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Take Advanced Technology Solutions (ATEC Group), a VAR that sells HP servers and blades to the midmarket.
"We used to sell IBM, but they were changing direction so many times that it was too confusing," says Tony Rametra, president of Albany, N.Y.-based ATEC, which specializes in selling into the health-care and education markets. "HP is more channel-friendly than IBM; they support us pretty well, and we do a lot of seminars and shows with them."
Last year, ATEC sold about $10 million in HP products alone, and the company is growing at about 20 percent a year overall, Rametra says.
Lenexa, Kan.-based Tallgrass Technologies, another HP VAR, last year saw an increase in HP servers and desktop sales into the midmarket. What's driving the trend?
"Price, quality and their channel partner efforts," says Chris Jones, account executive at Tallgrass. "We're looking to sell blades this year as well."
Blades, in fact, are a key part of IBM's strategy. Palmisano acknowledged that IBM's no longer the lone wolf in the blade space, but he was emphatic that IBM continues to take a lead there. The market, which analysts project to grow to $10 billion by 2010, goes far beyond selling just the servers themselves, he said. Rather, IBM is looking to partners to develop add-on products and solutions.
Palmisano said SOA is another major growth area for partners, driven in large part by customer demand for more flexibility, quicker ROI and shorter cycles of innovation.
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| "We're investing heavily to boost our midmarket business through partners," Palmisano said. |
Web 2.0 is an emerging space where Palmisano urged partners to get their feet wet. In June, the company is rolling out Lotus Connections, a Web 2.0-like software suite aimed at businesses. It will enable social networking technologies that today's users find in consumer phenomena such as YouTube, MySpace and FaceBook.
"This collaborative need we have as consumers is the same need that corporations have to work together," he said. "It's the same fundamental concept." One partner at the event that does consulting on IBM's collaboration portfolio expressed great optimism about Palmisano's vision, particularly his quest to grab more of the midmarket.
"IBM can make significant inroads in the midmarket, even against HP, from what I've seen," said Mike Nevin, managing director at Alliance Best Practice, a solution provider based in Solihull, England. "They're doing some great collaboration-related work through partners right now."
Interestingly, as Palmisano stood before a screen showing pie charts that break down IBM's many business facets, he took pains to reassure partners that IBM is not morphing itself into a General Electric-like holding company or a private-equity firm. The company is committed to driving innovation, integration and collaboration around IT solutions and making partners central to that. IBM's acquisition strategy will not abate, however; the company will continue on the path of divesting commodity businesses as it did with components, and looking to acquire firms that add strategic value to the portfolio.
"We bought 50 or 60 companies in recent years, and we very well may buy that many more," Palmisano said. He expressed some disappointment, though, that IBM hasn't yet succeeded in finding a more fruitful way to involve partners in the company's massive services arm, but the vendor plans to invest this year in initiatives that bolster hosting and consulting work done by partners.
Solution providers are genuinely pleased with Palmisano's message, hopeful that the midmarket investments will continue.
Logicalis is one of IBM's staunchest partners, but one that has a large HP practice as its legacy and has figured out a way to straddle the midmarket and enterprise worlds. Logicalis took on IBM products and services in 2004 and has grown that portion of its business from $8 million to $336 million in that time, according to Kirk Zaranti, senior vice president of sales at the Bloomfield Hills, Mich.-based solution provider. That represents 38 percent of Logicalis' total revenue, while HP comprises 30 percent.
"The midmarket is 55 percent of our business, and we see a lot of growth in that SMB space," said Zaranti, adding that Logicalis sells IBM's Express offerings and that business is also making headway in specific vertical spaces and other niches. "We've found that one of the benefits of working with IBM is the consistency of its channel program," he said. "It's allowed us to make investments in our business, knowing that the program will get us a certain return."
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