Does IBM Matter To You?

At a time when IBM has launched a push to double its market share in SMB, these solution providers say that the Armonk, N.Y., company has lost touch with them and their customers, that the cost of doing business with IBM is going up as sales are going down, and the vendor, once the partner of choice and a clear channel leader, simply doesn't matter anymore.

First, Hewlett-Packard last year took away the top spot from IBM as the world's largest technology company. Now, surveys conducted by CMP Channel show that IBM's channel footprint and influence is shrinking in the highly lucrative SMB market, while HP grows at IBM's expense. A recent CMP Channel survey of nearly 200 IBM hardware resellers found that those that are authorized and sell products dropped from 25 percent to 16 percent from June 2006 to April 2007. Among the 25 IBM partners CRN interviewed for this story, 19 said their total IBM sales are flat or down for this year. What's more, in a poll question on ChannelWeb.com, 78 percent of the respondents said their IBM system sales were about the same or down in the first six months of this year.

David Hudgins, president of PC Products & Services, a Greensboro, N.C., IBM partner, said his HP business is up this year, while his IBM business is flat to slightly down. "The channel is feeling more love from HP," said Hudgins. "IBM just doesn't have the field coverage out there they were always known for. We just don't see the IBM people like we used to."

Michael Demars, president of Competitive Computers, an IBM Premier business partner in Claremont, N.H., with annual revenue of about $2 million, said his IBM business is actually up about 30 percent this year vs. 2006. But Demars, like many other IBM partners, said the vendor needs to rethink its definition of small business.

IBM defines small businesses as companies with 1,000 employees and below. As a result, solution providers say, IBM tends to focus more on the medium companies and doesn't have a clear understanding of what it takes to capture share in smaller businesses. "It's like a guy with a size 8 foot being asked to try on a size 12 shoe," said Demars. "IBM has a hard time realizing that there is something out there called very small business."

One senior executive for a one-time large IBM partner said his IBM and Lenovo business combined is down as a percentage of total sales by 20 percent to 30 percent in the past two years. This comes as the solution provider has grown overall sales by more than 100 percent during that same period. "They are a non-issue," asserted the executive, who asked not to be identified.

"There is no articulate, clear message driving down to the channel from IBM's channel leadership," said the executive. "At HP, the message is clear, everything is defined and everything runs smoothly. At IBM, the left hand doesn't talk to the right hand. They don't know their own programs. The IBM channel reps working with the resellers are not working functionally with the product reps. It is a disorganized, ugly mess. It is clear to me that there is zero leadership."

The executive said that with Dell making overtures to the channel and HP riding high, IBM, for his business, has become "an afterthought." Simply put: "They are not part of our strategic business."

Ravi Marwaha, IBM's general manager, Global Business Partners, told CRN, however, that the fall-off in the number of partners selling IBM products could be misleading. "Our business in SMB is, in fact, doing very well," said the nearly 40-year IBM veteran. "Hardware grew 7 percent [in IBM's second fiscal quarter]. Within that, SMB grew, and business partners do somewhere between 85 [percent] and 90 percent of our hardware business in SMB. As you think about these lower numbers [of solution providers selling IBM], our business is in fact growing and our growth rate is accelerating over time."

Marwaha acknowledged that IBM lost a number of SMB partners when it sold its PC business to Lenovo more than two years ago. "We are in a little bit of transition when we look at an absolute number of partners, and that is because we came off a period where we had a lot of PC partners," he said. "We sold that business to Lenovo, and over time partners who were very significantly PC and had a low performance in servers ended up not being certified, extended, etc."

He said, however, that IBM is now in a recruitment mode in an effort to attract more SMB partners as it seeks to double its share there over the next 10 years. IBM added 750 business partners worldwide during the second quarter, 193 of which were added in the U.S, he added. An IBM spokesman said the vendor also added 190 revenue-generating partners in the U.S. during the first quarter.

Next: Too Focused On The 'M' In SMB