Partners Make The Difference

During the wide-ranging 90-minute interview, one of only three he plans to grant to journalists this year, Palmisano touched on many channel-centric issues in detail. He expounded on the Armonk, N.Y.-based company's push to drive on-demand computing by giving as many different solution providers as possible an opportunity to engage with IBM.

"To solve the problem requires a broad-based set of skills," said Palmisano. "We don't have all of the skills ourselves. We need partners that are really good at application integration, both linking as well as implementation. We need partners that are really good at open infrastructure, the architecture, the design, the implementation. We need more partners around open standards."

Palmisano guided the interview toward the open-standards theme several times. His sparsely decorated private conference room where the interview took place had just one photograph adorning a credenza: of him and Linux inventor Linus Torvalds.

Dressed in a conservative dark suit and running late after a customer meeting, the passionate Palmisano talked about the impact of adding several hundred Hewlett-Packard partners to the company's mix, the increasing importance of partner profitability, Linux, and his vision of an a la carte menu that lets partners decide where IBM can plug most effectively into their business.

Palmisano, a 31-year IBM veteran, who more than once ran channels for the company, said that Big Blue will stay out of the consumer-electronics market and focus on the enterprise and partner profitability. "Strategically, I don't think you can do both," he said.

Palmisano, who during the interview pressed for information on the view from the channel trenches, emphasized that the push toward on-demand computing is moving ahead but it requires investment and more work by IBM and its partners.

"On-demand is an industry shift; people get it confused with a marketing program or adaptive architecture," he said, positioning the concept as a change allowing customers to drive productivity and revenue growth. "To do that, depending on where you are as a partner, you are going to have to invest because when you talk about things like horizontal integration, which requires a different infrastructure, and the skills to do open infrastructure, all those sorts of things are skills. So it is very important for us that partners are doing well financially so they can afford to invest."

Palmisano was adamant that on-demand is not restricted to the high end of the market. "The business problem that people are trying to solve is identical. They are trying to integrate CRM systems with ERP. They want to integrate that because they want to get the productivity to drive revenue growth," he said, adding that size is just a dimension of the problem and that in some ways it's easier for smaller enterprises than larger ones.

He said that even though IBM Global Services is the largest IT services firm, it still has less than 10 percent of the services market and is incapable of meeting customers' needs on its own. "The world thinks we are big only because we are two times the size of the next guy," he said.

Palmisano predicted that the business world is going through, and will continue to go through, a period of reintegration of technology applications, presenting an opportunity for IBM and a broad set of solution provider partners.

"What is really happening in this industry is it is going back to the past. It is reintegrating, which is one reason why we put systems and technology back together again. If you ask why is it reintegrating and why did IBM Software organize themselves around industry segments [and] not by brand anymore, it is a statement of what is happening in the marketplace," Palmisano said. He noted customers are forcing integration of technology because they have realized they implemented lots of point solutions in the past and there are cost savings and efficiencies to be gained by integrating all the vertical solutions they now have in place.

He said the savings for customers are significant, and as an example said IBM saved nearly $11.5 billion in two years by integrating its supply chain process.

Linux is, and will continue to be, a high growth area and focus for IBM, he said, adding its traction is building. "It is so ready for the enterprise we get sued every day," he joked.

Palmisano, in his classic down-to-earth style, said while solution provider satisfaction with IBM is running very high, the company needs to be easier to do business with. "We can't give [solution providers] 30 versions of our terms and conditions, sliced and diced. What we need to do strategically is establish a relationship with the partner as IBM."

Palmisano said IBM is driving toward a future where solution providers can pick the capabilities they want from IBM, deciding where they want to add value and where they want to sell IBM capability.