IBM Outlines Q2 Comeback

At Arrow's Support Net Division May Days event here in Indianapolis, IBM outlined its plan to win back the business it had lost to its top competitors, especially Dell, during its disappointing first quarter.

Speaking to an audience of Support Net VARs, Donn Atkins, general manager of IBM Global Business Partners, and Towney Kennard, vice president of IBM Americas Business Partners, explained what the technology giant is doing to correct some "miscues" from the first quarter and how it's working with Support Net to improve IBM sales in the channel.

"We had some miscues," Kennard said during the general session Thursday morning. "We had some slippage of some business from first quarter to second quarter. That happened in our channel business and in our direct business."

Specifically, Kennard said the company struggled with its xSeries Intel-based eServer product line, as well as its storage business. While the problems with IBM storage were chalked up to internal transitions, Kennard said the culprit for slow sales and lost market share with xSeries was none other than Dell.

"The battleground right now is the Intel server space with xSeries. We cannot lose that to Dell," Kennard said.

After a successful series of quarters last year that saw the company take share from the competition, Kennard said IBM was pretty pleased with itself. But as a result, he said, "we woke up one of those sleeping giants. It's a price war with Dell now." To fight back, the IBM officials introduced new incentives for xSeries and an expansion of its bid certification program to cover low-end and blade servers. In addition to 2 percent rebates for xSeries server sales, IBM plans to shorten response time for its bid certification process and promote SystemSeller -- IBM's program to provide resellers with consistent, everyday pricing for volume products and eliminate special pricing conflicts, which can cause administrative delays and create additional costs for both VARs.

"The fact is, we still do too many special bids," Atkins said during the general session. "I want to remove cost and make it easier for you to do business with us."

IBM's bid certification program is designed to protect margins by awarding a particular deal to one partner and giving that partner the full discounts available while preventing other IBM partners from making last minute offers and undercutting the original partner that won the deal initially.

"Donn and I are working very hard on protecting the investments our value partners make from a low price dropping in on the deal," Kennard said. "We have a chance to come back and have a great quarter," Kennard told the audience.

In an interview with VARBusiness, Atkins said that Dell was stealing share with its direct model rather than swaying VARs to drop IBM and sell Dell. He added that the first quarter performance was "a pause" and that the company was well on its way to getting back on track.

"I think we have a great partner model, so I'm not concerned about it," Atkins said. "I still have more work to do with special bids, but we think the SystemSeller approach gives us a framework to get products to market with standard, consistent pricing."

To help improve its xSeries sales and win back some of the Intel-based server market, IBM is enlisting Support Net. Eric Williams, executive vice president at Support Net, said the distributor will concentrate on turning more IBM solution providers on to the xSeries product line while providing adequate training and certification to help them add value to the sales.

"It's all about customer expansion," Williams said. "A lot of people look at an Intel box and think it's just a volume play, but it's not."

Williams says SupportNet VARs have increasing their xSeries sales recently, but the numbers are coming from a relatively small number of solution providers. Indeed, several solution providers at the event said they were seeing more success with IBM's pSeries and iSeries eServer products. Thus, the distributor has diligently promoted four-way, eight-way and blade Intel-based eServers to such partners.

"We'll continue to focus on the high-end where Dell has back away," Williams said. "But Dell is obviously out there and they're aggressive."