IBM Offers Resellers Faster Margin Paybacks

IBM is eliminating sales thresholds channel partners were once required to meet before they would be paid margin paybacks, rebates and other incentives. The move is among a number of steps IBM is taking to make it easier for solution providers to work with the company.

"You now get paid on what you sell when you sell it. That's a huge deal," said Rich Michos, vice president of global channel strategy at IBM, in an interview. "We want you to perform, but we also want you to get rewarded right away."

Until now, channel partners had to meet certain sales targets, which varied according to the reseller's channel program level, the products it sold and other factors, before they could apply for rebates and other incentives they had earned. Michos said that system could create cash-flow problems for channel partners, especially in the current recession. "Economic factors make cash king," he said.

Michos repeated IBM's intention to leave nearly all sales to midmarket customers to the channel, a plan it outlined early last year. Two weeks ago, the company launched the IBM Business Partner Software Midmarket Value Initiative, an expansion of the company's Value Advantage Plus program that offers partners financial rewards for building midmarket solutions around IBM software, including such middleware products as WebSphere and Tivoli.

Sales to small and midsize customers are particularly challenging in the current economy. Last week, IBM reported that sales to SMB customers dropped 9 percent in its fourth quarter ended Dec. 31. Last year "was a pretty challenging year across the board," Michos acknowledged.

The eased limitations on sales incentives are the latest in a string of steps IBM has taken in the last year to make it easier for channel partners to work with the giant company. Michos said the company continues to invest in demand generation and other marketing activities, although he didn't provide a specific dollar figure as IBM did in early 2008 when it touted its planned $100 million investment in its midmarket initiative.

Michos also said recent layoffs in IBM's sales and software operations would not impact the company's channel efforts. "You're not going to see any significant impact in terms of the [sales and distribution] coverage model," he said. "We're going to do the things we need to do."

The channel strategy executive also said IBM is expanding its midmarket sales efforts into emerging markets overseas. While the company is primarily recruiting local solution providers in those countries, Michos said the move could provide some opportunities for U.S.-based resellers as well.

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