Big Blue's Mighty Midsize Ambitions

That doesn't mean IBM doesn't offer products and services for smaller businesses. The Express software portfolio and xSeries servers have given it substantial gains in the SMB market. Nevertheless, the company's midmarket share isn't growing fast enough or in the right segments -- particularly among companies in the 250- to 1,000-seat range.

Enter Ravi Marwaha, the relatively new general manager of IBM Global Business Partners. Since taking over for the retiring Donn Atkins in October, the four-decade IBM veteran has picked up on his predecessor's theme of building partner ecosystems for growing revenue, market share and geographic reach. To succeed, though, he says IBM's solution providers -- current and future -- need better tools, training and support to reach and satisfy midmarket customers.

"We're looking at strengthening our own investments so that we can enable our SMB-focused resellers and their distributors to grow profitably in 2007," Marwaha says. "Primarily, we'll do that by investing more in education, demand generation and technical support, giving that coverage to a wider range of partners than we have before."

Marwaha is a commanding figure. He speaks of IBM's strengths and challenges with absolute confidence and candor. Does IBM have problems with its smaller business partners? Yes. Is IBM failing in the midmarket, as some have intimated? No, but it could be doing much better. Does IBM need more smaller and midsize solution providers in North America? Absolutely. Does IBM need to provide more support and facilitate channel opportunities? Without a doubt.

"We believe it's our fastest-growing opportunity now and in in the future," he says. "This is not a new push in the SMB space, because I think our push into the SMB space now is working. But, really, this is a question of redoubling our efforts."

Where IBM is planning significant investment is in providing low-touch tools that give solution providers access to product information, pricing and partnership opportunities. The faster IBM can put information into the hands of partners, the faster they can hit the streets, form partnerships and close deals. Concurrently, IBM will be offering more training -- in both its technologies and market opportunities -- so solution providers can take advantage of the initiatives.

Part of IBM's ecosystem strategy is knowing more about solution providers, their capabilities and market reach. IBM recently underwent a corporate restructuring, through which its traditional technology business units have been bridged by horizontal slats designed to enable the creation of holistic systems with services components. Not all solution providers -- particularly the smaller ones -- have the technical or infrastructure capacity to leverage the IBM platform of products and services. Marwaha is banking on tying together the capacities of complementary solution providers to open new opportunities.

NEXT: IBM's force-multiplier vision

An ecosystem approach to growing market share isn't new, but IBM's way of thinking is interesting: By finding partners and value-added distributors to act as linchpins in the market, the master solution provider can become a force multiplier if it's able to bring multiple peers into the market. A single solution provider may not have the capacity or capability to offer a customer the full breadth of IBM's products, but a partnership between multiple solution providers with complementary skillsets and overlapping geographic reach gives them the ability to target customers with comprehensive solutions and complete service offerings.

"We welcome smaller partners who have the capability in the local market to provide what the customers want, not only how they access our partner Web site, but also in terms of how we'll provide them with support and incentives," Marwaha says. "But the local service provider needs to be able to provide the comprehensive solution, and that means making sure that they are in touch with the right partners," Marwaha adds. "We're bringing this ecosystem together so that our partners can very quickly get to the right collaboration between the ISV, the value-added distributor, the value-added reseller, and the solution provider and system integrator, or any combination thereof."

IBM understands that solution providers naturally sell to like-sized customers. VARBusiness' State of the Market research has shown that smaller solution providers have a greater propensity to sell to end users of the same size, and likewise for midsize and larger solution providers. And, not surprisingly, end users tend to do business with solution providers that are local to them. IBM's view of the market, and building channel strength, is to build programs and offerings from the customer perspective and deconstruct them into the channel framework.

"I keep reminding myself that we shouldn't only think of resellers, because we're talking about four or five types of partners and bringing them together as required," Marwaha says.

IBM is taking a deliberate approach to evaluating prospective partners by their disciplines, geographic reach and capacity, and is adding only those that complement its market and partnership needs. "It's not a blanket recruitment strategy. It's a targeted recruitment and a targeted expansion," says Debra Thompson, IBM's vice president of channel management and marketing.

Fulfilling IBM's midmarket ambitions will admittedly take a combination of greater enablement of existing partners, recruiting new partners to the Big Blue ranks and increased utilization of distribution partners. IBM has restructured the arrangements with its distributors, such as Avnet and Ingram Micro, placing more responsibility on them for partner enablement. For instance, IBM is providing performance incentives to distributors for their success in enabling and expanding opportunities for solution providers. Recently, IBM implemented an expense-based incentive program through which joint investment decisions are made and funding doesn't adversely affect revenue.

"We still want [distributors] to play the role and add the partners that make up the lion's share of their revenue stream," Thompson says. "We're adding investment into their achieving targets to nurture, develop and grow the next tier of partners." IBM will invest a fair amount in demand and lead generation as it helps pave the way for partner growth in the midmarket.

The result of this midmarket effort, Marwaha says, will be a more consistent, stable and easy-to-navigate channel program. If successful, the payoff for Big Blue and its partners could be huge.

"I do want our partners in the U.S. to know that we will be working very strongly to make sure that whenever they have a choice, they choose IBM and they choose IBM because it's good business for them to do that," Marwaha adds. "That's our challenge, and that's the [road] we're going to take."