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IBM's hardware chief has implemented a sweeping overhaul aimed at simplifying partner compensation and account engagement.
Robert Moffat Jr., who took the helm of the $18 billion systems and technology group nearly six months ago, said at the top of the list for changes that take hold effective Jan. 1 is a partner incentive structure that is "radically simplified."
Moffat, who made his mark in IBM overhauling the $90 billion computer giant's arcane supply chain to the tune of billions of dollars in savings, said his aim in simplifying partner compensation and account engagement was to make sure IBM partners can invest in growing their business in 2009, particularly in a difficult IT spending climate.
To that end, Moffat said partners will start earning what were backend rebates or incentives at "dollar one" rather than typically having to hit a 70 percent sales quota clip before getting a pay out. "We're moving a significant amount of money to the front end," he said. In some cases, that means partners who were not seeing pay outs until nine months out will see them at the outset of the year.
"This is the most substantial change we have ever made [to simplify partner compensation]," said Moffat. "It isn't words. It is concrete action. It is very specific things we have done and [partners] will see that clearly."
The changes will allow IBM partners to "invest" in growing sales with the certainty of a return, said Moffat. "That has never existed with the channel," said the 30-year IBM veteran. "Not in my history." Not even IBM's direct sales reps have that kind of sales plan, said Moffat. "My sales force would love to be on an absolute plan," he said. "They are not." In fact, IBM's sales reps will not see significant incentive changes in 2009, he said.
Moffat said IBM's systems and technology group also plans to make an additional $100 million investment in new 2009 global go-to-market strategies.
What's more, IBM is also for the first time publishing a list of 500 direct global accounts so there is no confusion over where IBM will take the lead and where partners will take the lead, said Moffat. Ironically, Moffat could not find a direct account list where IBM was taking the lead when he took the top hardware job. "There was no list," he said.
In addition, Moffat is publishing new principles of engagement that clearly spell out that the channel is the go-to-market lead in the midmarket and what IBM calls SMB (small to midsize business). Finally, Moffat is republishing and reaffirming the business partner charter.
IBM business partners said the changes, particularly the compensation changes, could have a dramatic impact on their ability to navigate a treacherous IT market in 2009.
"What IBM is doing is providing a level of comfort and security to the business partner that those dollars will be there even if 2009 proves to be a difficult year," said Joe Mertens, the president of Sirius Computer Solutions, IBM's largest business partner at $725 million, with headquarters in San Antonio, Texas. "IBM is showing a significant commitment to the channel to help ensure business partner economic models even if next year proves to be difficult."
"Many of the former programs were all or nothing," added Mertens. "This provides a level of consistency and security to the business partner." Sirius itself is planning for a flat sales year next year vs. 2008.
"This is probably one of the biggest set of changes I have seen since the early 1990s when IBM moved from being a predominately direct sales-focused company to starting to embrace partners on a broad-based basis," Mertens said. He predicted the changes will set the stage for a resurgence given that vendors sometimes cut back on channel commitment in an uncertain economy. "IBM realizes the manufacturer that invests in the channel during the downturn is going to gain share throughout the downturn and once the economic situation improves they are really going to gain share at a much more rapid level because the channel will be focused on their product set."
NEXT: The Biggest Stride IBM Has Made In Years
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