Integrating IBM

That's the assessment from IBM Business Partners on the eve of the vendor's annual PartnerWorld conference in Las Vegas. They point out that IBM's channel strategy and programs are not uniformly applied across all eServer brand teams, IBM software and IBM Global Services (IGS), which causes confusion and conflict and ultimately impacts sales and profits.

"We're delighted that IBM is moving forward with the channel, but we'd like to see better consistency," said Rick Kearney, president and CEO of Mainline Information Systems, an IBM Business Partner in Tallahassee, Fla. "Sometimes the brands aren't on the same page relative to partner strategy and account coverage."

Donn Atkins, IBM's general manager of Global Business Partners, says he has the team in place to drive "double-digit" global Business Partner revenue growth this year, building on a solid 2004. Last year, IBM's Business Partners sold or influenced $32 billion in IBM products and services, or one-third of the vendor's annual revenue, up from $29 billion in 2003.

And IBM this week is moving to rectify some of its seemingly disparate brand channel strategies by bringing more eServer lines into the bid certification program it launched last year for the pSeries. On March 1, the Armonk, N.Y.-based vendor will add iSeries to its bid certification rebate program and on April 1 will extend the plan to include high-end xSeries servers.

"The thing it does for us is [it] gives us a chance to protect the partner who makes the investment and does the solution work with the customer," Atkins said. "We think it's a more equitable way to reward partners for doing what we want, which is to create value for customers."

That move is a welcome sign to many Business Partners, which have long advocated protecting the investments of those generating demand for IBM.

"Bid certification really rewards folks that do the spade work and protects people against others who come in at the last minute and take advantage of the work that's been done," said Jim Simpson, president of MSI Systems Integrators, an IBM Business Partner in Omaha, Neb.

The plan requires that a Business Partner first register an opportunity and then submit documentation proving that it actually generated demand for the IBM solution. The certified partner then is the only one who receives the full discount for the product. In the case of the iSeries, partners say, that could be more than 15 points of margin over competing Business Partners.

While the extension of the bid certification plan now encompasses the bulk of the eServer line, Business Partners say the problem of too many of them competing on price for the same deal extends to IBM software as well.

"My opinion on this is that [bid certification] is the right direction for all IBM solutions, and software would be a part of that," said Kirk Zaranti, senior vice president of sales for the IBM division of Logicalis, an IBM Business Partner in Bloomfield Hills, Mich. "We believe that the partner that architects and delivers the solution should reap the rewards."

While Atkins would not commit to a time frame to include software in the program, he said, "This is clearly one of the issues we're looking at."

Still, some smaller Business Partners, while applauding the intent of the bid certification program, say it puts an unfair administrative burden on them because they don't have dedicated staffers who can file the necessary documentation to win bid certifications in accounts they feel are rightfully theirs.

"The big guys like it, but the small guys aren't as skilled at the sales job [in documenting their efforts to IBM], and they've not been certified on deals with customers they've had for 20 years because someone else made it look on paper that they were doing more to drive the business," said Robert Kennedy, president of CPS Technology Solutions, an IBM Business Partner in Brooklyn Park, Minn.

To address this issue, IBM at PartnerWorld will demonstrate an automated Web-based bid certification tool called Business Opportunity Warehouse designed to streamline the process. The intent is to get feedback from partners prior to launching the tool in the second half of the year. The new tool will allow partners to virtually store all of their sales documentation and have IBM's certification team review the materials and notify partners if they have won certification.

Overall, Business Partners say some IBM divisions need to work on channel team building. IGS, for one, gets mixed reviews from Business Partners.

At PartnerWorld, IGS is expected to launch an E-Business Hosting Services Sales Agent program in which Business Partners will sell IGS' full array of hosting services to small and midsize businesses. While Business Partners that don't specialize in hosting services themselves welcome the new agent program, others note that IGS tends to see them as potential agents to sell IGS-delivered services rather than having IGS bring them in for more lucrative work as project subcontractors. "We are one of the Midwest agents for selling IGS hosting services," said Bill Larsen, president and CEO of Computech Resources, an IBM Business Partner in Green Bay, Wis. "We have been talking about subcontracting with them for perhaps four years, but unfortunately we have not been able to figure out how to get people engaged and actually do the transactions."

But some of IBM's larger Business Partners say IGS is starting to bring them into more projects as subcontractors. "We did five times the number of projects with IGS last year than we did the year before," said MSI Systems Integrators' Simpson. "We have 120 billable folks and we are in markets that they are not. We feel that IGS has come a long way and made tremendous progress [in working with Business Partners]," he said.

Likewise, Logicalis' Zaranti said his subcontracting work with IGS was up 25 percent last year. "I'm even more optimistic heading into 2005," he said. "Our [subcontracting] opportunities could be up 25 percent to 40 percent."

Business Partners, too, would like to see more opportunity and less competition from IBM's direct-sales force in zSeries mainframes. IBM says that 24 percent of its zSeries business came from the channel vs. 23 percent in 2003, but Business Partners say IBM is keeping the channel zSeries business artificially low. "There are accounts where we sell every other brand except z simply because IBM wants to keep it direct," said Simpson. He says he has no problem with IBM going direct on mainframes in very large accounts, but the vendor also wants to keep some smaller accounts direct in order to build territories for its direct-sales reps, he said. "IBM should either get into the channel or not," he said.

Meanwhile, the iSeries line, which lagged behind other eServer lines last year, is set for an infusion of up to $1 billion in marketing support and incentives over the next two years, according to Peter Bingaman, IBM iSeries vice president.

The program, which will be unveiled at PartnerWorld, is called iSeries for Innovation and will help ISVs modernize applications written for the iSeries. As part of the program, IBM has struck alliances with more than 60 tools vendors.

"The tools innovation program will [help] ISVs extend their capabilities into areas such as RFID, Web services and VoIP," Bingaman said.

In addition, $200 million in iSeries channel incentives are planned as well as a 35 percent increase in funds to encourage Business Partners to go after SMBs and accounts in tertiary markets. The net impact of the incentives will boost partners' operating margins by up to 8 points, Bingaman said.

"There is new momentum in the iSeries because of what IBM is doing," said Harvey Najim, CEO of Sirius, an IBM Business Partner in San Antonio. "What they are doing is huge. The brand kind of got lost in the shuffle [last year], but I am predicting double-digit growth in iSeries this year."

IBM also is slated to unveil plans to double the number of ISVs participating in PartnerWorld Industry Networks. Launched last year, the program helps ISVs using IBM middleware and eServer platforms market and deploy their applications by partnering with IBM integrators. Buell Duncan, IBM's general manager of ISV and Developer Relations, says more than 2,500 ISV companies joined the initiative last year. "We expect the number to double to 5,000 firms in 2005," he said.