Does IBM Matter To You?

At the heart of that plan is a sweeping shakeup that IBM claims will make it easier for VARs to do business with the vendor. The changes include the integration of IBM's Global Business Partner organization with business partner teams from its Systems and Technology Group—which along with related services and financing accounted for 80 percent of IBM business partner sales in 2006—and its Global Technology Services Group. IBM said this will result in a single team and sales coverage model that will present one unified face to partners. The shakeup also includes a new Small Medium Business Systems Business Unit—but the unit does not include the popular System x Intel servers. The restructuring also does not include the IBM Software Group, which continues to show strong sales growth on its own—separate from the hardware organization.

Partners are hoping the SMB shakeup will help. But they are far from confident, given the gap between public channel statements and their actual experience in the sales trenches.

One formerly exclusive IBM Premier software partner with less than $10 million in annual sales said he has added Microsoft, BEA Systems and Red Hat to his product portfolio after what he called his worst year ever as an IBM partner in 2006. "We have had to dump exclusivity with IBM," he said. "We were loyal true blue partners. We wouldn't sell anything else. Loyal to the end. After all the changes in IBM's policies, we are now best-of- breed. We had to do that or we'd be out of business."

He estimates his costs associated with being an IBM partner have climbed 20 percent over the past three years—and it was already incredibly expensive and difficult. He estimates his total sales, general and administrative costs associated with being an IBM Premier partner at about 35 percent of sales compared with about 10 percent for Microsoft.

The partner also pointed to the high costs associated with mapping into so many different brand managers and IBM reps. He says he has about 15 IBMers he must deal with, including brand managers and territory reps on a regular basis. On a $20,000 IT deal, he has had as many as 10 IBMers on a conference call with the client. "The customer flips out," said the partner.

Another solution provider executive said that after selling more than $20 million in IBM product during the first quarter, his IBM business fell off the cliff in the second quarter. "I've done almost nothing in the second quarter; it's frightening," said the solution provider, who asked not to be identified. He said the biggest problem is that IBM seems to want to take all large deals direct. "There is a 20 percent delta between IBM direct pricing and channel pricing," he said. "Channel pricing should be cheaper, not more expensive than IBM direct."

He noted that IBM is slow when it comes to providing him with server pricing, often causing him to miss out on deals. "I don't know whether they are screwed up or purposely dragging their feet so they can take the deal direct," he said.

Some See A Silver Lining
Yet, it's certainly not all doom and gloom in the small-business segment, where some solution providers have thrived with IBM even though they are anything but happy with just how difficult it is to deal with the vendor.

Competitive Computers' Demars said that not only is his IBM business up this year, but that his IBM channel reps understand his business and help him work through issues. It's upper management at IBM that shows less understanding of small business, he said. Still, he's chosen to stick with IBM as his primary server vendor. "We are like the chef who views IBM as a high-quality ingredient in our restaurant," he said.

Also, he said, IBM has a real opportunity to differentiate itself in SMB. "The only [server] options out there are HP, IBM and Dell," he said. "Too many guys I know say, 'Dell's direct; IBM's too hard to work with; I'm going with HP.' I want IBM to get better at this [SMB] so they can stay in the game."

PC Products' Hudgins is hoping IBM's new streamlined sales coverage model will reduce both partner and customer frustration. "Imagine if you went into a fast food line and you had to order your drink, hamburger and fries from five different people," he says. "That's the way doing business with IBM is like. Finally this gives one point of contact for me and my customer so that I don't have to have five conversations with five different people over the same solution."

Although he does sell blade servers and Intel System x systems, Hudgins said IBM may view it as economically unfeasible to touch partners like him. "Maybe IBM is testing the water to see if they should move back up the food chain to i and p systems away from Intel servers, which are becoming more commoditized," said Hudgins. "They got out of the desktop business. Is there a long-term strategy in place to possibly sell the Intel base or anything below blades as it becomes commoditized?"

Solution providers said IBM's ambivalence and HP's channel charge is showing up in quarterly results. In the most recent quarter, HP's industry-standard server revenue was up 17 percent, with blade server revenue up a whopping 58 percent. Compare that to IBM, whose Systems and Technology Group sales was up only 2 percent, with blade servers growing at a 15 percent clip year over year.

Rick Chernick, CEO of Camera Corner Connecting Point, a solution provider in Green Bay, Wis., stopped selling IBM servers this year after selling about $200,000 of IBM's servers in 2006. "IBM used to be a force in the channel and they aren't anymore," he said.