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IBM Looks To Cultivate Diverse Ecosystem With New Channel Strategy While Driving Next-Gen Solutions

One large partner tells CRN Big Blue inadvertently made some channel missteps in 2017, but a new incentive structure looks to have the old problems successfully sorted.

IBM is preparing to implement a new channel strategy, one that reorganizes the partner program in a way that mirrors the larger transformation across the company while remedying some problems that irked partners last year.

The "2018 new generation ecosystem strategy," which goes into effect April 10, changes how partners are incentivized to embed advanced solutions like cloud and artificial intelligence (AI). The program also simplifies the reselling of IBM's Software-as-a-Service portfolio, John Teltsch, IBM's channel chief, told CRN.

One goal of the effort is to cultivate a more diverse ecosystem. That strategy started developing last summer, soon after Teltsch took the reins of the channel program from longtime IBM channel leader Marc Dupaquier.

[Related: IBM Breaks Revenue Slump With Growth In Cloud Services, New Mainframes And Power Architecture Systems]

"We spent a lot of time listening to top partners, distributors. We needed to continue to transform the organization, as the IBM company has been transforming itself the last three, four years," Teltsch told CRN.

Some of the company's largest partners felt an overhaul was necessary, said Darrin Nelson, vice president of software sales at Sirius Computer Solutions, based in San Antonio, Texas.

In trying to simplify its channel engagement model last year, IBM implemented changes that had some unintended consequences, Nelson said. "For us bigger guys who invested in infrastructure to optimize margins, we got hurt and hurt badly," Nelson said. "When [IBM] understood that, they went to work" fixing the issues, he said.

IBM has been "reimagining the incentive model around our distributors and our business partners" as one that shifts focus from fulfillment to value – raising margins for partners who develop new clients or retain existing ones, generate new opportunities and implement high-value solutions, Teltsch told CRN.

"We had a number of software incentives that our partners had to work through to qualify for incentives and it was fairly complex," Teltsch said.

The 2018 plan, Teltsch said, recognizes the "world has changed in the last 12 to 18 months." IBM needs to entice new types of partners, from developers to small managed services providers, to born-in-the-cloud resellers, while continuing to nurture success at its stalwarts.

The new program looks to encourage partners to embed next-gen products – cloud, data and analytics, Watson AI – when selling industry solutions. IBM also wants to simplify the process of selling SaaS so as it launches new cloud software products, they hit the market and scale faster.

As part of the overhaul, IBM will also be streamlining its PartnerWorld program.

The program's tools and mechanisms have accumulated over 35 years, Teltsch said, and with the transformation of the ecosystem "we need to simplify how we engage our existing partners and how we engage our new partners, how do they interact with us digitally."

Third-party marketplaces play a large role in that partner-engagement process, and IBM will work more with distributors as they build out their online marketplaces to develop alternative routes to market.

"We're going to evolve and iterate into the changes we're making. Our partners will see this as a fairly major remaking of our ecosystem and its direction," Teltsch said. "We want to be very clear this year where we want our partners to play and where we don’t want them to play."

Nelson, of Sirius, said he is optimistic the new incentive structure will return Sirius to growth after the 2017 program modifications resulted in the solution provider's first year of revenue decline.

"I'm happy to say the changes they've made in 2018, what they've previewed me on, in spirit, look to remediate the bad things that came out of last year's changes," he told CRN. "They fixed all the wrongs made in 2017, plus some other stuff."

That starts with reinstating rewards for winning new business, he said.

Sirius is also pleased to hear IBM will no longer offer lower reseller margins on accounts with the ELA designation – something that preceded the 2017 changes and resulted in a "painful" impact on margins, Nelson said.

The launch of a SaaS registration program will also go a long way in helping partners that do the hard work of winning customers keep those accounts without having to "bleed the profits onto the street" to prevent the customer from being poached.

Nelson credits new leaders of IBM's channel program, including some who came from outside the company and "didn't tolerate the response that this is how we always did it."

At the same time, executives from IBM's security division were promoted into the global channel program, and security was "always the most-forward thinking of IBM's brands" as far as rewarding partners for the right behavior, such as cross-selling and landing new accounts, he said.

Given the "significant market movement to SaaS and cloud," Nelson said, and the lower profitability, at least initially, of selling subscriptions over perpetual licenses, it was important for IBM to deliver partners greater means to drive profits, he said.

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