IBM’s End-Of-Quarter Discounts Raise Ire

Some IBM solution providers are asking the vendor for a programmatic fix to end-of-quarter product discounts that they say cause customers to delay purchases in hopes of garnering better deals.

They say the vendor has a long history of becoming more aggressive on pricing near a quarter's end as it strives to hit sales targets for the period.

"Those customers that know IBM well know that they kind of panic at the end of months and quarters and they come out with all of these specials," said Darren Waldrep, manager of strategic alliances at Datatrend Technologies, Minnetonka, Minn. "It can put a little squeeze on margins. But our main concern is that we try to spread the load out, but sometimes we can't because customers are waiting [for the discounts]."

Waldrep said when the orders suddenly come in all at once product availability often becomes an issue. "IBM needs to be a little less predictable," he said.

Waldrep and other solution providers said these end-of-quarter buying habits are merely a nuisance when market conditions are normal. But with the current economic slump, purchasing delays exacerbate an already tough market.

"We know the demand is there, but customers are hesitant to commit their budget dollars," said John Flores, marketing director at Sirius Computer Solutions, San Antonio. "[IBM] customers have become conditioned to buy at the end of a quarter. The savvy customers wait."

Flores said he'd like to see programs from IBM that incent customers to buy earlier in the quarter so that sales are more evenly spread out. He suggested a declining-tier discount that loads more discounts toward the beginning of a quarter with the incentives declining toward the end. Customers would be encouraged to buy earlier rather than postpone purchases.

But Peter Rowley, IBM's general manager of global business partners, said it's difficult to design incentive programs that encourage partners and customers to spread out purchases. He said customers and solution providers would likely perceive the new discount patterns and adjust their behavior if they are intent on timing purchases to gain maximum discounts.

"That's not our strategy; we are trying to get out of that [a rush of end-of-quarter sales]," Rowley said. "I believe the answer is a management system that encourages a more even flow of product throughout the quarter, and we are working very hard to do this." Creating a much larger sales pipeline that makes it difficult for either IBM or the channel to book the bulk of orders at quarter's end is key, Rowley said.

"That's why we've got all these relationships with [systems integrators], software vendors and new influencers who can bring new business to the resellers of the world," he said. "We can never do 33 percent, 33 percent and 33 percent, but we can do better than we are and we've got a lot of focus on that as a company."

Some IBM solution providers are already perceiving a change in IBM's behavior.

Joe Vaught, COO of PCPC, Houston, said IBM seems to be "telling customers that the bottom is here" and not automatically lowering prices to win a deal.

Vaught recently closed a deal for 514 IBM xSeries servers in the Houston area that was an add-on to more than 1,200 servers the customer had purchased in the United Kingdom. But when Vaught was in the process of closing the deal, IBM raised the price on the servers by about 10 percent.

"It was the toughest deal I've ever closed," he said. Vaught said he had to lower the price of some of his add-on services to win the business.

Tweet

   

More Channel Programs