots of stuff. In the end, the basics are more important than ever -- reading, writing, reasoning. BobABW: Here's a follow-up from JStolly. Question: Who is doing the best job in designing Internet applications? IrvingWB: Many customers out there are putting out great applications. There are an increasing number of them, as you can see from Web sites. I don't know if there is a particular one that I would characterize as better than others, but what is so impressive is how many are showing up, more and more each day. BobABW: I guess this falls under the heading of a personal question. Question: When you surf the Net, which search engine(s) do you use? IrvingWB: I tend to use Yahoo engines. Isager: Me, too. BobABW: Dr. W-B, if I may...what did IBM learn from its Olympics experience? IrvingWB: The most important thing we learned is that any applications that deal with the press is a missions-critical application by definition, or perhaps a super-missions-critical application. But seriously, we learned a lot how to scale, with our Olympics Web site that supported almost 200 million hits during the Olympics. We learned how to store huge amounts of information in databases and serve them up as needed on demand. We also learned a lot on how to mix text with audio, images, video, and all kinds of things like that, which we are busy trying now to build into future products. Isager: How does IBM make money on the Internet? IrvingWB: IBM will make money the old-fashioned way -- that is, by selling lots of systems, software, services, and solutions. In the end, what the Internet will do the most for the IT industry, including IBM, is to stimulate huge demand for new applications, and that is where we will all make our money, by providing the basic tools and hardware and software and services to support and build those applications. BobABW: Here's a good question, from and for our audience. Question: What exactly is the IBM Global Network I've seen written about? IrvingWB: The IBM Global Network or IGN is our own network that many customers use for connecting their systems around the world, and, in addition, it is offered to consumers as an Internet Service Provider. IGN competes with AT&T, MCI, and other network providers, but, in addition, it is a partner with AT&T, from which we buy the underlying networking pipes. In the world we live in today, most of the time your competitors in the morning may be partners in the afternoon. Isager: Why does IBM need its own network? IrvingWB: IGN is a profitable business in its own right, which is the main reason for having it. The main advantage is that it lets us do business around the world. Perhaps in the U.S. we would not need our own network, but to support global customers, IGN is probably the most far-reaching network today for doing business around the globe. BobABW: Mike Jab is next. Question: There are many companies trying to drive the Internet -- Netscape, Sun, Microsoft, for example. Where does IBM fit in? IrvingWB: IBM's main objective is to help customers do business on netowrk, use the network to integrate their existing enterprises, reach out to many users out there. So, in the end, it is an extension of helping customers do business -- which is what we have been doing for a long time. The Internet is just the next main step -- albeit a huge quantum jump from the past. BobABW: Here's a question on the future, from OChuckles. Question: What type of systems will consumers use to connect to the Internet in the future (cable, ISDN, etc.)? IrvingWB: I believe that it will be all of the above and possibly new ones that we have not even discovered so far. The beauty of the Internet protocols is that they are independent of transport mechanisms -- and so we can build them and move them around to whatever is the most reasonable transport available at the time for a particular situation. BobABW: DGRIZZ's question may not be in your area, but can you help? Question: What is the best way to voice a complaint with IBM computer support? IrvingWB: There is an IBM 800 number for support, which I do not know right now. Perhaps we can follow up, or better still send me E-mail at irving@ vnet.ibm.com Isager: IBM's Internet offerings are mostly geared to businesses, but what can consumers expect to see from IBM? IrvingWB: We are totally consumed with supporting business, because in the end that is what we know best. We will generally reach consumers through our business customers -- that is, instead of IBM reaching readers directly, we would sell stuff to Business Week, and you reach your customers that way. That is in general. Some parts of IBM, such as the Consumer Div., do things aimed at consumers directly, and I am sure that you have seen the beautiful new Aptivas we have started to ship. But that is in the small minority. BobABW: Here's Sheri7102. Question: It seems that IBM's vision in the early '70s was right. A large server delivers power to local PCs or dumb terminals. Oracle seems to be taking on that challenge by emphasizing server power over Microsoft's heavy client vision. IrvingWB: I am sorry, I am not sure what the question is. In general, I believe that there will be many different kinds of clients connected to networks: Some will be very heavy, and many new ones will be very, very thin, perhaps consumer kinds of devices. If people are happy with their PCs, like all of us using the chat room here, we will keep them but to reach the next 100 million people out there and the next 100 million after that, we will need to make computers much easier to use, much less expensive -- and that is where many new network computers will come in. BobABW: Maybe Sheri can elaborate while we go on. Here's a banking question, from JStolly. Question: My friend Gavin wants to know: I bank with Citibank, and they weren't in the recent IBM banking agreement to offer home banking. What is the difference between the way Citibank offers its services, and the way the member banks will offer their services? BobABW: Perhaps you could tell us more about IBM's banking initiatives. IrvingWB: I am not familiar with the Citibank service, but I assume that it is a very good one as well. The main advantage of Integrion, the new consortium we announced, is that the members can share a lot of the underlying network services and that way both reduce their cost and get a lot of new technologies out there quickly by sharing the work. So they share what makes sense to share, and they preserve their brand and compete in those parts where competition makes sense. BobABW: Speaking of banking, here's HotTinWoo. Question: What do you think of the CyberCash (or CyberCoins) venture, and future? How is it different from what IBM is doing? Why isn't Visa or Mastercard doing it for themselves? IrvingWB: We announced SET with Visa and Mastercard, which is the safest way of using credit cards over public networks. We will be shipping the first SET software late this year or early in '97, but, in addition, we are working in e-cash and e-checks so that a consumer can have an e-wallet and use whatever form of payment makes more sense for a particular purchase: credit, cash, or check -- much like they do today. The reason Visa and Mastercard worked with us is because our expertise is technology and theirs is running a credit card business, which is a pragmatic division of skills. BobABW: Here's Sheri's elaboration on an earlier question. Comment: I guess what I wanted to say was that Web servers are just that -- heavy servers and minimal clients. You can't deliver a technology to the average person that changes constantly. I wouldn't buy a new PC just to watch new TV shows. IrvingWB: Exactly. I think that just like electric motors are now embedded in all kinds of things, so that most of us do not know how many motors we have in our house, over time I expect that communicating browsers will appear throughout the house, in telephones, TVs, electric meters, and other devices, and some will have minimal intelligence while others will have more. BobABW: Here's a hot potato from HotTinWoo. Question: Should IBM have started a new Internet division earlier? Did you want to start it earlier? IrvingWB: I was busy running the RS/6000 Div. earlier, so I was not thinking about it until I was asked to start the division. The Internet as a business is a very new phenomenon, so I do not think that too many people started earlier -- perhaps Sun and Netscape, but not too many more. It is still in its infancy or crawling stage, so we all have lots to do to get it to grow up. BobABW: OChuckles would like a definition of a term you used a minute ago, Dr. W-B. Question: By "network computers" do you mean simple, cheap, no hard drive, the client's files on the server? IrvingWB: Yes, by network computers I meant the new kinds of "think" clients that the industry agreed to build and that started to show up. Isager: Why establish a central division if every product IBM offers needs to be Internet-enabled? IrvingWB: The Internet Div. is a way of getting going -- put focus into our efforts, get coordinated -- and hopefully over time, it will not be needed and can go out of existence because Internet technologies and culture have now been integrated into each division. BobABW: O.K., maybe it's early for this question. But will any of the small fry prosper? Question: Will the big companies gradually become ISPs to all of us, and the smaller ISPs become a small part of the total picture? IrvingWB: I think it is quite possible that there will be a consolidation of ISPs as the telecommunications companies are each becoming an ISP. However, it is very difficult to predict the free market, especially in an area as full of innovation as the Internet, so I would not count the small ISPs out just yet. BobABW: I think JStolly may be interested in IBM stock. Question: How long have you been with IBM? What are the biggest differences today vs. five years ago at IBM? And is IBM still fat, or have you cut your costs to the bone? IrvingWB: I joined IBM in 1970 in the Research Div. after getting a PhD in physics from the University of Chicago. IBM is a very, very different place today than five years ago. When you have gone through a near-death experience, you become both more modest and hungrier, and that is what we have become. IBM has now a lot fewer people than before -- perhaps 50% or so of the number five years ago. It is a more professional organization, where everyone works much much harder and things happen much, much faster than in the past. BobABW: Mkeogh wants to know... Question: How would you describe IBM in the year 2010? IrvingWB: That is a very tough question, given how fast the world is moving, but my hope is that we continue to be leaders in providing the most advanced applications, systems, and technologies to our customers in the year 2010. Now, the fascinating question is what those applications will be. I think they will be a lot more intelligent in the sense that they will manipulate a lot, a lot more information, and will perform all kinds of searches, data-mining, and generally extracting intelligence from the data. I think that visual interactions, images, and video will become much more important because our brains are wired to interact visually. I think that we will truly be universally connected in the sense that just about everyone will be connected with computers, much as just about everyone has telephones and TV today. Isager: I don't know if this is any easier: What will the Internet be like in the year 2010? How will it differ from the mainly text-based Net we see today? IrvingWB: I think that the Internet will be much more robust than it is today, with a lot more bandwidth that will permit the transmission of video to the home. I think every interaction will be very secure, and it will be very reliable. In short, it will have matured very nicely as we would all expect it to mature. The hardest thing is to predict new applications, because by definition the truly new ones are ones that we cannot even imagine today. BobABW: As you answer Sheri's question, perhaps you can define MVS. Question: How does IBM envision MVS in its long-term vision? Is it a dead technology, or will it be integrated into newer technology? To me, it's the most reliable OS around, and with its interactive shortcomings IBM's technology is solid in that area. IrvingWB: MVS continues to do what it is doing back there in large enterprise servers, supporting huge numbers of transactions and huge databases. We are shipping more and more MIPS each year, although the revenues are flat because the prices are decreasing so rapidly. I expect MVS to be around because of the huge investments people have made in applications for and because it does what it does so well. But I expect that we will use MVS via standards like everything else: TCP/IP, Java, etc. The operating systems are becoming more a part of the infrastructure, and will be less visible to most people. BobABW: HotTinWoo is back with a games question. Question: How much potential is there for multiplayer, online games on the Internet? Will it ever go mainstream, and, if so, when? IrvingWB: Yes, I am not expert but I fully expect that interactive games will go mainstream because the market will pay for them. I do not know exactly when, but I suspect it will happen for sure in the near future. BobABW: OChuckles is next. Question: Do you think we will start getting charged by the byte for our bandwidth usage? IrvingWB: No, I do not think so because that is such a cumbersome mechanism for buyers and sellers, but I do think that we will be offered different levels of subscription to services, with paying more meaning that we have access to higher classes of service and more bandwidth. IP6 is already putting in the hooks for classes of service. Also remember that people selling over the Net will want the best possible bandwidth to reach their customers, so perhaps a lot of the bandwidth to consumers will be supported by business over the network. BobABW: Dr. W-B, what do you see as the revenue split potential of the Internet when it comes to commerce vs. advertising? IrvingWB: Bob, I am not really sure. Both forms are used in today's world, so I expect that both will be there in the Net. I cannot predict right now which will be more prevalent. One of the main reasons to be active in the electronic marketplace is to experiment and learn, which is what we are all doing right now, and see which of the ideas survive the best. BobABW: Sheri's back for one more probing question. Question: How has the acquisition of Lotus Corp. affected your vision? Lotus Notes seems to have limitless possibilities in terms of forms-based dialogues. How does IBM plan to use that technology to its advantage? IrvingWB: Lotus is indeed one of the major technologies we have for our Internet efforts. We believe that Domino is the richest and best Web server in existence and will make it possible to build very sophisticated Web applications with lots of functionalities, because Domino leverages all the code that Notes has. Beyond that, collaboration, workflow, messaging, and many other things that Notes is good at are critical to intranets and to many applications that are all about getting people to work together better. BobABW: And now, here's BW's Ira Sager with our final question of the evening. Isager: Is there a danger of any company trying to take the Internet in a proprietary direction? IrvingWB: We are all worried about that, and that is why we have to keep a very keen eye on it. I believe that the Internet culture will not allow that to happen, but we have to keep repeating it over and over because getting proprietary is one of the worst dangers to the vision of universal access, connectivity, and applications. BobABW: Thank you, Irving Wladawsky-Berger for your informative -- and fast -- answers this evening. We'll no doubt be hearing from you much more in the future on this subject. Thanks to you, too, Ira Sager of Business Week. Ira's our IBM expert, which must have been obvious. IrvingWB: Thank you all for participating and for your very nice questions. BobABW: Thanks to you on AOL, as well, for your questions. That concludes tonight's program. Check BW's Search & Downloads screen for transcripts of this and past conferences. Thanks again, and goodnight. Copyright 1996 by The McGraw-Hill Companies, Inc. All rights reserved.