IBM just announced the purchase of WorkLight, an Israeli startup that provides a mobile app development and infrastructure software. IBM says the acquisition will help expand the enterprise mobile capabilities it offers to clients. Financial terms were not disclosed but we’ve heard that the acquisition price is around $70 million, according to Israeli publication Calcalist.

WorkLight, which has raised $18 million in funding, allows organizations develop and deliver HTML5, hybrid and native applications with, and deliver these applications with mobile middleware, security features and integrated data management and analytics. Worklight dramatically reduces time to market, cost and complexity while enabling better customer and employee user experiences across more devices.

Worklight’s customers range in terms of sector and include companies in financial services, retail and healthcare. For example, a bank can create a single application that offers features to enable its customers to securely connect to their account, pay bills and manage their investments, regardless of the device they are using.

IBM says that Worklight will become an “important piece of IBM’s mobility strategy,” offering clients a development platform that helps speed the delivery of existing and new mobile applications to multiple devices and ensures secure connections between smartphone and tablet applications with enterprise IT systems.

IBM’s goal is to provide an end-to-end solution that allows enterprises to build and connect mobile apps, manage security on these apps and devices, provide analytics for mobile data, and more. In addition to Worklight, IBM today is also unveiling IBM Endpoint Manager for Mobile Devices, a new software system that will enable corporate users to manage and secure their mobile devices these applications are running on.

The acquisition of Worklight is expected to close in the first quarter of 2012. Worklight will sit within IBM’s Software Group.

IBM just released fourth quarter and fiscal year 2011 earnings today. Non-GAAP earnings came in at $4.71, up 11 percent; GAAP earnings per share were $4.62 per share (up 11 percent) for the quarter. Net income for the quarter was $5.5 billion, up 4 percent for the quarter, with revenue coming in at $29.5 billion, up 2 percent from the previous year. Analysts expected earnings of $4.62 a share on revenue of $29.7 billion. So basically, sales missed but profits beat expectations.

Revenues from the Software segment were $7.6 billion, an increase of 9 percent. But revenues from IBM’s hardware systems and technology segment totaled $5.8 billion for the quarter, down 8 percent from the fourth quarter of 2010.

“We had a strong fourth-quarter performance, capping a year of record earnings per share, revenue, profit and free cash flow,” said Ginni Rometty, IBM president and chief executive officer. “We delivered outstanding results in all four of our strategic initiatives for the quarter and the year, as we continued to realize the benefit of our long-term investments in growth markets, business analytics, Smarter Planet solutions and cloud. We are well on track toward our long-term roadmap for operating earnings per share of at least $20 in 2015.”

Net income for 2011 in total was $15.9 billion compared with $14.8 billion in the year-ago period, an increase of 7 percent. Revenues were $106.9 billion, an increase of 7 percent, compared with $99.9 billion in 2010.

Quarterly revenues from the company’s growth markets increased 7 percent and tevenues in the BRIC countries — Brazil, Russia, India and China — increased 10 percent, says IBM. The company ended 2011 with $11.9 billion of cash on hand.

In the fourth quarter, IBM named Rometty as the company’s new CEO and president, replacing Samuel J. Palmisano, who remained as chairman of the board. The company’s fourth quarter acquisitions included DemandTec, and Emptoris.

In its first acquisition of 2012, IBM has announced the purchase of cloud-based software testing platform Green Hat. Financial terms of the deal were not disclosed.

Founded in 1996, Green Hat allows developers to test software applications prior to delivery in the cloud. Developers can test TIBCO, webMethods, IBM WebSphere MQ, SOA, BPM, SOAP, REST and Cloud applications with the company’s platform as well as Virtualize unavailable applications and test application performance.

Green Hat, says IBM, creates a virtual environment that simulates a wide range of IT infrastructure problems and issues, without the constraints of hardware or software services because the platform is based in the cloud. The virtual test environment can be set up in a matter of minutes versus weeks, and for a fraction of the cost for developers.

According to IBM, software testing represents more than 50 percent of overall development costs, and testing teams often spend upwards of 30 percent of their time managing the complexity of the test environment. Green Hat will join IBM’s Rational Software business, and will help Big Blue’s enterprise clients manage software development costs, test cycle times and risk.

Green Hat customers include British Airways, H&M, T-Mobile, JP Morgan, Goldman Sachs and Virgin Mobile.

It looks like consumers in the U.S. were shopping online alongside opening presents this year. According to IBM’s Coremetrics retail data, online sales on Christmas Day grew by 16.4 percent from last year.

Similar to trends seen over the Thanksgiving holidays, more shoppers were flocking to mobile devices to complete purchases. IBM says that 18.3 percent of all online sessions on retailers’ sites were initiated from a mobile device, up from 8.4 percent in 2010 (an increase of 117.8 percent).

Sales completed from mobile devices grew, reaching 14.4 percent versus 5.3 percent on Christmas Day 2010, representing an increase of 172.9 percent. In terms of specific mobile devices, the iPad led all mobile device traffic to retailers at 7 percent, followed by the iPhone at 6.4 percent and Android at 5 percent.

The day after Christmas also brought increased online sales, says IBM. E-commerce sales for December 26 were up 10 percent and 18.7 percent of all online sessions on a retailer’s site were initiated from a mobile device. And 13.8 of total sales came from mobile devices.

The holiday shopping season is still not over, as many online retailers are offering discounts post-Christmas and around New Years. We’ll see how online retail spending performs over the next week, but all signs are pointing to record sales this year.

On the heels of purchasing merchandising software DemandTec for $440 million, Big Blue is continuing the shopping spree to advance its smarter commerce strategy. IBM has just announced the acquisition of Emptoris, a cloud and on-premise analytics software that brings more intelligence to procurement and retail supply chain operations. Financial terms of the deal were not disclosed.

Emptoris’ software helps companies maximize financial performance and optimize commercial risk when it comes to supply chain and inventory management, procurement, sourcing and more in retail environments. For example, a global oil and gas company could use Emptoris to figure out how to source operations across suppliers. Emptoris has more than 350 customers in 75 countries.

IBM says the acquisition furthers its Smarter Commerce initiative, which aims to help companies respond to shifting customer buying patterns. The company believes this is a $20 billion market opportunity, particularly in the software space.

IBM has made a major purchase today in the commerce and retail world—DemandTec, a retail marketing and merchandising software company. IBM is acquiring DemandTec (which listed on the Nasdaq) in an all cash transaction at a price of $13.20 per share, or approximately $440 million.

DemandTec provides retailers and e-commerce companies with tools to transact, interact, and collaborate on core merchandising and marketing activities. DemandTec’s cloud-based analytics software allows businesses to examine different customer buying scenarios, both online and in-store, so retailers can spot trends and shopper insights to make better price, promotion, and assortment decisions that increase revenue and profitability.

For example, retailers can predict how consumers will respond to a price change before making the change. Or a merchant and supplier can work together to understand how one shopper segment differs from another to create a targeted merchandise plan.

DemandTec’s use of cloud-based price, promotion and other merchandising and marketing analytics helps companies better define the best price points and product mix based on customer buying trends. Essentially, DemandTec uses data analysis and forecasting to make the retail world smarter.

DemandTec customers include Best Buy, ConAgra Foods, Delhaize America, General Mills, H-E-B Grocery Co., The Home Depot, Hormel Foods, Monoprix, PETCO, Safeway, Sara Lee, Target, Walmart, and WH Smith. DemandTec also has a portfolio of 31 patents in the areas of pricing, response analysis, and promotion analysis.

For IBM, the acquisition is all about its smarter commerce initiative. IBM estimates the market opportunity for Smarter Commerce at $20 billion in software alone.

IBM’s recent acquisitions include Algorithmics, and Tririga.

As of yesterday afternoon, Cyber Monday online sales were up 18 percent but apparently a surge of activity yesterday evening helped push the day’s e-commerce sales to record amounts. Cyber Monday online sales, according to IBM’s Coremetrics report, were up 33 percent over 2010, and up 29.3 percent over Black Friday.

comScore is reporting that Cyber Monday sales reached a record $1.25 billion, up over 20 percent from last year, to become the heaviest online spending day in history. According to the Wall Street Journal, this is only the second time a billion dollars in online commerce has occurred in one day. For the holiday season-to-date, $15 billion has been spent online, 15 percent increase versus the same days last year.

Overall, 10 million people bought online on Cyber Monday, representing the first time on record that threshold has been reached in a single day. The average online buyer conducted 1.9 online transactions on Cyber Monday for a total of nearly $125 in spending.

IBM says that the average order amount was up 2.6 percent this year from $193.24 to $198.26. The shopping peaks during the day took place at 11:05am PST/2:05pm EST as well as after commuting hours on both the east and west coast.

comScore also reports that half of dollars spent online at U.S. Web sites originated from work computers, up slightly from last year. Buying from home comprised the majority of the remaining share (43.2 percent) while buying at U.S. Web sites from international locations accounted for 6.6 percent of sales.

On Cyber Monday, 10.8 percent of people used a mobile device to visit a retailer’s site, up from 3.9 percent in 2010. Additionally, mobile sales were up as well, reaching 6.6 percent on Cyber Monday versus 2.3 percent in 2010.

Interestingly, more people flocked to mobile devices to shop on Black Friday than Cyber Monday. On Cyber Monday mobile traffic averaged 10.8 percent compared to 14.3 percent on Black Friday. And consumer sales on mobile devices reached 6.6 percent versus 9.8 percent on Black Friday.

Apple’s iPhone and iPad continued to rank one and two for mobile device retail traffic (4.1 percent and 3.3 percent respectively). In fact, shoppers using the iPad drove more retail purchases than any other device with conversion rates reaching 5.2 percent compared to 4.6 percent for the iPhone.

Android came in third with 3.2 percent. Collectively iPhone and iPad accounted for 7.4 percent of all online retail traffic versus 10.2 percent on Black Friday.

Referrals from social networks were only slightly up yesterday from last week. Shoppers referred from Social Networks generated 0.56 percent of all online sales on Cyber Monday versus 0.53 percent on Black Friday. Similar to Black Friday, Facebook led the pack, accounting for 86 percent of all social media traffic.

Discussions on social media sites leading up to Cyber Monday increased in volume by 115 percent compared to 2010. Consumers were mainly sharing tips about using price comparison websites while avoiding cyber scams, Cyber Monday deals for international consumers and Black Friday in-store shopping experiences.

eBay also released its Cyber Monday stats, revealing that consumers in the U.S. spent two and a half times more via eBay Mobile this Cyber Monday than last year. PayPal Mobile announced a six-fold (552 percent) increase in global mobile payment volume compared to Cyber Monday 2010. And GSI Commerce announced a four-fold (374 percent) increase in U.S. mobile sales when compared to 2010.

Shoppers in Athens, GA; Los Angeles and New York spent the most via eBay Mobile on Cyber Monday. For PayPal, there was a more than four-fold (397 percent) increase in the number of customers shopping through PayPal mobile on Cyber Monday 2011 compared to last year. On Cyber Monday 2011, PayPal saw global mobile payment volume more than double (154 percent ) compared to an average Monday. And Cyber Monday 2011 resulted in a 17 percent increase in global mobile payment volume compared to Black Friday 2011.

We also saw record breaking Thanksgiving and Black Friday sales, so the big jump in Cyber Monday sales isn’t completely surprising. More and more retailers pushed lucrative online deals, as well as free shipping offers this year, making shopping online more convenient and wallet-friendly for consumers. And the risk of pepper spray incidents in stores certainly was an incentive for shoppers to purchase from their computers or mobile phones.

Early results for Cyber Monday are looking good for retailers. Cyber Monday 2011 online sales are already up 15 percent for this same time period over Cyber Monday 2010, according to IBM’s Coremetrics retailer data.

IBM says that it expects most online shopping to come from laptops and PCs during the day with mobile shopping activity picking up later in the day, when consumers are purchasing from home.

Currently 12.3 percent of consumers are using a mobile device to visit a retailer’s site and 7.4 percent of consumers are using a mobile to make a purchase. In terms of devices, the iPhone continues to lead all mobile device traffic at 4.88 percent, followed by Android at 3.9 percent and iPad at 3.26 percent.

Black Friday online spending was up over 20 percent, so it’s looking good for Cyber Monday. Last year, Cyber Monday was the heaviest day of online spending ever, with sales exceeding $1 billion. And it’s looking like e-commerce spending will be well over $1 billion.

Thanksgiving brought record online retail sales for the holiday, with spending up 39.3 percent over Thanksgiving 2010. And today, IBM Coremetrics data shows a 24.3 percent growth in online sales on Black Friday compared to the same period last year.

Mobile traffic on Black Friday was 14.3 percent of all retail traffic compared to 5.6 percent in 2010. Sales on mobile devices surged to 9.8 percent from 3.2 percent year over year. As we saw with PayPal stats from Thanksgiving and Black Friday, mobile shopping volume is increasing by over 500 percent this year.

Mobile shopping was actually led by Apple devices, with the iPhone and iPad ranking one and two for consumers shopping on mobile devices (5.4 percent and 4.8 percent respectively). Android came in third at 4.1 percent. Collectively iPhone and iPad accounted for 10.2 percent of all online retail traffic on Black Friday.

As predicted by eBay, Google and others, tablets were a major platform for shoppers this year. IBM says that shoppers using the iPad led to more retail purchases more often per visit than other mobile devices with conversion rates reaching 4.6 percent compared to 2.8 percent for overall mobile devices.

IBM took a deep dive on conversion rates of mobile shoppers vs. online shoppers and traffic from social networks. Mobile shoppers demonstrated a laser focus that surpassed that of other online shoppers with a 41.3 percent bounce rate on mobile devices versus online shopping rates of 33.1 percent. Shoppers referred from Social Networks generated 0.53 percent of all online sales on Black Friday. Facebook led the pack, accounting for 75 percent of all traffic from social networks.

There was actually a 110 percent increase in discussion volume around Black Friday sales on social networks compared to 2010, with conversations centralized around sharing tips on how to avoid the rush. Topics included out-of-stock concerns, waiting times and parking, and a spike in positive sentiment around Cyber-Monday sales.

Department stores sales were up 59.0 percent from this time last year, mainly because of the strong deals and online shipping incentives. Home goods also reported a 48.8 percent increase in sales from Black Friday 2010 and apparel sales were also strong this holiday with Black Friday numbers showing an increase of 47.2 percent over 2010. Health and Beauty online sales were up 34.2 percent year over year.

eBay Mobile announced that shoppers in the U.S. purchased nearly two and a half times as many items via eBay Mobile this Black Friday when compared to 2010. PayPal Mobile announced a six-fold (516 percent) increase in global mobile payment volume compared to Black Friday 2010. There was a more than four-fold (371 percent) increase in the number of customers shopping through PayPal mobile on Black Friday compared to last year. And PayPal saw global mobile payment volume more than double (148 percent) compared to an average Friday.

GSI Commerce announced a three-fold (254%) increase in U.S. mobile sales this Black Friday compared to 2010. And searches through the Milo.com platform increased 692 percent over Black Friday 2010.

Considering the strength of online sales so far, it should be interesting to see if Cyber Monday, which tends to be a peak day for online retail, can surpass the sales from Black Friday.

As we heard a few weeks ago, retailers were expecting Thanksgiving Day to be a major online shopping day as more and more consumers are hitting their laptops, tablets and more to get a head start on sales in between Turkey time. It looks like early results point to the day being a profitable one for retailers. According to IBM’s Coremetrics retail data, online Thanksgiving 2011 sales were up 39 percent over Thanksgiving 2010.

Mobile shopping also had a break out day on Turkey Day. The number of consumers using a mobile device to visit a retailer’s site reached a high of 15.2 percent, up from 6.45 percent in 2010. The number of consumers using their mobile device to make a purchase increased to 11.09 percent, up from 4.25 percent in 2010.

The success of online and mobile sales on Thanksgiving is a good signs for Black Friday and Cyber Monday sales as well. As eBay predicts, ‘couch commerce,’ will be huge this year. Basically, consumers will be using their tablets and mobile phones from the comfort of their couches to shop this holiday shopping season.

It looks like eBay may have been on to an important trend this season. comScore is expecting a 15 percent increase in overall online spending during the November-December season; and already online sales are up 14 percent.

As the usage of smartphones increases in business operations, IBM is debuting a new service to help businesses secure mobile devices with access to corporate data. Called the Hosted Mobile Device Security Management service, the new product includes a security application for smartphones and tablets, along with managed services including policy management and user compliance monitoring.

IBM says the Device Security Management hosted service helps organizations protect against and monitor data loss and other risks caused by device theft, unauthorized access, malware, spyware, and inappropriate apps.

The service allows businesses to configure and monitor employee smartphones and tablets to comply with security policies, secure data in the event that a device is lost or stolen, help to find a lost or stolen device, protect against spyware and viruses, detect and remove malicious and unapproved applications, track user activity, and maintain secure web connections.

IBM says it is working with Juniper Networks to provide the protection and device management technology for the service, which will be available for Apple iOS, Google Android, BlackBerry, Symbian and Microsoft Windows Mobile.

As more and more businesses adopt smartphones and tablets for employee use, the need to secure these mobile devices both when it comes to business data and everyday security issues like malware. The product sounds very similar to the Lookout’s Mobile Security App, Zenprise and Enterproid. Of course, it’s a little surprising that IBM didn’t just acquire one of these companies considering its acquisitive nature.

IBM’s Coremetrics Benchmark is releasing data around holiday shopping trends we can expect over the next few months. Big Blue says that mobile retail traffic will more than double this holiday season.

During this year’s November holiday season, an unprecedented 15 percent of people in the U.S. logging onto a retailer’s web site are expected to do so through a mobile device, says IBM. All online sales in November will experience a growth of 12-15 percent over the same period in 2010.

IBM reports that in October nearly 11 percent of people used a mobile device to log onto a retailer’s site, up from 4.2 percent in October 2010. Additionally, mobile sales continue to increase, reaching a high of 9.6 percent in October 2011, up from 3.4 percent in October 2010.

One of the new trends expected to take place is among Android users. And for the first time, the growing number of Android users will demonstrate similar levels of mobile shopping as iPhone users. These October 2011 numbers show iPhone accounting for 4 percent of mobile traffic and Android 3.5 percent. The iPad will also play a big role in holiday shopping this season. In October, iPad conversion rates reached 6.8 percent as compared to the overall mobile device conversion rate of 3.6 percent.

IBM also says that mobile shoppers will display a laser focus on buying this season that surpasses that of other online shoppers with a 44.2 percent bounce rate on mobile devices versus online shopping rates of 37.3 percent.

Social influence, mainly from Facebook, will also play an increased role in the buying process this holiday season. According to October conversion rates, 9.2 percent of consumers that visited a retail site from a social media site made a purchase. This compares to 5.5 percent of all direct online shopping last year.

All signs point to this holiday season being a big one for mobile shopping.

Editor’s note: This post was written by guest contributor Aaron Levie, CEO and co-founder of Box.net. His last post on TechCrunch was Go Forth and Conquer.

The narrative of the little guy going up against the hulking giant is baked into the history of Silicon Valley, starting with the traitorous eight leaving Shockley Semiconductor to subsequently found Intel, AMD, Kleiner Perkins, and many other industry disruptors of their time.  Fighting unnaturally large battles is part of the technology industry’s DNA, and yet it would seem that every startup begins the process anew, rewriting the story of how to compete and succeed in the face of formidably large competitors.

There are times when competing against the incumbent feels like an insurmountable challenge (and by “times,” I mean pretty much every day).  Your larger, more established and better-resourced competitor is an ominous and omnipresent danger to your existence.  It will subsidize its products to compete with you, monopolize the distribution channel, spend more on marketing a single launch than you will ever raise, and create uncertainty in the market about your product among customers.  Given all this, startups should be in an inherently disadvantaged position in any market, emerging or mature.  And in most industries outside of technology – those that rely on high fixed costs, retail distribution, or a vast network of partners – this is absolutely the case.  But in the world of internet-delivered services, rapid innovation, evolution, and constant disruption, no one’s power is guaranteed.  This creates huge opportunities for startups going up against the big guys, if executed properly.

Finding the new dimension that matters 

Larger competitors are rife with gaps in their product offerings, but these should never be the main impetus for starting a company.  Blind spots or holes are often easy to spot, but rarely the best areas to compete on (unless you’re aiming for acquisition).  Merely filling the gap of an existing player lacks the upside of an outsized return, and puts you at the mercy of the competitor “completing” its product and thus neutralizing your differentiation.  Rather, success is best achieved by taking advantage of completely new vectors that the larger incumbent isn’t valuing appropriately, or can’t build on altogether.

“The supreme art of war is to subdue the enemy without fighting.” – Sun Tzu

Take the case of Box’s competition with SharePoint.  When SharePoint launched, it started simply enough as a corporate portal tool that let you share documents and work on projects.  After early success and rapid adoption, Microsoft evolved the product to cover broader content management and collaboration.  SharePoint was the “light-weight” commodity solution in the space, competing with stalwarts like Documentum and even Oracle.  Fast forward to 2011, and SharePoint has consistently expanded to tackle more and more enterprise use cases, with a staggering 125 million SharePoint licenses sold and 93,000 partners. If SharePoint were a stand-alone company, it would be one of the top 50 software firms in the world.

Yet this ubiquity and success has brought new challenges:  SharePoint is nearly impossible to manage, prone to sprawl, and overkill for most organizations. Furthermore, the way people work has changed dramatically in the decade since SharePoint came into existence.  While many of the extensive features that SharePoint offers are still critically important to some businesses, the core value of the service – document sharing and collaboration – has had its usability and innovation eroded by the clutter of countless other services.  This has left a huge opening in the market for competitors to pivot off the specific dimensions that matter most today: getting access to content from mobile devices, working from anywhere, sharing outside the firewall, and more.

While this process of vigorously adding features (until the original point of differentiation is forgotten) is quite pervasive in the enterprise, leaders in the consumer space often share the same fate.  While not every company succumbs to complexity, they do all generate sufficiently large weaknesses and gaps. Those that are focused on just a handful of problems (Apple and the ‘new Google’) present huge opportunities for startups in the areas they’re not attending to; other unfocused giants (Microsoft or IBM) often don’t serve their customers fully.   And for every customer that feels they’re paying too much, dealing with too much complexity, or not solving fundamental problems with an existing solution, there lies an opportunity to compete on a new dimension in the market.

Giving startups the advantage yet again, large competitors are notoriously lazy when it comes to quickly finding emerging budgets at enterprise customers; this is why you’ll see categories like social CRM (Radian6), marketing automation (Eloqua, Marketo), or mobile security (MobileIron, Lookout) nearly always led by startups.  And with business models on the internet constantly in flux, startups are able to penetrate markets more efficiently than ever before.  MySQL made the database free, and charged for support.  Skype collapsed the cost of calling by making it peer-to-peer.  Zynga made playing games social instead of solitary, charging users incrementally versus up front.  Salesforce helped customers get started with CRM in minutes, and charged elastically.

These were all angles that the incumbents couldn’t recognize or exploit, at the time, without dramatically shifting their businesses in response.  If and when they do decide to get on board, it’s often too late for them to make a dent.

Why big companies struggle to compete

Investors, partners, potential employees and onlookers will nearly always default to believing the incumbent will win.  Every leading company today was once an underdog without a chance:  Apple and IBM. VMWare and Microsoft.  Facebook and, uh, Myspace.  Salesforce and Siebel, or Microsoft again.  We instinctively expect big companies can take over the market, but it’s their size which renders them nearly defenseless against new, more agile competitors.  The Innovator’s Dilemma describes the difficulty a larger corporation faces in competing with products or new solutions that serve to undercut their lucrative business model.  While we tend to point our attention to the economic rationale around why this happens—most companies don’t want to disrupt a highly profitable business that’s working just fine—the organizational paralysis that prevents effective competition is far more interesting.

Simply put, the size of a company and its speed are inversely related.  As a large system, organizations generally lack the ability to act and respond quickly to changes in a market, new challenges from customers, and disruptive new technologies.  The very processes and procedures that keep a large business successful invariably slow down the key decisions and actions needed to compete in new areas; the travel time between customer feedback from a sales rep to decisions being made by a product organization, or actually getting built, can be measured in quarters, if not years.  Andy Grove’s Intel famously made the rapid transition from memory to microprocessors, but far too few large organizations respond quickly enough, and with the right conviction to these types of difficult challenges.

Did Microsoft’s product managers not see the impact and importance of Android or the iPhone?  Did Siebel not see CRM delivered over the web as a threat?  When large organizations are attacked, it takes a disproportionate amount of energy to modify course, or affect meaningful change in the marketplace.

By comparison, in a startup, the distance from data to decision may be hours.  Startups have the benefit of expending 100% of their energy on competing externally, ideally without the need to fight internally for resources, preparing obsequious strategy presentations, or disrupting existing lucrative businesses to address the market effectively.  But to take advantage of this, you need to be incessantly focused on changes in the market, emerging technologies that drive cost performance, or new disruptions that can be leveraged that set you apart.  And your startup must maintain the speed and agility of decision-making, but also execution, to respond in a way dissimilar to your larger competitors—whether it’s iPads emerging in the enterprise, Facebook becoming a “host” for social games, or cell phones being able to double as payment gateways.

Focus, Focus, Focus

Startups only have an opportunity at winning, though, if they focus on the new areas in which the incumbent players can’t compete,  You only have an advantage over a big competitor if you focus disproportionately on your area of expertise and new dimension, avoiding all the common distractions that take you off course.  In Geoffrey Moore’s new book, Escape Velocity, he calls this practice placing asymmetric bets.  And your asymmetric bets need to be the opposite, or at least materially different, from your competitors (naturally).  These are the attacks you’re going to bet the entire business on, and by doing so you earn a chance to win the market.  Zendesk is doing it with socially-integrated customer support, Domo and GoodData with dramatically simpler business intelligence, SnapLogic with cloud integrations, and Zuora with subscription processing.  In each of these areas, there’s reason to believe incumbents can’t or won’t get to the market fast enough before the products are scaled, and the payoff only comes when it’s taken to the max.

Startups often don’t exploit their advantage aggressively or acutely enough.  It’s easy to get caught up in the different directions and opportunities that being in a new category creates.  You have to constantly shy away from new product directions and extensions that may immediately net new customers or opportunities, but will ultimately take away from your critical focus.  To succeed as a startup, you have to capitalize on the strengths that accompany your size and market position.

Going up against the big guys is insanely tough.  But you don’t have to approach it blindly—the Valley is filled with broadly applicable battle tales and success stories.  And there’s plenty of reasons to try.

Photo credit: Robert Scoble.

IBM’s board of directors has just named Virginia M. Rometty as the company’s new CEO and president, replacing Samuel J. Palmisano, who currently is IBM chairman, president and chief executive officer. Palmisano will remain chairman of the board. Rometty will become CEO effective January 1, 2012.

Rometty was previously senior vice president and group executive for sales, marketing and strategy. Rometty joined IBM in 1981 as a systems engineer. She was previously senior vice president of IBM Global Business Services, and then was promoted to global sales leader. In her most recent role with Big Blue, She is accountable for revenue, profit, and client satisfaction in the 170 global markets and for the company’s worldwide sales results, which exceeded $99 billion in 2010.

She also is responsible for leading IBM’s global strategy, marketing and communications functions. And she previously served as general manager of IBM Global Services, Americas, and of IBM’s Global Insurance and Financial Services Sector.

Palmisano says of Rometty in a release, “Ginni’s long-term strategic thinking and client focus are seen in our growth initiatives, from cloud computing and analytics to the commercialization of Watson. She brings to the role of CEO a unique combination of vision, client focus, unrelenting drive, and passion for IBMers and the company’s future. I know the board agrees with me that Ginni is the ideal CEO to lead IBM into its second century.”

Palmisano, 60, became IBM chief executive officer in 2002 and chairman of the board in 2003.

IBM has released its third quarter results today, with non-GAAP diluted earnings coming in at $3.28 per share, compared with operating diluted earnings of $2.85 per share in the third quarter of 2010, an increase of 15 percent. Analysts were expecting $3.22 per share with revenue of $26 billion. The company posted diluted earnings of $3.19 per share, compared with diluted earnings of $2.82 per share in the third quarter of 2010, an increase of 13 percent.

Big Blue’s third-quarter net income was $3.8 billion compared with $3.6 billion in the same quarter in 2010, an increase of 7 percent. Operating (non-GAAP) net income was $4 billion compared with $3.6 billion in the third quarter of 2010, an increase of 9 percent. Total revenue for the third quarter of 2011 of $26.2 billion increased 8 percent from the third quarter of 2010.

IBM chairman and CEO Samuel J. Palmisano said this in a statement: “In the third quarter, we drove revenue growth, margin expansion and increased earnings as a result of our innovation-based strategy and continued investment in growth initiatives…Growth markets delivered outstanding revenue performance across software, hardware, and services and contributed to the company’s expanded margins. We also achieved strong results in Smarter Planet, business analytics and cloud.”

Some of the growth markets he’s referring to are from the BRIC countries — Brazil, Russia, India and China. Revenues in the BRIC countries increased 17 percent, with total revenues from the company’s growth markets increased 19 percent. Growth markets revenue represents 23 percent of IBM’s total geographic revenue for the third quarter.

Revenues from the Software segment were $5.8 billion, an increase of 13 percent. Hardware revenues totaled $4.5 billion for the quarter, up 4 percent. IBM ended the third-quarter 2011 with $11.3 billion of cash on hand and generated free cash flow of $3.5 billion, up approximately $300 million year over year.

Because of this quarter’s strong earnings, IBM is raising its 2011 full-year operating earnings per share expectations to to at least $12.95 from at least $12.87, and for non-GAAP earnings to at least $13.35, from $13.25 per share.

You can listen and comment on IBM’s third-quarter earnings call, which starts at 4:30 pm ET, below.

IBM is announcing the acquisition of Q1 Labs, Massachusetts-based provider of security intelligence software. Financial terms of the deal, which is expected to close in fourth quarter, were not disclosed.

Q1 Labs software collects and analyzes information from hundreds of sources across an organization such as the network, applications, user activity, mobile endpoints, and physical security devices such as badge readers — including both cloud-based and on-premise sources.

Q1′s network security software, QRadar, include log, threat, and compliance management solutions; as well as Flow and Event Processors for processing network and security events, and network and application flow data. Q1 Labs analytics and correlation capabilities can automatically detect and flag actions across an enterprise that deviate from prescribed policies and typical behavior to help prevent breaches, such as an employee accessing unauthorized information.

The company has 1,800 clients and serves various industries, including publicly traded companies; financial institutions; retail organizations; healthcare institutions; utility, manufacturing, and transportation companies; educational institutions; and federal, state, and local government agencies. Q1 Labs also has strategic partnership with Juniper Networks; Enterasys; Nortel; McAfee; Foundry Networks, and 3Com.

IBM says the acquisition will help its clients more intelligently secure their enterprises by applying analytics to connect information from key security domains and creating security dashboards for their organizations. IBM also plans to apply Q1 Labs’ analytics to drive greater security intelligence capabilities across its security products and services such as identity and access management, database security, application security, enterprise risk management, intrusion prevention, endpoint management and network security.

Q1 Labs, which has raised $29 million in funding, will actually join the newly-formed IBM Security Systems division, which will be led by Brendan Hannigan, CEO of Q1 Labs. For Big Blue, network security and services is a $94 billion opportunity.

Q1 Labs will join more than 10 strategic security acquisitions IBM has made in the last ten years and the more than 25 analytics-related purchases, including the recently announced acquisition of security analytics software firm, i2. IBM says it currently monitors 12 billion security events per day in more than 130 countries and holds 3,000 security patents.

Big Blue’s recent acquisitions include Algorithmics, and I2.

Is IBM making up for lost time? After acquiring crime data intelligence software developer i2 yesterday, Big Blue is announcing another purchase this morning. The company is buying Canadian risk management analytics software developer Algorithmics for $387 million.

Algorithmics’ risk analytics software, content and advisory services are used by banks, investment and insurance businesses to help assess risk, address regulatory requirements and make more insightful business decisions. Basically, the software quantifies, manages and optimizes company risk exposure across a range of financial risk domains including market, liquidity, credit, operational and insurance risk as well as economic and regulatory capital risk.

The company has more than 350 clients, including 25 of the top 30 banks and a number of leading insurers, use Algorithmics’ analytics software and advisory services. Clients include The Allianz Group, BlueCrest, HSBC, Nedbank, Nomura, Societe Generale, and Scotia Capital.

IBM says that the acquisition will expand the company’s business analytics offerings for the financial services industry. Algorithmics’ risk analytics software and services will be paired with risk compliance technologies IBM acquired from OpenPages last year to provide clients with a range of business analytics software solutions.

IBM is making a big bet on business analytics, and has spent $14 billion on acquisitions in this area in the past five years. And Big Blue’s Business Analytics and Optimization team has more than 8,000 consultants including 200 mathematicians with more than 500 patents and a network of analytics solution centers.

As we wrote yesterday, this is only one of a handful of acquisitions IBM has made this year. Unlike 2010 (IBM spent $6 billion to acquire 17 companies in 2010), 2011 has been a relatively low-key year for IBM in terms of buying companies. This year’s purchases include real estate software company Tririga. But considering the past two days of purchases, perhaps IBM is set to begin a shopping spree in the second half of 2011.

IBM is announcing the acquisition of i2, a company that provides intelligence and investigation management software for law enforcement, defense, national security and private sector organizations. Financial terms were not disclosed.

With more than 4,500 customers in 150 countries, i2 is provides intelligence analytics for crime and fraud prevention in sectors such as banking, defense, health care, insurance, law enforcement, national security and retail. i2 solutions are currently used by 12 of the top 20 retail banks globally and eight of the top 10 largest companies in the world.

i2 does doesn’t replace human intelligence but helps improve the technology that can drive crime-fighting, fraud prevention and counter terrorism. i2 will be integrated into IBM’s Software Group.

IBM says the acquisition will help IBM’s clients harness data to combat fraud and security threats. From the release: Using IBM real-time analytical solutions in combination with the technologies of i2, public agencies and private enterprises battling fraud will now have the capability to better collect, analyze and process all the relevant data at their disposal.

While its already August, and this is only one of a handful of acquisitions IBM has made this year. Unlike 2010 (IBM spent $6 billion to acquire 17 companies in 2010), 2011 has been a relatively low-key year for IBM in terms of buying companies. This year’s purchases include real estate software company Tririga.

Linux and open source development is not a zero sum game. This was the explicit message from Ubuntu Technical Architect Allison Randal’s keynote speech at LinuxCon, but the sentiment had been articulated in a number of ways all week long from everyone here. The processes by which a company makes great open source software improve the world for everyone.

“Free software is a fundamentally superior model for developing software,” Randal repeated several times. In addition to the classic Linus’ Law (“given enough eyeballs, all bugs are shallow”), Randal put forward the claim that human beings long to be part of something greater than themselves, and free software development satisfies that in spades.

According to Randal, the future of technological innovation is not stealing limited resources away from one another, but creating new resources — and new opportunities to create new resources — together in a rich ecosystem. The term “ecosystem” came up several times in my chat with Dr. Irving Wladawsky-Berger, Chairman Emeritus of IBM Academy of Technology and Dan Frye, Vice President of IBM Open Systems Development. Frye made it clear that IBM’s efforts with Linux are to be a “solutions company” as opposed to a product company. IBM doesn’t make their own Linux distribution, but they work hard to contribute to the kernel and other key open projects that bring value to IBM’s customers.

It’s all about collaboration, and working together with other open source participants. Sometimes this means collaborating with direct competitors, but IBM “gets it” that this collaboration on open source creates new resources for everyone, and they’re not in a cut throat competition for a finite number of customer dollars. Certainly they compete strenuously in a variety of markets, and sometimes they compete strenuously against the companies with whom they’re simultaneously collaborating on open source. But it’s not a zero sum game.

Wladawsky-Berger continued the “solutions company” explanation by pointing out that a skyscraper is never built by a single company. Legions of small companies with specific expertise work together under the guidance of a project manager to coordinate and execute their specific tasks in the right order. This is ultimately how IBM envisions themselves, as a leader in the open source ecosystem working to enable new workloads for their customers.

There are many ways to thrive within the open source ecosystem. Whether its an unwavering dedication to kernel excellence (a la Linus Torvalds and Greg Kroah-Hartman) or a dedication to producing viable, usable tools for everyone to use to avoid reinventing the wheel. The Yocto project is working on this for the embedded space, just as SUSE, under the fresh leadership of Attachmate, is making available their Open Build Service to help people roll packages for multiple distributions. SUSE is also sharing their SUSE Studio to allow ISVs and companies to develop and maintain their own Linux build for use in appliances and “golden master” images. You don’t have to be a SUSE customer to use these tools.

But all of this collaboration doesn’t always happen naturally. Companies are still beholden to shareholders and their bottom line, after all. So sometimes it takes a neutral third party to get the interested parties together, provide neutral ground for discussion and shepherd the communications channels. That’s where the Linux Foundation comes into play. They provide much of the framework and stewardship of the communication between competitors that result in unparalleled technical advancement across so many industries.

“Free software is a fundamentally superior model for developing software,” said Allison Randal. Eucalyptus Systems’ Marten Mickos took it one step farther: “Any company with an IT strategy needs an open source strategy.” It’s important to recognize –and embrace! — the larger ecosystem of Linux and open source software, and to find a way to collaborate within it to increase the number of available resources for which to compete.

In the past few years, Apple has been in berzerker mode. Not even 15 years ago, they were on the verge of collapse when Michael Dell famously said that if he were CEO of Apple he would, “shut it down and give the money back to the shareholders”. Apple now has a market cap well over ten times that of Dell’s. And in the past year or so, Apple has even managed to far surpass their old nemesis, Microsoft, in terms of market cap, revenue, and profit.

Today, Apple’s stock closed above $400 a share for the first time. This has pushed their market cap up to roughly $375 billion, making my prediction that they have a shot at catching Exxon to become the most valuable public company in the world this fall, look pretty good (they’re now “just” $45 billion away).

But what’s next? What other mountain can Apple scale? Well, there’s still a pretty big one in the tech sphere.

It’s easy to forget that despite all of the financial success Apple has had in recent years, they’ve still been far behind a couple rivals in one key metric: revenue. In the previous full financial years, both IBM and HP have towered over Apple in this category. IBM’s last fiscal year saw them report $99.87 billion in revenue. Meanwhile, HP reported an astounding $126 billion. Apple? They reported roughly $65 billion. Yes, HP was still nearly double Apple in revenue.

But that was last fiscal year — which ended almost a year ago for all the companies. Things are changing quickly when you look at the more recent numbers. And they very much point to Apple taking this crown as well.

In the last four quarters, Apple has reported $100.32 billion in revenue. In the same timeframe, IBM reported $104.6 billion. Given these numbers, it wouldn’t be surprising at all if Apple surpasses IBM in yearly revenue next quarter.

But what about HP?  In the past four quarters, they’ve reported $127.9 billion in revenue. So they’re still quite a bit ahead of Apple. But not far enough ahead that Apple can’t catch them in the next year or so.

HP’s reporting timetable is a bit odd. While many tech companies reported earnings in the past few weeks or will do so this week, HP doesn’t report their Q3 2011 numbers until August 18. So the most recent numbers we have for them are Q2, which ended in May. In that quarter, HP reported $31.6 billion in revenue. In Apple’s last quarter just ended, they reported $28.57 billion. So Apple is clearly closing the gap — and fast — but there’s still some ground to make up on a quarter-to-quarter basis. That could change next quarter, or it could take until Apple’s next holiday quarter (in two quarters). But it seems almost a foregone conclusion at this point that Apple will surpass HP in revenue on a quarterly basis soon.

Is it fair to compare HP and Apple in this regard? Yes. While some complain that comparing Microsoft to Apple is comparing a software company to a hardware company (even though both do both), HP and Apple are much more akin.

HP is the largest PC-maker in the world. With the recent launches of devices like the TouchPad and the Pre, they’re clearly going right after Apple. They also now make their own software, webOS, thanks to the Palm acquisition. And while HP won’t admit it, insiders suggest that their strategy the past year or so has been to  become more like Apple.

When I wrote that a year ago, some were up in arms, citing the fact that HP brings in so much more revenue than Apple does. But again, that was then. Things looks very different now. And the trends should be clear to all.

Further, while HP still holds the revenue crown, Apple has far surpassed HP in the one metric more important: profit. You know, the money you actually get to keep.

In the last four quarters, HP did $11.4 billion in profit. Apple? $23.61 billion. Yes, Apple pulls in more than double the profit despite trailing in revenue.

As we enter the “post-PC” world, where iPhone and iPad sales far outpace Mac sales for Apple  (a chart by asymco today illustrates this nicely), HP will have their work cut out for them in order to maintain their revenue crown. Unless the Pre or the TouchPad take off, I’m not sure that HP will be able to hold off Apple for long. I give them a year.

[image: flickr/archer10]