This week IBM hosted its annual symposium for venture capitalists and their portfolio companies at its research headquarters, the Thomas J. Watson Research Center, in Yorktown Heights, NY. The event attracted more than 70 investors from 60 firms, executives from 70 software companies, scores of IBM executives, as well as three analysts from AMR Research.

After the welcome and introductory comments by Claudia Fan Munce, vice president and managing director, IBM Venture Capital Group, the day opened with presentations from two IBM executives. For me, this was the most valuable part of the program. Because of space limitations, this Alert will focus primarily on the opening program.

The first presentation on IBM Innovation was delivered by Paul Horn, senior vice president and director of research for IBM Research. Dr. Horn oversees a $5.5B R&D budget that includes more than 3,000 researchers across eight global labs. This investment is partially offset by the $1B that IBM receives from companies licensing its intellectual property. During his presentation, he said that he has researchers focused on a wide variety of disciplines, including behavioral sciences, mathematics, physics, chemistry, computer science, electrical engineering, and materials science.

A quick trip to his home page reveals deeper interests, too, such as the need to build “autonomic computing systems” or self-healing systems, and the “exploration of novel modes of storage, processing, and computing, such as nanomechanical devices, atomic-scale manipulation, carbon nanotube structures and ... superhuman speech systems.”

New focus: the science of services

During his talk, Dr. Horn referenced a relatively new area of study—services science, management, and engineering (SSME)—that is attempting to bring science to the services industries. According to IBM’s SSME website, “services now accounts for more than 50% of the labor force in Brazil, Russia, Japan, and Germany, as well as 75% of the labor force in the United States and the United Kingdom.” One consequence of the shift to a service economy is the skills gap in delivering higher value services. This will be exacerbated by the looming retirements of hundreds of millions of baby boomers worldwide. By the middle of this century, there will be more than 2 billion people over the age of 60.

One final note on SSME: universities are beginning to develop curricula around this topic. Dr. Horn cited the University of California-Berkeley, MIT, and North Carolina State University as among the pioneers. Last January, IBM issued a press release announcing that it was working with NC State on a new curriculum initiative for SSME. The release also noted that in the 1950s, IBM made a similar effort to help establish computer science as a new academic discipline.

Disruptive technologies: the Web 2.0 meme versus packaged apps

As you might surmise, one of the goals of IBM Research is to identify and exploit disruptive technologies. The current fascination with Web 2.0 is a good example of a potential disruption to the enterprise applications market. In this case, the web becomes the platform. All innovation shifts to the web. Instead of building applications, we use web services to create and/or extend business processes.

Starting with “web as platform” as the hub, here is how Dr. Horn viewed the spokes radiating out, presumably to end users: tools (e.g., RSS, AJAX, PHP, and Ruby—more on these in a future Alert); standards (e.g., REST and XHTML); technologies (e.g., mash-ups, wikis, tagging, blogging, and rich user experience); small pieces loosely joined or re-mixed; harnessing collective intelligence; architectural participation; services, no packaged applications; software that gets better as more people use it; and lightweight programming models. Personally, I could have spent hours on this slide.

Dr. Horn went too quickly through the differences between packaged apps and the new programming models. The only two points I retained were the ideas of traditional equals transactional, while the more favored situational is designed to be more collaborative, and that business is moving from a focus on the four walls of the company to a network of business services. I talked about something similar in last week’s Alert on E2open.

The last part of his presentation was on the ubiquity of innovation. Innovation spans products, services, business processes, business models, culture and management, and policy and society. I could have spent at least half a day on this subject, too.

SOA: the $1B investment

John Soyring, vice president, solutions and software, IBM Software Group, closed out the first set with a presentation entitled “Delivering Key Technologies To Deliver Industry Partnerships.” I wrote down four points during his talk:

IBM has made a $1B+ investment in software and services for service-oriented architectures (SOAs).

SOAs, web services, new technologies, and best practices will be critical to solving some enormous issues, such as reducing the cost of healthcare by adopting electronic patient records, streamlining the flow of paperwork among all the connected parties, and adopting best practices for patient treatment and healthcare management.

IBM has been developing business services “Fabrics” for 17 industries. According to IBM’s website, the Fabrics are designed to assure consistent business services use and achieve semantic interoperability and help software architects achieve reuse and reduce rogue services.

IBM is working on a new SOA-based model for Enterprise Payment. While Mr. Soyring didn’t go into a lot of details, his slides seemed to indicate that IBM will soon announce a new framework for managing the financial supply chain.

The Horn and Soyring sessions ended at 9:00 a.m., and were followed by a set of breakouts arranged by vertical market. These included panels on banking, retail, healthcare and life sciences, media and telecom, government, and energy and utilities. The panels featured a mix of IBM executives, one or two venture capitalists, and one or two software firms. The vertical breakouts were a great idea, particularly when you could focus on the areas where IBM is actively looking for software or services to fill holes. The discussions were very candid.