Software Resellers Cry Foul Over IBM Enterprise License Deals

IBM

When it comes to Enterprise Licensing Agreements, (ELAs), several large software resellers--none of which would be quoted by name--complain that IBM has taken direct deals they had conceived and nurtured.

"They've deprived the channel of tens of millions of dollars easily in [individual accounts where people like us have been doing all the ground-level work," said an executive with one large software reseller. "In their effort to sell up, [IBM rolls the accounts into ELAs, which are then taken direct in many, if not all, cases."

Resellers and other industry observers said that IBM has been poaching enterprise accounts and taking them direct, in contrast with rival Microsoft's Enterprise Agreement (EA) game plan, whereby Microsoft negotiates EA terms and conditions up front with customers but then turns fulfillment and support over to resellers.

Many of these same resellers feel that while they might want more money from Microsoft in its EA deals, at least Microsoft is not taking those licensing deals direct. All Microsoft EA fulfillment is through partners, the resellers said.

Yet one reseller said the current "terrible IT spending environment" exacerbates long-standing conflicts. "There is more pressure now," she said. "Everyone has huge incentive to maximize margin and profit, and vendors are trying to expand their footprints in existing accounts."

IBM Global Services (IGS), the vendor's huge services arm, looms front and center in most of these complaints. While IBM product groups say they treat IGS as just another integration partner, resellers don't see it that way. "To me, IGS and IBM Software are one and the same," said the large software reseller executive. "To us, it's all IBM, it's the right pocket vs. the left pocket and either way, they're competing with us."

Mike Colleary, vice president of software channel sales for IBM, said the company remains committed to its value-added reseller partners and maintains that channel conflict has been reduced. "I've heard an occasional complaint about IBM taking things direct, but those [moves are customer-driven," he said.

"Any customer who wants a partner involved, we have the partner involved," he said.

But even Colleary admitted that "you always hear about conflict with IBM Global Services." He and partners alike contend that IBM has done well in fostering good relationships in the SMB space. The major conflicts appear to arise in large enterprise accounts, where ELAs are a factor.

In his role at IBM, Colleary manages relationships with large integrators, including Accenture, Computer Sciences Corp. (CSC) and others that compete with IGS. "I see less conflict than in the past, but certainly as you go up into the enterprise, the more you see," Colleary said.

Roger King, president of product services for Software Spectrum, Garland, Texas, said some level of vendor channel conflict is inevitable. "From time to time, and I'm counting on the fingers of one hand, some deals ended up direct but that's life in the big city," King said.

Many SMB resellers contend that they're doing quite well by IBM. "Once you prove yourself, you find you're the big man on campus with IBM and they invite you to the dance," said Doug Pelletier, president of Trifecta Technologies, a small reseller based in Allentown, Pa. "We do see some conflict with IBM Global Services, but it's healthy. Sometimes I hate it, but other times the IBM Software people would rather engage us than IGS. We provide a much better price point, very high customer satisfaction."

IBM's Colleary said that for all its scope, IGS still only covers 15 percent of the market. "If you have a problem with IGS, go next door, because they're not there," he noted.

He also insists that most of IBM Software's partners make more money than ever on the company's offerings, which include Lotus Notes and Domino and IBM's DB2 database. He also said the percentage of IBM product being fulfilled through partners increased across all software segments last year.

Other resellers said they are doing well with ELAs, but still report problems getting a coherent story out of the giant computer company. "They have wonderful products, but communication needs to be better," said Lou Johnson, president of Siwell Consulting, a New York-based partner. "All the big vendors have the same problem; the executive ideal doesn't always make it out to the ends of the tentacles [in the field."

Brian Hilgenfeld, vice president of enterprise software for Midland Systems Integrators, an Omaha, Neb.-based reseller, concurred. "There's been great improvement in channel relationships in the past 12 months, but I believe there's still good work to be done to make sure the customer sees a cohesive partnership between the partner and IBM," he noted.