But its interest in turning those patents into new products is muted enough that IBM loses frustrated talent. And that may be one reason why IBM is shrinking at 3%, despite demand that's growing at 4.7%.
IBM is pleased with the cash it hauls in from licensing those patents. According to an IBM spokesperson, Mike Fay, "Our patent leadership supports innovation in our offering portfolio, freedom of action to support our clients around the world and has historically contributed about $1 billion a year in IP based technology licenses and Joint Development Agreements."
Fay declined to comment on IBM's outflow of talent -- noting IBM's "employee information isn't public." Really? One public example of IBM's lost talent is Shmuel Kliger -- he earned a PhD in Computer Science from Israel's Weizmann Institute -- who was employed at IBM's T.J. Watson Research Center when his IBM boss and her now ex-husband persuaded Kliger to bolt with them to start a company.
How so? In 1993, Kliger joined his boss, Shaula Alexander-Yemini, and her now ex-husband, Columbia University professor, Yechiam Yemini, at their "event automation and real-time network systems management software" start-up, System Management Arts (SMARTS), because he could not see how his research for IBM was ever going to turn into a product that people would use.
As Kriger explained in a July 22 interview, "I did not have the patience to do all the maneuvering up and down all the layers of IBM's management needed to turn a patent into a new product that IBM would sell."
In addition to losing Kliger, Alexander-Yemini's departure was even more costly. Before launching SMARTS, she was the Senior Manager for Distributed Systems Software Technology at T.J. Watson, "where she received an IBM Outstanding Innovation Award for Optimistic Recovery for Fault Tolerant Distributed Systems."
IBM's loss turned into a nice win for SMARTS' investors. In 2005,
As for Kliger, he became the Resource Management Software Group CTO at EMC -- but it did not take. "I had as little power as EMC CTO as I did as a researcher at T.J. Watson," said Kliger.
He left EMC in 2006 and tried launching a venture to boost the productivity of radiologists -- whose ranks were growing far more slowly than the number of images each one had to analyze. But he had no contacts in the industry and did not get market traction.
In 2008, Kliger started VMTurbo -- headquartered in Burlington, Mass. with R&D in Valhalla, New York (making it easier to recruit talent from IBM and Columbia) -- based on Yemini's idea of applying economic theory to IT resources.
As Kliger explained, "Yemini had the idea of putting a price on IT resources - those that were not being used much would have a lower price than the ones that were stretched to the limit. VMTurbo is a control system that uses this pricing system to keep IT resources in equilibrium."
VMTurbo is growing fast. As he said, "In 2012, our revenues and customer counts tripled. We expect both of those to double by the end of 2013. We are winning because we offer companies a rapid payback period on their investment. We charge them between $1,000 and $1,200 per socket and they recover that investment in three to four months."
VMTurbo generates a return on its customer's investment in three ways. "We reduce the amount of time that computing resources -- such as processors or storage -- are idle. This reduces clients' capital expenditures. A company with a $10 million IT budget might pay us $100,000 -- thus boosting its asset utilization by 5%, enough to reduce its IT budget by $500,000," explained Kliger.
And VMTurbo offers two other benefits. "We reduce the number of incidents that affect corporate applications -- thus lowering service costs. And by boosting application uptime, we help companies increase revenues -- though we can't quantify that," explained Kliger.
VMTurbo bills itself as a more efficient and effective solution. "Competitors either help network managers with viewing data about application problems or doing something to solve those problems. VMTurbo takes the network manager out of the process -- replacing that person with a marketplace that matches up IT resources with applications that demand them," noted Kliger.
Kliger believes that VMTurbo has the potential to get big enough for an initial public offering. "We see the market in three dimensions. First is extending VMTurbo in the vertical IT stack, second is horizontal -- working with the hybrid cloud; and third is tightening the loop between planning, onboarding resources, and control. If we can do all three, we can become a big company."
While VMTurbo's investors will benefit from Kliger's commercializing great ideas, its lack of comment makes me wonder whether IBM views the loss of Kliger and Alexander-Yemini as a beneficial expense reduction or a loss of talent that could have generated new products to reverse its market share slide.
