QA: IBM Execs Sound Off On SMB Sales Overhaul

Bob Samson, head of sales for IBM's SystemsTechnology Group (STG), and Alex Gogh, who heads up channel strategy for the group, spoke with CRN about the company's far reaching shakeup of its SMB sales strategy. The restructuring, aimed at making it easier for partners to do business with the unwieldy behemoth, integrates business partner teams from the SystemsTechnology (STG) hardware group, the Global Technology Services (GTS) Group and its Global Business Partners (GBS) organization into a single team that IBM says will present one unified face to business partners. The overhaul also includes a new SMB business called the Business Systems Unit and what IBM is calling a streamlined channel sales coverage model. Below are edited excerpts from the question and answer session with Samson and Gogh.

CRN: Talk about why you made these changes.

Samson: Bringing this organization together and having a common framework, a common set of programs that we can deliver to the channel to help them drive more growth and prosperity for both of us in the SMB market is a big reason we are doing this.

CRN: Talk about the new sales coverage model and the new SMB Systems sales managers in the territories?

Samson: This is probably the largest, most significant realignment of our sales coverage in the last 15 years inside STG. Today as you know we define the SMB market around 220 SMB territories in the world. Inside those territories is a territory manager who has responsibilities for all those clients both enterprise and larger SMB clients and the very small clients. And in that model we now deploy an iSeries (sales) rep, a pSeries rep, an xSeries rep, a storage rep. In our new coverage model we are creating a new role called the system sales manager (SSM) and that manager has all of those brand specialists working for him or her. Now this is just for SMB. We will roll this out into the sector for larger enterprises later this year and into 2008. We have been working on this for over a year. We have now aligned all of our regions and territories around the world. So they have SSM coverage. We moved the sales specialists as part of that. And the SSM in the territory will have responsibility for the whole STG portfolio.

We are also creating a new role called a systems sales rep who will sell more than one brand. What you very quickly realize is that you cannot cover these territories without a very robust channel team to help do it. So the SSM will be responsible for working with those partners in that territory. In a way the partner now has one sort of throat to choke.

They can go to a territory and say I am a partner that wants to work in this territory and I have a number of clients that I need to work with rather than going to an iSeries, pSeries, xSeries, zSeries and storage (sales reps).

CRN: That SSM individual then will be spearheading the sales efforts in each territory?

Samson: In a way they are the orchestra leader of the coverage. So the SSM would say I have four people that work for me and I have to cover 80,000 accounts. Here is what I am going to do: I will take my four and they will go work on some of these accounts maybe with a partner. The SSM will also coordinate the business partner coverage in the territory to work with the channel to say: Can you help us provide capabilities for this set of clients here?

CRN: How do you decide which accounts your direct sales force can go after and which ones will be business-partner-led accounts?

Samson: Remember in SMB there are no house accounts per say. It is a very joint sort of effort. The SSM is responsible for all of the STG revenue whether it is delivered by the direct rep or the partner. In most cases what will happen inside a territory.The SSM will say I have got four people and I can probably make 25 percent of my quota with the four people I have. Now I need to make the other 75 percent up with engaging the right channel partners to help me do this. In a way we do this today inside the territory model. That isn't terribly different. The difference though is in today's world we do it with different brands doing it. Now you are going to have one sort of orchestra leader. It is going to make it much easier for the partner who will interface with one person instead of five.

One of our principal design points in creating the system sales manager was this very important point: that is you have one person instead of five and you have one person who is very closely aligned to the territory.

CRN: How many channel employees working in the U.S. will be laid off as a result of the consolidation?

Gogh: Zero.

CRN: Will there be an increase in the number of channel facing people out there now calling on channel partners?

Gogh: It is 2,000 (IBM) people (affected by the restructuring) and the strategy behind this in terms of integrating in front of the IBM partner is to simplify the experience.

Number two, it is about getting the economies so that we can increase the number of partners that we are covering through the simplification. So this is not an attrition program. This is not, we are going to add more resources. Instead what we are doing is simplifying the experience through the integration of STG, GTS and our business partner organization in order to have greater coverage on the business partner community. That is number one. We could have stopped there.

NEXT: More channel facing coverage for partners

CRN : In the U.S. will there be more channel facing people touching SMB partners? Right now a lot of these partners aren't getting touched at all in the wake of the sale of the IBM PC business to Lenovo two years ago.

Gogh: There will be a greater number of partners covered as a result of the economies that we are getting from this integration.

CRN: How many partner reps are there going to be knocking on SMB IBM partner doors in the U.S.?

Samson: As you know, we are going through the integration work now. The simple answer to the question is: We'll have more. The specific number I can't give you. I just don't have that number in front of me. But we will have more. And the reason is rather straightforward. If you look at it today we have got an STG coverage model and we had before an S&D [Sales and Distribution] coverage model for the channel. When we bring both of those together we will certainly have a larger aggregate number but we will also deploy that number more consistently over the channel partners that we have with a consistent set of programs that we do not have today. In that regard we are actually going to improve our coverage and we will cover more partners.

CRN: When will partners know the name of their new channel reps?

Samson: For a lot of partners the team members are not going to change on day one. It is not going to change at all. As we cover more partners they will learn their new person's name.

CRN: Haven't you had a territory manager there all along having a final say on partner and direct sales in each region?

Samson: Let's sort of take this from the ground up. We define the world by 220 SMB territories and in that territory is a territory manager who sells everything. He has responsibility for services, software, hardware and aligned with that territory manager in the past we had five different specialists. Let me give you an example in Hartford, Conn., we would have an iSeries rep, a pSeries rep, an xSeries rep, and a storage rep, all calling on clients with that territory manager. The territory manager has the whole IBM portfolio not just the STG hardware portion of it. So you had those five specialists coming in and out working with partners in that territory and those specialists reported to managers all over the place. The iSeries rep might report to someone in Boston. The pSeries rep might report to someone in New Jersey. The xSeries rep might report to someone in Rochester, New York. The problem you had was now I am an xSeries rep and I am going to go work with a partner in Hartford. My manager is in Rochester. He doesn't even know how to get to Hartford probably. And that manager has to go help work with the channel partners and work with the xSeries rep and he is not even there. In the new model, there is going to be a person in Hartford who is the SSM that has those specialists for those same brands working for him or her. Now if you are a partner and you want to go create the right coverage model and leverage the right kinds of relationships you can go to one place: the SSM. The SSM does not work for the territory manager. He works with the territory manager.

CRN: Will this also simplify pricing at IBM? Now will fewer people be comped on a single sale because you have a more streamlined organization?

Samson: We have a lot of issues to solve with regard to the number of people that get paid for an individual transaction. That has been one of my pet peeves, to be honest with you. I attack this from a different point of view. If you are a sales person and you are being comped for things for which you had no contribution on, it is not particularly, how do you say this, affirming as a salesperson. You get paid for something you never had anything to do with it. There is a sales sort of culture that is part of this that is wrong by paying people for things they never had anything to do with. And yet our model over time, because you had account people, client people, specialized people, you have people that are called overlays that might be part of this on a specialized product sale. They participate in sales at least with regard to being comped for them for which they had nothing to do. So the first sort of order of business that the SSM will have to go work is to destack some of this stuff. You have got to destack some of this. You have got to say a guy in New Jersey getting paid for a transaction in Hartford that he had nothing to do with does not make any sense. But the only way you can do that is in the individual territory or the individual cluster. It is very difficult to make a broad based program to say these people aren't going to get comped. It needs to be done from the ground up. That needs to be done by the SSM.

Now is that going to happen on day one? No. Is it the responsibility of the SSM to help us destack ourselves so we don't have 14 people getting paid for one transaction? Absolutely. It is also then the responsibility of the SSM to make sure we have got the right channel capacity, the right channel skills with the channel partners that are there that reflect that particular territory and the requirements of that particular territory. So a part of this is jointly working with partner teams to go do that.

CRN: Will there be particular products that benefit in the IBM product portfolio?

Samson: In a perfect world I'd like balance across all our product portfolio. That is the perfect world. But here is what happens. The SSM will essentially become a reflection of the territory that they have responsibility for. So you might have an SSM that has more System iSeries clients or an SSM that has more System pSeries clients.

The composite makeup of an SSM will be a direct reflection of the kind of clients they have in their territory. It won't necessarily buy us into one brand or another.

NEXT: The channel recruiting plan

CRN: Do you have enough partners in the SMB space. Will that be an area of major recruitment in the U.S.?

Gogh: We are constantly looking at the portfolio of partners that we have in the U.S. and around the world to ensure that we can lead in the SMB space.

We have now taken a product development offerings division and really focused them on the SMB space with specific offerings. That is why we have got to ensure that our partners are enabled and prepared adequately to win in the SMB space. And we will do some portfolio analysis to make sure that we have the right partners for that space.

CRN: Is part of this not just recruiting partners but re-engaging ones that you have lost contact with?

Gogh: We continue to rely on our distributor channel. The Avnets, the Arrows, the Tech Datas of the world to be sort of that face to the partner community. Number two as we continue to hone in on the business systems offerings that we are bringing to the market space we will continue to do a portfolio analysis. I do, however, feel that the portfolio of partners we have today allows us to have a very strong presence in the SMB.

CRN: Are there any new rules of engagement that prevent channel conflict vs. direct sales and the channel as you roll this out? Right now the deck is stacked in favor of those territory managers working with their buddies in the IBM sales force rather than the channel.

Samson: I would be surprised if that was true in the SMB market. I could see how sometimes that conflict occurs in the enterprise space, mostly because the enterprise space is controlled by client execs and a very deep sort of heritage calling on those larger clients. I am going to be honest with you. I have never seen evidence of that in the SMB space.

CRN: You have guys working with divisons of large companies, and as soon as a deal reaches a certain size, direct is all over it.

Samson: There is no incentive for the direct sales force to do the deal instead of a partner. There is no reason logically, financially or any other reason, why they would do that. There is no reason.

There is no reason why a direct rep would want to take it direct vs. a partner.

CRN: Then why not make a statement that this is the exclusive turf of the channel and that you have no direct sales reps, only channel support sales reps?

Samson: Well look you can get into all the legal reasons why you can or can't do that. That is not really the question. I think the question is our route to market in SMB is the channel. Period. End of discussion. That is the route to market. It is not a matter of saying it is the exclusive [domain of partners]. The purely pragmatic aspect of this is the only way you are going to get to these clients is with the channel and with our channel partners. I would be curious to hear of any instances where a partner has had a [channel conflict] deal with direct vs. partner in SMB. We just do not have enough resources to cover it. We don't have enough feet on the street. The direct team is focused on helping coordinate and working with the channel and they are incented to do so.

CRN: Is this going to unleash a calvacade of new SMB products from IBM?

Gogh: The answer to that question is yes. First of all you saw a significant announcement from us with Blade Center S last month, specifically building a blade center for the SMB marketplace. Back in April when we announced the System iSeries 515 model that was specifically targeted at the SMB marketplace and it has been extremely well received not only by the channel but by the end users. The third thing is as we bring this Business Systems division under Marc Dupaquier we are increasing our investment to build offerings specifically for the SMB marketplace.

CRN: Some partners see their IBM sales as a total percentage of their business shrinking since the sale of the IBM PC business to Lenovo two years ago. Do you agree that this comes at a time when you are losing channel share in SMB to HP?

Gogh: No. This strategy was built on the market opportunity of the SMB space that we have going forward. You saw SMB grew 10 percent in our [just released] quarterly earnings. We have channel partners who are factoring in when they make comments like that their PC business, they look at their printing systems business and then they factor in the server on top of that. We are looking at the market that we are playing in that customers are asking us to play in. This was truly driven by marketplace opportunity.

CRN: So this is not a response to HP channel gains?

Gogh: I know you'd love me to say yes. The answer is no. This is all about marketplace opportunity. If HP wants to continue to sell PCs and printers and ink then go for it.