IBM Doubles Rebates For HP Competitive Wins

Dan Fortin, IBM's vice president, business partners Americas, told some 500 IBM solution providers attending Avnet Hall-Mark's IBM Business Unit's annual partner conference in San Antonio Monday that the vendor would increase the rebates for competitive wins against HP to 10 percent of the sale price from 5 percent. The rebates, slated to run through the end of the year, are for "takeouts or for going into [an HP] footprint," Fortin said. "We recognize there is more heavy lifting [with unseating HP], and we want to help with that."

The announcement was met with applause by conference attendees.

"As hardware margins get tighter, anything that adds incentive into new SMB competitive wins certainly helps," said Thomas Mullen, vice president at CMA Consulting Services, a solution provider in Latham, N.Y.

Fortin noted that IBM already pays 10 percent for competitive wins against Sun Microsystems, but in the past has paid only 5 percent for HP wins. He added that IBM would also begin paying 5 percent rebates when special-bid pricing is involved in the competitive wins. Previously, IBM didn't pay any competitive rebates when special-bid pricing was involved.

The rebates come as Avnet Hall-Mark's IBM Business Unit racked up a 27.4 percent increase in sales year over year for its fiscal year ended June 30, said Fred Cuen, executive vice president and general manager of the unit. Cuen told conference attendees that priorities for the company in the coming year include increasing service contract attach rates, increasing the amount of equipment leased and improving the maintenance of software licenses.

"About 35 percent of the IBM servers sold have a service contract attach rate," he said. He noted, however, that because of that low attach rate, IBM Global Services people then follow up with calls to sell service contracts. "By the time IGS walks away, they have increased the attach rate to 70 percent," he said. "If you get excited about IGS calling into your accounts, it would make sense to increase the attach rates."

Roger Arndt, vice president product and customer marketing for Avnet Hall-Mark's IBM Business Unit, said that the Hall-Mark IBM VARs sold about $130 million in server service contracts last year. By doubling the attach rate to 70 percent, he told VARs they could effectively double that revenue to $260 million by reselling IBM service contracts.

In order to help VARs increase their services revenue, Avnet Hall-Mark announced a suite of Renewal Portfolio tools and an aftermarket services program for IBM VARs. As part of the program, Avnet Hall-Mark will sell, manage and renew software license and hardware maintenance contracts on behalf of VARs. Avnet Hall-Mark will take a fee for the service and give the VAR the bulk of the services revenue.

"Wouldn't you rather get a big chunk of something than 100 percent of nothing?" Arndt said.