IBM Software Levels Sales Rep Commission Structure

Partners call move a good first step, say it will boost business

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IBM's Software Group has changed the compensation structure for its SMB sales reps by eliminating higher commissions on software sold direct,a move that solution providers say stands to boost their IBM software business.

As of Oct. 1, commissions for U.S.-based SMB software sales staff are the same whether the software is sold direct or through the channel, said Dan Russell, director of channel strategy for the IBM Software Group. "I want to look at any point of channel conflict and get rid of it," Russell said.

The changes apply only to the SMB software product specialists, not to the client reps, Russell said. In addition, the changes to software sales commissions are only in effect until the end of the year. But Russell said IBM aims to make them permanent once next year's planning cycle closes and back-end systems are upgraded to accommodate the changes.

IBM Software's Dan Russell vows to get rid of channel conflict.

Though leveling the commission structure for software product sales reps represents a good first step, IBM still must change compensation for its client field reps, who receive more compensation for direct software sales, solution providers said. "The client reps probably influence more software sales than [the software product sales reps]," said Vince DeRose, president of Peak Resources, a Denver-based IBM business partner.

The client reps, who have assigned end-user accounts, are already becoming more channel-friendly because they have to work with channel partners to achieve their SMB sales goals, DeRose said. "But hopefully [IBM] will change the commissions for client reps, too," he said.

A "small difference" in commissions made direct sales more profitable for IBM sales reps, Russell said. He declined to specify the difference between direct and indirect commissions, but IBM business partners put the figure as high as 10 percent.

Russell acknowledged that the delta was great enough to artificially tip more sales direct. "[IBM SMB software sales reps] value every dollar, and it was creating some general channel conflict," he said.

Bill Larsen, CEO of Computech Resources, a Green Bay, Wis.-based IBM business partner, said he's pleased with the commission structure changes and hopes they are permanent. "The difference was about 10 percent, and that was just enough to send a message [to the IBM sales reps] that if you do it yourself, you'll make more money."

IBM business partners said the new commission structure will increase their software sales.

"IBM has [made] a real concerted effort about increasing market share in the SMB space," said Mike Fischer, vice president of enterprise software and services at MSI Systems Integrators, an Omaha, Neb.-based IBM business partner. "The only way you can do this is by incenting the channel and incenting the IBM product specialists to work with their channel."

>>%A0Commissions for sales reps will now be the same for direct and channel software sales.
>>%A0Previously, IBM software sales reps received about 10 percent more for direct sales.
>>%A0Change started Oct. 1 and runs until Dec. 31, but it will likely become permanent starting next year.


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