IBM May Be Out of Place

Reorganizations at IBM are nothing new. The computing giant each year has more reorganizations and executive rotations than Barry Bonds has home runs. But some changes taking place within IBM's hardware and channel organization are worth a long, hard look. Shortly after IBM disclosed one of its best quarters under CEO Sam Palmisano, it rather hurriedly unveiled a massive change to its partner organization intended to salvage the

company's standing in the SMB market--clearly the weak link inside IBM. Let's take it from the top. Those changes are meant to strengthen IBM's SMB sales not with a major product initiative but with executive shuffling and channel coverage. Not sure I hear the cash register ringing. The reorganization resulted in the IBM Business Partners organization, which is responsible for coordinating the company's channel activities--being split between the lumbering hardware group and fast-growing software group. Ravi Marwaha, IBM's top partner executive whose organization is 2,000 strong, will now report to the esteemed Bill Zeitler, who runs IBM's Systems & Technology Group (STG). IBM says the move makes sense because the bulk of its partner sales--80 percent--are hardware-related, so what better place for Marwaha's organization to reside? The takeaway from the solution provider community and other observers is that clearly IBM is struggling to catch up with its main competitor, Hewlett-Packard, in the SMB space.

You may have read that at the company's annual PartnerWorld lovefest, Palmisano called SMB the company's single largest opportunity for growth. So wouldn't it make sense to shuffle the deck chairs on the boat to satisfy the big boss? IBM did the expected. It changed its field coverage model so that there's just one expert assigned to a solution provider or customer rather than the usual army of people that represent the different product groups. It also formed a new SMB business unit under Marc Dupaquier, but oddly, didn't give him the Intel-based System x servers--just the low end of the System i gear. And, of course, it vowed to vigorously develop breakthrough products for small and midsize customers. Given that IBM is now so removed from these clients, and its brand is attached at the hip of enterprises like Lindsay Lohan is to the tabloids, you have to wonder how it will accomplish this.

What's utterly fascinating, though, is what the move says about its efforts in software. If the bulk of the partner organization is going to be embedded within the hardware group, then is IBM acknowledging that its efforts to penetrate the midmarket space with its Express offerings have fallen short? Or is a true IBM software offering in SMB a long way off? This is a huge issue for IBM because it's a company that practically has a trademark on the word "solution." If the hardware group is driving SMB, then you have to wonder if its partners will settle for half of the solution around commoditized products with less services appeal than software.

If you're running a VAR organization today, you should take a hard look at IBM's product portfolio and how it fits into your business. The organizational changes are irrelevant, but the field coverage is extremely important. If you're a large partner, then not much should change. But if you're a small, growing VAR, why would an IBM rep care about you? If it doesn't have the SMB channel or the product set yet, then what is that master field manager going to do? Probably focus his energies on the big VARs who can move big-ticket items.

I think you get the picture. There's still hope, though. Bob Samson, who runs IBM's hardware sales, intends to straighten out the sales compensation issues and develop the right incentives. Samson has an amazing track record and might just be able to crack the code and ride off into the sunset.

But just one last thought: If it really wanted to make a statement, IBM would create a separate SMB initiative with fresh execs, recruit new VARs and have the right products in place.

Let me know what you think.

Robert C. Demarzo (rdemarzo@cmp.com) is vice president/publisher of VARBusiness and GovernmentVAR magazines.