IBM Reorgs Hardware, SMB Sales

Passing nearly all midmarket leads to channel partners could provide resellers with system business opportunities worth some $2.5 billion, said Alex Gogh, marketing vice president in channels marketing in the Systems and Technology Group (STG). Today about 84 percent to 85 percent of IBM's midmarket hardware business is done through channel partners, and Ravi Marwaha, general manager of IBM Global Business Partners, expects this could become 95 percent or higher under the new plan.

"It's a space that has been overlooked and needs attention," said Tony Merendino, president of ServIT Inc., an IBM partner. "The programs are a good start to [increase] activity and revenue from the under-1000-employee firms," he said in an e-mail interview.

IBM is also revamping its partner compensation plans, providing more rewards for capturing new business for IBM, particularly in key vertical industries, and for selling more storage and software products and services bundled with servers, Marwaha said. IBM is also streamlining what has been a complex partner compensation system, establishing consistent incentives and rebates across product lines and geographies, he added.

But Marwaha said IBM will be demanding more from its channel partners in return. "We will steer business to our partners. Our expectation is that our partners will steer their business to us. In the midmarket, in particular, that's going to be a fundamental criteria of success," he said. "This is not a one-way street, it's not intended to be a one-way street and it won't work if it's a one-way street."

IBM sales reps that work with channel partners will now be measured and compensated based on the amount of products their assigned channel partners sell to their customers, not the volume of sales IBM makes to the partners. "It creates a community of purpose between us and our business partners," Marwaha said.

In the STG reorganization, IBM's server and storage system sales and marketing efforts are being recast around types of customers rather than platforms.

"It was clear that we needed to shift our axis from a product-outward approach to a partner- and customer-in approach," said Tom Jarosh, vice president of transformation for STG.

STG will now be made up of four business units: Enterprise Systems focusing on large clients, Business Systems for small and midsize customers, Industry Systems that cater to customers in specific industries such as retail and health-care markets, and Microelectronics for customers that buy IBM's custom microprocessors and ASICs.

Business Systems will be of particular importance to channel partners given its SMB focus. The unit will be managed by Erich Clementi, who led IBM's z Series mainframe division and most recently served as general manager of Managed Business Process services within IBM Global Technology Services.

Under the old organization, customers and channel partners often ran into inconsistent business practices from one business unit to the next, such as different contract terms and conditions and bidding processes.

"It wasn't a packaged solution-oriented approach," said Joe Mertens, executive vice president at Sirius Computer Solutions, one of IBM's biggest resellers. If Sirius was bundling IBM storage products with a System p server, for example, the cost to Sirius of the storage products wasn't based on the value of the total solution, Mertens said. And if Sirius needed trial equipment, it had to deal with each server brand organization separately.

"Conceptually it makes sense," Mertens said of the new STG plan. But he was quick to add that channel partners exclusively selling IBM products generally have fewer issues with the giant vendor than those who sell products from multiple vendors—another indication that IBM will be looking for more partner loyalty in the new year.