Is IT giant IBM on a collision course with networking leader Cisco? While Cisco believes enterprise applications will ultimately reside in the network, IBM has a vastly different vision.

The world’s largest IT products and services company on Wednesday hosted partners and clients at its conference facility in Palisades, N.Y., where it offered details of its “revolutionary” integration of cloud computing and traditional IT.

The move runs counter to Cisco's continued path of acquisitions to build a strategy around  network-resident software.

“The fact that two very large vendors are working independently on innovative IT speaks well for the end user,” said Charles King, principal analyst with Pund-IT Research. 

IBM is not interested in direct participation in the cloud computing market targeted by Google, Amazon.com, and hundreds of small companies that sell their Internet-based services and applications to smaller business clients.

Instead IBM is targeting larger companies whom it assumes will not trash their huge investments in IT systems and hand over the management of their entire IT data flow to Google and Amazon.

In its presentations IBM indicated that cloud computing will not replace traditional on-premise IT. Rather, large companies will pick and choose non-core business applications such as expense reporting, human resources, or app testing to farm out to the cloud.

IBM will provide the hardware, software, and middleware pieces that enable the integration of cloud computing and traditional IT-based apps. Its 230 cloud computing partners will provide the customer-facing software and services.

Cloud computing is the provision of computing resources as a service over the Internet. It has a number of names such as hosted services, and software-as-a-service, but they all refer to the delivery of computing resources via the Internet.

What's starting to happen is that cloud computing and social networking are blurring the lines between hardware and application software. Once only a seller of networking devices and communications software, Cisco in the last couple of years has acquired 16 application software firms.

The San Jose, California, company plans to embed many of its newly acquired collaborative applications into the enterprise network, as it proceeds on its network-resident software push.

“It will increase the choices available to end users. It is always good for vendors to define their long-range technology plans in terms of the business value to the user,” Mr. King said.

In the current global economic climate, just having great technology is not the answer, he said, both IBM and Cisco have to show the user how they are going to save money while enhancing the efficiency of their businesses.