The Doyle Report: IBM’s Sandy Carter Makes the Case for Big Blue’s Growing Software Ecosystem

Editor's Note, May 26: The company referred to below by Carter that appears on "American's Greatest Makers" was named the overall winner of the competition and will receive a $1 million prize for its efforts.

For the last three years, Sandy Carter, IBM’s General Manager of Developer Ecosystems and Startups, has wooed thousands of ISVs to embrace IBM’s cloud platforms, Bluemix and SoftLayer. By all accounts, she’s done a remarkable job. Thanks to the efforts of Carter and her team, IBM has recruited Bitly, GitHub, Alpha Modus, Grush, Fitbit, WhatsApp and more to the IBM software ecosystem. In the past year alone, IBM has recruited 8,500 startups to its fold.

Many are drawn to the company’s cognitive technology and Internet of Things (IoT) strategy. But make no mistake, many have been charmed by the indefatigable Carter, who turns up everywhere evangelizing on behalf of IBM. You can see video interviews she does at IBM Partnerworld, South by Southwest (SXSW) and more. She is constantly in motion. Since moving to Silicon Valley nine months ago, she has hosted events for nearly 80 IBM enterprise customers and ISVs. Next month she will venture to India to meet even more would-be IBM partners.

Before heading out, The VAR Guy caught up with Carter to discuss her progress and her upcoming presentation slated for next week in Santa Clara, Calif., at the 2016 Channel Visionaries event for industry channel chiefs. (The VAR Guy will be on hand to moderate and MC many of the sessions on behalf of the event’s host, Vistalks Event Marketing.)

Here’s some of what Carter had to say, including a bonus audio question on whether there's a bubble building in Silicon Valley software circles.

THE VAR GUY: When people think applications development ecosystems, they tend to think of Apple, Microsoft, Google, Salesforce.com, etc. You’ve been out there making the case for IBM. What is the reason why app developers are now choosing IBM’s cloud platform over others?

SANDY CARTER: I think there are a couple of main reasons. One is Watson. We have such a leadership position when it comes to cognitive computing with our Watson services. Visualization. Text-to-speech. Speech-to-text. Trade-off analysis. Personality. It is such catnip for the applications developer space. Let me give you an example. We have a startup called Alpha Modus out of New York. They have an application built for asset manager traders. The founders were both traders on Wall Street and they took their expertise and developed [technology] for Watson and have now trained Watson to examine sentiment in forums, to look at what’s happening with gold, to look at what’s happening overseas, etc. It analyzes all that data and then makes recommendations on trading selections. The reason they went with us was because of the power of Watson, that cognitive power that no one else could provide. I’ll give you another example down in Atlanta, Simple C. They are doing an application on an iPad for Alzheimer’s patients. They found that using a combination of gamification and cognitive technologies, the can tap into parts of the brain to help and assist people with the disease. The company has a story of one gentleman up on their web site. The individual played football for Michigan State. But he was starting to struggle to recognize his son, grandson and more. But through the system that Simple C developed using cognitive computing, he was able to sing the Michigan State fight song, recognize his grandson, etc. The application doesn’t cure Alzheimer’s, obviously, but the power of Watson was able to make a significant difference in that person’s life.

So when you ask “why do people choose IBM?,” that’s a big part of it. I could say the same about what we are doing around the Internet of Things, with sensors reading the data. We have several partners such as Diabetizer of Germany doing things in this market. This startups leverages sensors to get data directly to patient’s doctors so that the patients can create a better life for themselves and keep that disease under control. All of this starts with the power of cognitive [computing] built on the cloud.

I would say the second reason why app developers are choosing our platforms is them ability to leverage our programs such as the Global Entrepreneur Program, which gives them access to not just the technology that we talked about but the go-to-market assistance and business model assistance they need. Take Simple C. We featured them in a go-to-market showcase that promoted the best of IBM. Alpha Modus was featured in one of the ads that played during The Masters [golf tournament]. It’s not just the technology that counts; it’s also the ability to make money. When you look at surveys, they never say that companies went out of business because they didn’t know what to do with technology, it’s always that they didn’t get enough revenue or have the right business model or the right exposure in the market. It’s always about the go-to-market. So we feel as IBM that providing both of those—technology and go-to-market assistance—is very powerful in the marketplace.

THE VAR GUY: Let’s talk a little more about the IoT. There are companies like GE, Microsoft, my former employer Cisco, Johnson Controls, etc. A lot of those industrial-strength giants are looking to build partner ecosystems as the nexus of digitization and the Internet of Things.  Give me a little bit more of what IBM is doing and what you think it’s true potential is…

SANDY CARTER: I would say—and I know this is going to sound strange—that we are making things easier. If you look at investments today from VCs, the Internet of Things and using sensors has moved from companies that place the sensors to companies that can analyze the data from the sensors. Where is the money going today? It’s really going from sensors to analysis. This is a big advantage for IBM because we are able to do so much with the data that comes from those IoT sensors. We make it easy to analyze that. We actually have something for developers called IoT recipes. They are very simple ways of how you might use and leverage that data. It may be data that comes in from a Raspberry Pi or a sensor in the ground for a farmer. We infuse intelligence into the data to help take action on what’s happening in the region. SmartFarm is one of startups in this space. They don’t develop any sensors of their own but read all of the sensors that may be present in a farm today. This includes billions and billions of sensors. It can analyze the data to help farms determine if they need more fertilizer or water or if they need to rotate crops. All of the information that helps you take action, in other words.

There’s been about $7.4 billion invested in IoT startups since 2010. We’ve really seen people gravitate to us. I’ll give you one example, Grush. The company is now on "American's Greatest Makers," which is a TV show started by the people behind SharkTank. Grush is one of the top five. Grush has created a smart toothbrush with motion advanced sensoring and wireless communications. The sensors can look at each tooth you brush. Assuming people brush their teeth twice a day, it collects about 10,000 data points per day. The power of their business model isn’t that they have an iPhone app with a game so you can track yourself as you brush you teeth. The power is they have this cognitive insight coming in from the sensors that can engage, track progress, and perform an analysis of the information. So for instance, there are apps that help set dental insurance rates based on brushing similar to the way car insurance companies can set rates based on [driving behavior]. Dental insurers are now looking at these smart toothbrushes and saying, “If you brush you teeth well, I’ll give you a discount on your dental insurance.” We are seeing companies come to IBM for the simplicity of the way we leverage that IoT data and then apply cognitive to it. It’s a big competitive advantage.

THE VAR GUY: We see opportunities for partners to make money selling and installing IoT sensors, monitoring and managing the systems they go into, and then putting that data to use to help customers with their businesses. Do you see things similarly?

SANDY CARTER: I do believe partners will be able to make money in all three of those areas but the big money will be in the latter bucket. Ask yourself why so many resellers are systems integrators? Why did they do that? Is there money in reselling software? Yeah. But the real money is in the service side and it’s in other parts of the business. I think the same thing s going to happen in the IoT. You are going to see people do the installation and the maintenance and the monitoring because it has to get done. But the “show me the money play” is that third area.

THE VAR GUY: How does the IBM software ecosystem look different compared to three years ago? Different type of companies? More maturity? What’s your sense of that?

SANDY CARTER: First of all I would say that it’s more cloud based. We are seeing more players on SoftLayer and Bluemix. I also think the mix of partners is broader. We have over 8,000 startups that have come on in the last year and are now playing a big role in the ecosystem. In addition we are seeing the emergence of accelerators and incubators and VCs that are entering. Since I moved out to Silicon Valley nine months ago, I’ve hosted 78 enterprise clients. A lot of the enterprise clients want to come out to the Valley to learn about new methods and methodologies of the startups and the ecosystems that support them. The VCs are playing a role in that. When clients come out they want to host a VC dinner and learn from them where they are investing. So embracing these organizations as part of the ecosystem is a big change in the last three years. I think the last big change is around developers. They are everywhere. They are inside systems integrators, inside resellers, inside ISVs, inside startups, in  universities—everywhere. And I think that developers have become a crucial part of our ecosystem, especially given the changes in technology. Unlike the past, you can stand up a business very quickly. You don’t need a huge investment. So as a result, developers have a lot of the king-making and queen-making potential. They are wielding a lot more influence today than they ever did before.

THE VAR GUY: From all your meetings, do you get the sense that we are in an over-invested stage? Do you see a bubble building?

SANDY CARTER: We certainly saw a lot of companies get money before they were ready. And I think what you’re seeing now is a slight correction in the market to really gear for businesses that make a difference. And I think everybody is really talking about that now. When you have too much money, sometimes you don’t spend it wisely. Having the money supply tighten up is causing a change in behavior out here. It’s causing incubators to be a little more select in terms of who they pick for incubation. It’s causing startups to focus more on revenue and the client as opposed to just getting out there and making a lot of buzz. I see a good change coming from that based on the restriction of capital. I have to tell you a funny story. A while ago we did a speed mentoring [session] here for startups. I sat down with one startup and said, “Well, tell me what you got.” He tells me and then I asked about the strategy to acquire customers and get revenue. He said, “Oh, we are not really interested in revenue, just getting clients.” So then I asked him how he thought he was going to make money. And he said. “well once we get bought out, it’ll be up to the next person to figure out how to make money.” Wow, I thought. And this person has already received seed funding. I think that has changed. I don’t think you’d get away with that pitch today.

THE VAR GUY: So lets flip it. When you look out at the landscape, what do you see two-to-three years out?

SANDY CARTER: I see cognitive as a game changer. Today, about 1 percent of the developers in the ecosystem are embedding cognitive. By 2018—just two years out—50 percent of developers will be embedding cognitive in their applications and systems.

So what does that tell you? It says that if you are a startup you need to learn cognitive and embed it in. There will be changes in the way that people design software because cognitive drives a different design. Ninety-five percent of healthcare leaders said that by 2018 they want cognitive embedded into their healthcare. So if you a reseller that targets healthcare, you’re going to have to learn how to do the integration with cognitive, look at the design, etc. You’re going to have to figure it out. One of the big changes is that today cognitive is an ingredient. In just two years it will be a requirement and more mainstream, and if you don’t know it… then you won’t be successful.

I also think there will be a bigger dependence on things that change the user experience. Today, for instance, we are seeing consumer impact business-to-business technology. But in two or three years, there will be no difference between the two. And I think that will make a big difference in the way that people resell, integrate, drive their businesses and do startups. I’ll give you an example, gamification. Look at the best user interfaces out there. They are usually gaming applications. We see more companies expecting that same level of experiential learning from [their business technology]. Take healthcare again. By 2019, healthcare providers will want simulations only done with gamification. I think that’s a big change in the way that people look at stuff. Before it was let’s get it up and get it going; the user interface can be second. But I think in the next two-to-three years it will have to be first and equal to what we are seeing on the consumer side.

The third thing I see is the emergence of Blockchains as an emerging platform. Shared, trusted, public ledger will drive a new ecosystem, and I don’t think it’ll be just in fin-tech. I think it will be in fin-tech and retail and beyond. It’ll be across industries, it’ll be a disruptive technology and it’ll go beyond digital currency and touch smart contracts and record keeping and the whole nine yards. It’s going to be driven first to cut costs. In fact one statistic shows that by 2020, Blockchain will reduce banks’ infrastructure costs by $15 billion-$20 billion per year. [Momentum] will also going to be driven by increasing effectiveness, efficiencies, reducing disputes among suppliers, increasing use of working capital—the whole nine yards. I think the whole way you do channel financing will change and become a Blockchain.

Those are my three big bets.

THE VAR GUY: When you look at the partner developer landscape, do you see partners making single commitments to an Apple, IBM, Microsoft, etc., or are they spreading their bets around.

SANDY CARTER: As they always do, they pick one, two or three to bet on. If they only want to go with cognitive, however, they are only going with IBM. We see that a lot with startups. Some of the more mature ISVs are doing double bets, in some cases triple bets but very rarely.  It’s all based on the platform. In software, it’s almost essential that you have a platform to win.

THE VAR GUY: What is the revenue model for all these startups that are turning to IBM, especially the SaaS developers that you attracting. How do the economics work exactly?

SANDY CARTER: I think you’re seeing some experimentation. Watson, for example, has a revenue-share model. We also have a new straight, pay-as-you go model as well. You’ll see a lot of experiments. For the most part with IBM, you get the software for free as a startup for a year and then you start paying. As a developer you get a good way to get up and going quickly and start generating your own revenue before paying IBM. You’re also seeing revenue models where companies are placing their services in our marketplace. One of Twilio’s services is actually in our Bluemix dashboard. It’s kind of hard to talk about it generically because there are now so many different models… I don’t know how many or which model will prevail. It may be in the next year or year-and one-half. I don’t think it’s been decided yet and I don’t know what’s going to win. You know we believe heavily in the agile design model and methodology. We do a lot of A/B testing and we do it across the board, kind of simulating the startup activities and values.

THE VAR GUY: Is their a home for developers within the channel inside the IBM ecosystem? Are you seeing evidence of customer-facing partners embrace it?

SANDY CARTER: Oh yeah. Just last year alone we had 8,500 startups join our ecosystem and jump on the IBM cloud platform. So yes! The program makes it easy. We have people in each city to work with them; we have a digital self-service model that can support them, too, if they like that. But I think we have the best-in-class startup program in the industry. We are attracting great startups from around the world. Bitly. GitHub. Alpha Modus. Grush. Fitbit is on our platform. WhatsApp is on our platform. You’re seeing major unicorns already selecting our platform and you’ll see the winners of the next startup competitions on our platform as well. Do we have more to do? Absolutely. But I think our program has really facilitated that relationship with IBM.