IBM Reorgs Hardware, SMB Sales


IBM is hoping the changes will spur sales of its servers, software and storage products, particularly those within its Express Advantage portfolio. The company's server sales, in particular, could use a boost: A Gartner report in November said IBM's server sales fell 6.5 percent in the third quarter of 2007 to $1.5 billion, while IBM rivals Dell Inc. and Hewlett-Packard Co. both gained in server sales.

The reorganization of the Small and Midsize Business Group will likely have the biggest impact on channel partners. In the past, sales reps from the SMB Group, despite its name, sold to companies ranging from those with fewer than 1,000 employees up to customers with thousands, even tens of thousands of employees. The result was that sales reps, channel resources and even channel partners often spent a lot of time and effort chasing a small number of big sales opportunities within their designated sales territory and not devoting enough to hundreds of smaller opportunities, said Steve Solazzo, general manager of the SMB Group, in an interview last week at IBM's Armonk, N.Y. headquarters.

"Any time one of those very large customers has a big opportunity, the attention of not only my face-to-face sellers but also some of [our] business partners goes to those large enterprise customers," Solazzo said. "As a result ... the attention goes away from those 200 to 300 midmarket customers that are covered in the territory as well."

Now the SMB organization, renamed the General Business Group, has been divided into an Enterprise Business Unit that's focusing on enterprise customers and the Midmarket Business Unit that's concentrating on developing midrange customer opportunities. That may sound like little more than a redrawing of the IBM corporate organizational chart, but there are substantive differences that impact solution providers.

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Most direct sales resources within the General Business Group will reside within the Enterprise Business Unit, focusing on the relatively small number of large-company opportunities. IBM, meanwhile, is promising to devote more resources to its midmarket efforts. That includes spending $100 million this year for lead generation and other co-marketing efforts with solution providers targeting SMBs. IBM also is shifting telecoverage resources to the midmarket efforts, including assigning channel partners to telecoverage sales reps who will help develop and qualify sales leads. Each telecoverage rep will have a defined set of 100 to 125 channel partner accounts. IBM is also creating new midmarket territory sales rep positions to work with channel partners and telecoverage personnel to identify and develop SMB sales opportunities.

IBM is also appointing vice presidents to pull together all these resources in each major geographic region where IBM operates to make sure sales opportunities are passed along to channel partners, according to Solazzo. For North America, that role will be handled by Judy Smolski, until recently IBM's vice president of small and midsize business marketing who is now vice president of midmarket sales in the Americas.

Next: Midmarket Hardware Business Passing nearly all midmarket leads to channel partners could provide resellers with system business opportunities worth some $2.5 billion, said Alex Gogh, marketing vice president in channels marketing in the Systems and Technology Group (STG). Today about 84 percent to 85 percent of IBM's midmarket hardware business is done through channel partners, and Ravi Marwaha, general manager of IBM Global Business Partners, expects this could become 95 percent or higher under the new plan.

"It's a space that has been overlooked and needs attention," said Tony Merendino, president of ServIT Inc., an IBM partner. "The programs are a good start to [increase] activity and revenue from the under-1000-employee firms," he said in an e-mail interview.

IBM is also revamping its partner compensation plans, providing more rewards for capturing new business for IBM, particularly in key vertical industries, and for selling more storage and software products and services bundled with servers, Marwaha said. IBM is also streamlining what has been a complex partner compensation system, establishing consistent incentives and rebates across product lines and geographies, he added.

But Marwaha said IBM will be demanding more from its channel partners in return. "We will steer business to our partners. Our expectation is that our partners will steer their business to us. In the midmarket, in particular, that's going to be a fundamental criteria of success," he said. "This is not a one-way street, it's not intended to be a one-way street and it won't work if it's a one-way street."

IBM sales reps that work with channel partners will now be measured and compensated based on the amount of products their assigned channel partners sell to their customers, not the volume of sales IBM makes to the partners. "It creates a community of purpose between us and our business partners," Marwaha said.

In the STG reorganization, IBM's server and storage system sales and marketing efforts are being recast around types of customers rather than platforms.

"It was clear that we needed to shift our axis from a product-outward approach to a partner- and customer-in approach," said Tom Jarosh, vice president of transformation for STG.

STG will now be made up of four business units: Enterprise Systems focusing on large clients, Business Systems for small and midsize customers, Industry Systems that cater to customers in specific industries such as retail and health-care markets, and Microelectronics for customers that buy IBM's custom microprocessors and ASICs.

Business Systems will be of particular importance to channel partners given its SMB focus. The unit will be managed by Erich Clementi, who led IBM's z Series mainframe division and most recently served as general manager of Managed Business Process services within IBM Global Technology Services.

Under the old organization, customers and channel partners often ran into inconsistent business practices from one business unit to the next, such as different contract terms and conditions and bidding processes.

"It wasn't a packaged solution-oriented approach," said Joe Mertens, executive vice president at Sirius Computer Solutions, one of IBM's biggest resellers. If Sirius was bundling IBM storage products with a System p server, for example, the cost to Sirius of the storage products wasn't based on the value of the total solution, Mertens said. And if Sirius needed trial equipment, it had to deal with each server brand organization separately.

"Conceptually it makes sense," Mertens said of the new STG plan. But he was quick to add that channel partners exclusively selling IBM products generally have fewer issues with the giant vendor than those who sell products from multiple vendors—another indication that IBM will be looking for more partner loyalty in the new year.