Partners: IBM Still Too Slow Approving Discounted Deals

IBM hardware resellers say they've seen progress in the company's efforts to shorten the amount of time it takes to approve discounted deals negotiated by partners. But they'd like to see more.

The resellers' observations come after approval times had stretched out to days and even weeks, according to partners, including one who said he lost a deal because of approval delays.

"We compete with EMC, HP, Dell and NetApp in almost every deal. Our competitors are able to deliver discounted proposals in hours," said an IBM reseller who asked that he not be identified. "IBM resellers have to wait days and frequently weeks to get a price approval. We had a PureSystems proposal in the seven-figure range, which took four weeks to get approved."

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"We lost one PureSystems deal because of delayed pricing approval," he said.

An IBM executive, responding to the complaints, maintained that IBM developed an automated system that approves the majority of discounted deals, also known as "special bid pricing," almost immediately. And special bids that require more scrutiny are being approved within an average of four hours and a maximum of 24 hours.

IBM is in a hard fight with Dell, Hewlett-Packard, Oracle and other competitors that sell server and storage hardware. Given that IBM's worldwide unit server share dropped 14.4 percent in the first quarter, according to preliminary data from Gartner, the company can't afford to lose any deals.

Partners say part of the problem is because IBM requires that special bid pricing deals for IBM servers (PureSystems, Power Systems and System x) and storage systems be approved at higher management levels compared with competitors that approve such deals at the field level. Delays also occur when complex deals include more than one brand, such as IBM's System x, Power Series and PureSystems servers, which require approvals from each product operation.

"I actually believe it has gotten better. But it hasn't gotten to where it needs to be," said another channel partner who also requested anonymity. He said as recently as six months ago deal registrations and discounted bids "always came back with questions. And that elongates the process." He also said deals involving more than one brand had to be cleared by managers at each brand "and that's a pain."

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Other partners said they see few problems. "It's not a real issue for us," said John McCarthy, COO of Mainline Information Systems, a Tallahassee, Fla.-based solution provider that works with IBM, HP and other IT vendors. "We have not noticed any major delays, usually a day or two. We don't always get the amount of discount we would like, but that's a different story," he joked.

McCarthy, who checked with his sales bid team in response to questions from CRN, said he was told that IBM's response time has improved. "The bulk of our deals require a special bid. From the time that the bid is submitted, it normally takes a few hours to a day before we get a response. It is very rarely more than a day."

"However, it is not uncommon that there is additional information needed," McCarthy continued. "Not sure I can blame IBM to require additional information. This involves IBM sending a note back to the [account executive and support services representative], which means that they have to respond and the process starts over. That is probably what others are referring to regarding turnaround times of multiple days."

"IBM can approve a price within a day as long as it isn't deeply discounted," said the partner who lost a deal because of delays. "Storage [system] sales are often deeply discounted -- 60 percent to 85 percent discounts are not unusual. When a deep discount is required, it often takes days. If it is a cross-brand deal, server and storage sold together, multiple pricers have to work together to agree on a price, [leading to] delay.

"When we know what price is necessary to win the business, it often takes IBM too long to approve that price and we lose the opportunity," he said. "Our competitors have pricing delegation at the field level, therefore they can put the price to win in front of the customer much more quickly than an IBM partner can."

IBM developed the automated bid approval system in consultation with members of its partner advisory board, said Ilse Cilliers, IBM's vice president of Storage and Technology Group channels, North America. She said that "the majority of special bids" today are automatically approved by the system almost immediately. Some bids are special requests or are complex and require management approval, she acknowledged, but said the average time needed to approve those deals is four hours and -- at the most -- 24 hours.

Sometimes the customer prospect requests changes in a deal and Cilliers said those changes are also approved within a maximum of 24 hours. And she said the 24-hour maximum also applies to multi-brand deals. Cilliers said the response time statistics go back to the third quarter of last year.

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The partner who said he has seen improvements in discounted deal approvals said another issue is the length of time it takes for IBM to select a partner for a contract when more than one partner registers for a deal. IBM requires lots of paperwork from the partners about the sales activities related to the deal to prove "investment validation," and he said it can take weeks for a decision from higher-level managers. Other vendors -- he specifically pointed to Cisco -- speed up that process by giving local account managers the authority to rule in such cases.

That partner, who works through distributors, said deals can even bog down over basic mechanics, such as when IBM requests additional information and the vendor and distributor need documentation in different formats.

"The prospects are there," said the first partner. "IBM has the best products and very capable channel and direct sales teams. They can't move approvals through the IBM maze quickly enough to compete with companies who delegate pricing to the field level."

IBM's Cilliers said the company has improved its deal registration system during the last 12 months and in that time has delegated more deal-approval authority to speed up decisions.

The complaints come as IBM is trying to turn around the sluggish performance of its Systems and Technology Group, including its System x and Power Systems brands and its storage hardware. IBM has said it could divest itself of one or more underperforming businesses and CRN has reported that IBM is in talks to sell its x86 server business to Lenovo.

Last month, President and CEO Ginni Rometty addressed IBM employees in a video that urged them to "step up" and move more quickly to new computing models to stay competitive. In that video, Rometty specifically cited a lost software sale to a major customer in the retail industry because IBM was too slow to act. "We were too slow to understand the value and then engage on the approval and the sign-off process," she said, according to a Wall Street Journal story about the video.

IBM has said it's trying to be more responsive to channel partners' needs, such as reducing the amount of time it takes to approve financing for partner-led deals. At the company's PartnerWorld Leadership Conference in February, the company promised to provide more sales leads to partners.

At UBM Tech's XChange conference in March, Bill Donohue, IBM business partners vice president, outlined a number of initiatives to help partners move into such areas as cloud computing, business analytics and mobile computing.

Channel partners who complained about deal approval delays say they have seen some improvement in recent weeks -- especially for deals involving the company's PureSystems converged infrastructure servers. "IBM has been much more responsive with PureSystems deals; we now get pricing in a few days from request. IBM has also added more margin to PureSystems deals," one of the partners said.

Another partner said he had a PureSystems deal that required special bid pricing approval, and the sale was jeopardized when IBM took a couple of weeks to approve it. By then the customer requested a requote, the partner said. But to IBM's credit, he said, the vendor sent a representative to complete the negotiations in person and the deal got done. The partner said that since then he has completed another PureSystems deal that was approved in just two days.

"I don't think IBM's quite there yet," the partner said. "But they're making progress."

PUBLISHED ON MAY 8, 2013

This story was updated on May 8, 2013, at 1:58 p.m. PST, to include comments by IBM's Ilse Cilliers made after press time.