Five Reasons IBM Dropped Synnex

1. Somebody had to go

In this economy, IBM chose to hunker down with four distributors, two that focus in the enterprise space (Arrow Electronics and Avnet) and two broadliners (Ingram Micro and Tech Data). Synnex was the odd man out. Despite the fact that Synnex was reportedly the top System x distributor, IBM may feel the distributor did not have the scale nor the resources of its larger broadline brethren.

2. Other distributors pressured IBM to knock Synnex out

Synnex has long been known as the price leader in the channel, aggressively pursuing wins by leveraging its lower cost structure to outmuscle other distributors.

Synnex's sales reps have the ability to cut price-competitive deals to win sales that require higher-level approval than the competition. Synnex says its Asian back-office operations allows it to operate at a lower cost than other distributors. This time it might have come back to bite Synnex in the back. Arrow and Avnet are used to making more margin and might have pressured IBM, along with Ingram and Tech Data, into cutting Synnex to increase their own potential profits.

The big question now becomes whether IBM can make more money by shuffling its Synnex customers off to other distributors, or whether Synnex can convert those VARs to Hewlett-Packard, Lenovo or another vendor's systems. It's a danger that IBM should not underestimate. Synnex's nimble, no-holds-barred approach has won a rabid following and with management looking to develop a higher services quotient, the company is in good position to capture more share.

3. Synnex does not have a global presence

Arrow, Avnet, Ingram Micro and Tech Data all have more of a global presence than Synnex, including large operations in Europe and Latin America.

Synnex is focused much more on North America. IBM may feel it gets more bang for its global buck by sticking with the companies that have the most reach. In fact, one of IBM's biggest challenges is changing terms and conditions so partners can sell globally without being hampered by the IBM bureaucracy. At issue are country and geographic restrictions that make it difficult for distributors and solution providers to seamlessly conduct global business. Solution providers note that they may be authorized to sell certain IBM products in one geography but not in another. Additionally, IBM warranty policies require that products be purchased in the geography they are sold or the warranty is void, business partners said. Solution providers say, therefore, they are forced to work with multiple distributors on most global deals. Bottom line: the global issue was probably a big reason for Synnex being the odd man out.

4. IBM wants to focus on the midmarket

IBM might feel, rightly or wrongly, that Synnex serves a lower-end of the market with System x products than Arrow and Avnet, and possibly Ingram Micro and Tech Data. The vendor may feel that Synnex was a mismatch for IBM's new channel direction, which charges distributors with more recruitment and enablement of higher-end partners.

5. Cost cutting

It's likely that the driving force behind the move to slash Synnex was Robert Moffat, Jr., IBM senior vice president and group executive, IBM Systems and Technology Group. Before taking the top systems job, Moffat won raves for cutting more than $5.3 billion in costs in only one year out of IBM's supply chain as senior vice president of integrated operations.

IBM CEO Sam Palmisano handpicked Moffat for that all-important cost-cutting job. That would mean Palmisano was well aware of the move to cut Synnex out of the picture. The unanswered question is what is IBM's end game? Was it the right decision to open a flank to an HP offensive in the System X market? Only time will tell.