Also, Duncan in an interview emphasized the momentum of IBM's partner programs such as PartnerWorld Industry Networks, in which the company is assisting more than 6,000 software partners. The program includes third-party companies who have found themselves suddenly competing with Oracle or Microsoft after those vendors made acquisitions, he said.

"If you are a CRM business, all of a sudden Oracle has acquired Siebel. That is a major competitor," Duncan said. Microsoft, with its purchases of Great Plains and Navision, also has gotten into the applications business, he said.

But many smaller players remain in the applications space, Duncan indicated. "Despite there appearing to be consolidation in the marketplace, at the same time the market is more highly fragmented than it has ever been," Duncan said.

SAP and Oracle, despite their large size, collectively only hold 15 percent of the application market, which was sized at US$70 billion a year, Duncan said. That $70 billion market drives another $400 billion in ancillary middleware, servers, and services, he said.

IBM spends $1 billion a year to help partners build solutions on IBM platforms, such as WebSphere, DB2, and Tivoli. IBM also co-markets these solutions.