IBM Relies On E-Business And Solution Providers To Resurrect PC Fortunes

IBM

Bob Moffat, IBM's general manager, Personal and Printing Systems Group, said IBM will "stay focused on its strategy" in the face of a brutal market for PCs. IBM's Personal and Printing Systems Group lost $153 million in 2001 and saw revenue decline by more than 20 percent for the year to $12 billion.

In January, the company sold its NetVista desktop computer production facilities in Research Triangle Park, N.C., and Greenock, Scotland, to Sanmina-SCI, a contract manufacturer in San Jose, Calif. The company also committed to a three-year, $5 billion outsourcing deal with Sanmina-SCI for the production of the desktop PCs, based on IBM designs.

At the same time, IBM said it would stop production of its thin-client line and will resell thin clients manufactured by Neoware Systems, King of Prussia, Pa.

Moffat said he would not rule out outsourcing more PC production in the future. "If there is an advantage to be gained, we would consider it; if there's not an advantage to be gained, we won't," he said.

Instead, IBM's PC technology advantages in wireless capabilities and security make the business a vital part of IBM's e-business infrastructure strategy, he said. He called the PC business on its own a "dog eat dog world." But he said that IBM's strategy is to use the PC as a way to build out the e-business infrastructure.

He also said that about 40 percent of IBM's PC business goes direct to large accounts. "But 60 percent still goes through our biggest [channel partners," he said.

Russell Madris, president and CEO of MoreDirect, a solution provider in Boca Raton, Fla., that won IBM's reseller of the year award at the vendor's recent PartnerWorld conference, said his IBM PC business was up about 42 percent last year. "We've been able to make major wins against both IBM direct and Compaq direct because with our procurement system you can track serial numbers online, you do three-way matches of invoices, and get asset management reports generated by end users."

What's more, MoreDirect's online ordering system shows inventory not only from vendor direct facilities, but also channel inventory at all major distributors.

Meanwhile, channel executives and sources close to IBM said the vendor is working on new incentive programs for SMB solution providers through distributors. The sources said that the new initiative, the details of which are still being worked out, comes in the wake of Compaq Computer's push toward a direct distribution model that bypasses distributors. Also, ongoing uncertainly over the Hewlett-Packard/Compaq merger is creating new opportunities with distributors for IBM, sources said.

Meanwhile, Moffat defended IBM's decision earlier this year to eliminate its channel field sales reps in the PC Division and instead shift solution providers over to telesales support. "If we thought we'd lose business or mind share, we wouldn't have done it," Moffat said. "Any time you make a change like that, there is a fear factor. Now that we're 60 to 90 days after the fact, people are more responsive to the change."