News Corp.'s (NYSE:NWS) MySpace and Google's (NASDAQ:GOOG) YouTube are powerful examples of social networking. They build online communities where users can share blogs, music, and videos. Now, IBM (NYSE:IBM) wants to apply a similar approach to the business world.

A firsthand look
When I met with IBM executives and technologists back in November, I was struck by how often I heard such phrases as "social networking" and "Web 2.0." During my visit, I got a demo of the company's internal online community system, dubbed Blue Pages. From what I could see, it was a part of everyday corporate life for IBMers.

The firm's globally diverse employee base makes a great testing ground for new technologies. Over the past couple of years, IBM has been experimenting with online tools to help reduce costs, improve productivity, and foster employees' creativity. It's now ready to release the fruits of those experiments into the corporate world.

New from Big Blue
IBM has announced two new social networking products: Lotus Connections and Lotus Quickr. While such announcements are typically PR buzz, these products actually suggest that IBM remains a potent and innovative organization.

Lotus Connections lets far-flung employees at large corporations easily collaborate on projects. Each employee has a searchable profile that lists his or her skill sets, a feature that gives managers an easy way to pull together workers with specific talents or specialties for a given project. Connections also lets users bookmark useful content to more easily keep track of it, and it lets them set up blogs to share their observations on a given topic.

In the same spirit, Lotus Quickr makes it easier for employees to share various documents -- often a big problem in large companies, especially those that rely primarily on email. The Quickr system works with a variety of common business software, including Microsoft (NASDAQ:MSFT) Office. Both programs have stringent security and audit features, and both back up their content in case of data emergency.

Staying in shape
Like Oracle (NASDAQ:ORCL) and other tech giants, IBM has been aggressively buying up smaller software firms. That's one way to fatten its margins and keep its growth alive, but the company shouldn't neglect its innovation, either. Software can easily become outdated, and competitors are always waiting with newer, better applications. IBM has an extensive patent portfolio, but it's still struggling with Microsoft in office software and Google in search.

The launch of Connections and Quickr is an important step in keeping IBM competitive and relevant. The company is also bolstering its search offerings, including a recent free offering in partnership with Yahoo! (NASDAQ:YHOO).

As I wrote in an earlier article, IBM's prospects look strong for 2007. The company's software acquisitions should start to boost its performance, and the stock still trades at a discounted valuation to its large-cap peers. More importantly, in the face of ongoing competition, IBM is committed to pushing its technologies forward against the competition.

Further big, blue Foolishness:

Microsoft is an Inside Value pick, while Yahoo! is a Stock Advisor selection. Try the Foolish newsletter that best fits your investing style free for 30 days.

Fool contributor Tom Taulli does not own shares mentioned in this article. He is currently ranked 1,623 out of more than 20,000 participants in Motley Fool CAPS.