IBM Software Chief Sees Midmarket Channel Push

IBM's software chief says the company is poised to make a bigger run at the midmarket in 2008, and has already been working to boost financial incentives for channel partners to capitalize on opportunities there -- as key developments like Microsoft's forthcoming new server and the build out of virtualization continues at a strong clip.

Steven Mills, IBM's senior vice president and software group executive, also told CMP Channel Wednesday that the company needs to examine Windows Server 2008 to leverage its own product line, services and partner base in what has become a critical piece of the company's business.

"As far as what Microsoft will deliver, obviously, we have to get our hands on it and understand what it will do for the customer," Mills said. "We have a very big franchise today on Windows. It's not just an X Series market-distribution relationship, but I run most of my products -- save for a select set of things that are mainframe-unique -- on Windows. It's my largest platform from a volume perspective. So billions of dollars of IBM software revenue relates to Windows, and in delivering on top of the Windows platform. As Microsoft iterates an operating system's features and functions, especially on the server, I've got to keep pace with that. We, like all other ISVs, will test and deliver."

Mills also said that, even after 60 acquisitions during his tenure running IBM's software business, the company would still keep its eyes open on some strategic deals. Earlier this year, IBM announced its intentions to buy business intelligence software company Cognos and bring it into the fold of IBM's $18 billion software business.

"I would like to see more of my partners carry more of the portfolio," Mills said. "We have a lot of focus on the spread of partners, in terms of the part of the world they participate in, and the market segments they cover. In particular I'd like for us to find more high-value partners that serve the midmarket. One of the things we've done this year is look at our true midmarket partners. We have partners who are geared toward serving large accounts. Guys who do incredible work with some of our larger customers. In the midmarket space I think we could have more partners than we have today."

IBM executives have been trying to raise the noise level in the channel as its business has come under pressure in some quarters. Software margins during IBM's third financial quarter came under pressure -- a trend the company would like to change.

Earlier this year, IBM launched a partner portal designed to help solution providers extend their competencies across its brands, including Lotus, Tivoli, Rational and others, and provide them with avenues for training, marketing assistance and an evaluation of investment needed to broaden their VAR practice. "Besides the recruiting and enabling process, we've done some things to sweeten the financials, if you will," Mills said. "We're trying to get more partners excited about that (midmarket) space. Financial motivators are part of that process."