A Letter To IBM's CEO

An Open Letter To IBM Chairman And CEO Sam Palmisano

Dear Sam:
Congratulations on your company's best quarterly showing since you took the top job in January 2003. Some of your enterprise partners are posting super results. My question: Will you be able to sustain that given that the midmarket channel and VARs focused on smaller businesses are rapidly turning away from IBM? In both markets, my contacts tell me your longtime trusted hardware partners are showing flat or declining sales. Now, I know you expected to lose some low-end small- business strength when you sold the PC business to Lenovo two years ago. Even taking that into account, the IBM SMB channel is wanting when compared with industry leader Hewlett-Packard, which replaced IBM as the No. 1 technology company and now seems to be increasing its lead.

STEVEN BURKE Can be reached at (781) 839-1221 or via e-mail at sburke@cmp.com.

For the sake of IBM's long-term health, let's compare No. 1 HP to No. 2 IBM. HP is deeply engaged at every channel segment of the market from small business to the enterprise. IBM is heavily dependent on the enterprise and the "M" in SMB and appears to have given up on small-business-focused VARs selling Intel servers. VARs tell me HP's PartnerOne program is driving more profitable sales in every market segment. These VARs, which once coveted their IBM partnership, say your channel programs have become less lucrative. HP's SMB sales coverage model also is outpacing IBM's and has gotten a lot clearer. IBM's SMB sales coverage model has gotten more confusing and costly.

A recent CRN survey of IBM's partners alerted me to these issues and and prompted calls to several dozen more. Many of your partners see HP eating your channel lunch. And, frankly, that's because HP Chairman and CEO Mark Hurd and his leadership team are focused and executing against their channel message. Up until two years ago, VARs lauded IBM's consistent and predictable channel programs. That is no longer the case. IBM's channel is a shadow of its former self.

Before the IBM SMB channel reaches a breaking point, you need to get involved and look at pro-channel compensation models, consistency of message and ease of doing business with partners. From where I sit, you don't have a lot of time before your earnings start to reflect these challenges.

IS IBM'S SMB CHANNEL INFLUENCE SHRINKING?
Let me know at sburke@cmp.com.