Palmisano Says VARs Must Think Globally

That's the advice from Sam Palmisano, chairman, president, and CEO of IBM, to an audience of IBM's solution providers and business partners during the IBM Business Partner Leadership Conference, held this week in Los Angeles.

Palmisano said that discussing the adjustments partners need to make in the face of the major changes taking place in the worldwide IT market far overshadows the need to talk about selling new things. "Because the world is changing, we need to make some adjustments," he said. "We need to make some shifts. We need to make the kind of investments to capture (new opportunities)."

Palmisano said he has been talking about the need to make those changes since the collapse of the dot-com bubble, which has been recently replaced with the collapse of the housing bubble. "It's good that we have all these bubbles in the U.S. economy," he said. "It makes it more exciting for everyone else here from outside the United States."

Such changes are not cyclical or quarterly happenings, Palmisano said. "These shifts that are occurring are fundamentally real, and creating different kinds of opportunities for all of us around the world," he said.

The first is the emergence of global economies, where potential clients in countries around the world represent a new level of skills and a new level of increased demand for services.

The second, which is very complimentary, is a dramatic shift in the computing model," Palmisano said.

"The PC is receding in its influence," he said. "It was the focus of everything of value in technology not that long ago. But it's being replaced by this networked infrastructure. And this network infrastructure is enabling many of these countries to come on-line. It's enabling much of this talent pool to participate in the global expansion. And at the same time, it's enabling businesses to quickly go after emerging opportunities."

The third is customer focus on innovation and integration, a focus that enables IBM and its solution providers to create new value and integrate on a global scale. "And from the CIO's perspective, it's more than just having a seat at the table," Palmisano said. "It's having a seat with something to say. (CIOs) are not very patient people. You weren't developed to become the CIO for patience. It's not in the gene pool."

At the end of the day, CIOs are trying to set an IT agenda that is transformational for their companies, Palmisano said. "Yes, they need IT infrastructure, and they need software, and they need servers, and they need everything to get it done, but that's not the outcome," he said. "That's just the input."

IBM has made several changes starting with the end of the dot-com area. The first was a conscious decision to leverage IBM on a global scale while deciding to make significant investments in emerging markets in 60 or 70 countries around the world.

The second was to break from the past and focus on the future. The most visible change was IBM's decision to sell its PC division to Lenovo, as well as divest itself of other product lines including memory, hard disk drives, and display panels.

"This was the ultimate divestiture, because it was about the past," he said. "We moved to the future. We're not saying there's not a lot of opportunities in mobile computers. We're not saying there's not a lot of excitement in handsets and digital phones. We're just saying we moved to a new space. This is a space that has more growth and more profit characteristics than consumer electronics."

This can be seen in IBM's new offerings today, including green data center architectures, server blades, and SOA (service-oriented architecture), Palmisano said. "We're adding strategic capability to complement the $7 billion we're spending every year on research and development, and moving into spaces that have a better financial characteristic," he said.

The last strategic choice is in innovation and integration. Integration is more difficult for a company like IBM which will shortly turn 100 years old than it is for a company that was just founded by a couple of kids in a garage. "We had to get rid of a lot of the overhead," Palmisano said. "We had to change the back-office processes. We had to change the motivation systems, the remuneration, the compensation, all those different things, to begin to do a better job of integrating for the client, and do a better job of partnering with you to solve the clients' problems."

The question Palmisano asked solution providers was, can you change with us. "There's all this opportunity happening around the world," he said. "Literally, 3 billion people will enter the middle class during our lifetime. They will demand higher educational standards. They will shop. They will buy cars. They're going to want roads. They're going to expect clean water. And on and on and on. And all this is supported by IT."

The growth of the midmarket is also important, Palmisano said, but many companies looking to serve such businesses, especially with hardware-only sales, often find it difficult to justify the time spent.

However, the value is there if smaller businesses are approached from a platform perspective, which is why IBM announced its Blue Business Platform, Palmisano said.

"We can create the application marketplace, where clearly you all would have the expertise," he said. "We could do the demand generation, and some of the technical support required. Some of it you could do on-premise, and some in the cloud, wherever the cloud happens to be. All those things will tend to emerge. This is an opportunity for us to create a new way of business to try and address some of the fundamental issues associated with this business environment."

The third strategic change is the data center, where fundamental changes such as increasing support costs and lack of power and space have become major issues, and where adopting some new networking solution or virtualizing the router or a few PCs is not the answer, Palmisano said.

"The cloud clearly has a role in the enterprise," he said. "Virtualization is the key, but our point is, don't dumb-down the PowerPoint. If you walk into (the CIO) and say that the answer is they can turn four Intel servers into one, they're going to ask you to take your PowerPoint presentation home. That's not what they're managing."

The key is to offer a solution, and IBM has new programs to help partners offer solutions involving helping customer increase the efficiencies of their data centers.

"But as we do that, you need to make some investments. Because if you don't have the skills and you can't engage in this kind of conversation, you probably aren't going to last very long trying to represent this kind of solution. You can't go out there and say, 'hey, it's simple. Just put VMware on one server and you're done.'"