I spent some of this week at IBM's annual "Connect" analyst event, a cornerstone for understanding Big Blue's direction from the perspective of its fastest-growing and most profitable division.

And the direction is pretty clear: behind-the-scenes product integration is enabling tighter marketing and sales integration across what have been separate brands (Lotus, Tivoli, Cognos, etc) in the software portfolio. Now the emphasis is on capabilities, and on tuning or packaging those capabilities into industry-oriented bundles like "social business" or "smarter commerce."

IBM's Smarter Planet initiative is starting to have a positive impact in its software business. For the first couple of years since launch, Smarter Planet was principally a door-opener for IBM's business consulting teams, creating interest among clients in how IBM could help assess and improve business performance.

As those engagements have progressed and multiplied, the consulting organization has created "patterns" across them, problems that they run into repeatedly in a particular industry or geography. Those patterns are now being put into code for industry-specific solutions, for APIs that other software vendors can hook into, and other software artifacts. So Smarter Planet is starting to drive opportunity and revenue for the software group as well as consulting services.

For example, IBM noted it has several dozen wins this year (since its launch in June) of its Intelligent Operations Center (IOC). This is a software product -- available in code, in a dedicated hosted facility, or from the cloud -- that is aimed at the smart city market.

It enables city administrators to tie together disparate operations like water/sewer, public safety, and transportation into a single dashboard or control panel. My colleague Jennifer Belissent recently blogged about what the IOC looks like in Rio de Janeiro.

The IOC's target is city governments, but IBM has found other types of clients that run mini-cities are interested too. Port authorities, stadium owners, airports, railroads and the like operate big, multi-faceted operations that need integrated management.

About half of these IOC wins are in what IBM calls the growth markets, basically the rest-of-world outside of North America, Western Europe, and Japan. The U.S. is also a strong market, while paradoxically, Europe is a "distant third."