Partners Help IBM Steal Market Share

And the company hopes to expand on that success in 2002 by increasing its support and cooperation with partners, especially in the small and medium business space, says Peter Rowley, IBM's general manager for global business partners.

"Many of our competitors got distracted," said Rowley, during a keynote address Monday morning that opened IBM's PartnerWorld 2002 event in San Francisco. "But thanks to all of you, IBM did what good companies do in tough times. We took market share from our competitors."

IBM, according to its figures, saw an eight percent market share increase in its U.S.-based server business, a four-and-a-half point increase in storage and a three point increase with WebSphere. While the company's IBM Global Services division increased its market share by a much smaller mount, only fractionally, Rowley said the increase is impressive considering the bad economic conditions last year that affected most of the IT services space.

Specifically, partners accounted for a large chunk of IBM's successful server business last year, including 56 percent of its e-Server business, 83 percent of iSeries, 74 percent of pSeries and 26 percent of zSeries and about two-thirds of xSeries. And more than half of IBM's storage revenue and small business revenue also came through partners.

In addition, IBM saw its financing business gain a single percentage point of market share, "To the point where we are now twice as big as the next competitor in IT financing."

Looking forward, he said the two main components to IBM's partnering strategy are a heightened focus on delivering e-business solutions tailored to customer needs and keeping IBM units integrated to provide the best value proposition in the industry for clients and partners. IBM's other key value proposition is its focus on building what Rowley called "the best products" in the industry.

"Many of you have told me we have fabulous products," he said. "For years we've had good products, but we've been perfecting them. Today I think we are in the lead. At our core we are a technology company."

Rowley also told attendees the entire IBM organization is lined up to support business partners, from his own division to specific product areas all the way up to IBM Global Services.

From IBM's perspective, the main gauge for its success in partnering is still partner profitability, making sure IBM business partners make money working with IBM. "Let me be honest with you. This time last year we really didn't understand how you made money. We didn't really understand the triggers of your profitability," said Rowley.

To fix that, IBM financed a comprehensive partner survey last year to learn more about their businesses. "We now have an understanding of the triggers of your profitability, and we are using those to orchestrate our future programs."

For instance, some of the complaints IBM heard from partners were that the cost of doing business with IBM was too high, competition between partners has been driving down price, IBM has too many specialties, and IBM isn't managing leads well. "These are some of the issues that we've heard and are addressing already and will continue to address this year," he said.

The company has also been continuing its efforts to better integrate its sales and marketing activities with partners' efforts. This year, for instance, IBM says it will spend $100 million to complement partner marketing activities. Rowley also said IBM has been working to make it easier for partners to do business with the company, an initiative he called "solidly a cross-IBM effort." The effort included the creation of a council with executives from various parts of IBM's business, including hardware, software, developer relations and PC businesses, to dramatically improve the way partners relate to IBM.

"We're not there, I know that," he said. "But I can tell you that there is an intense commitment to consistency. You have my personal commitment that there will be a notable improvement in ease of doing business this year."

On the other hand, what IBM expects from its partners is continued cooperation in lead and demand generation and skills training. "We need you to invest in skills. All our research says that skills are empowerment," said Rowley.

To that end he cited a number of specific examples, calling on IBM hardware resellers to re-certify themselves on e-Server, asking high-end partners to get up to speed in e-business infrastructure and Linux, and urging software and partners to focus on technical skills and expand cross-brand skills to include multiple IBM brands.