IBM To Add Blade Servers To Deal Registration Plan

Adding blades to what IBM calls its "bid certification" program may protect solution providers' margins, but the process can take too long, said Joe Vaught, COO of PCPC, an IBM business partner in Houston.

"Is bid certification good for blades? Yes, it is, and no, it's not," Vaught said. He said certification could eliminate last-minute swooping of deals by large national product resellers. But he said it can take several days to certify a deal, which works for pSeries deals, but may not work as well in the fast-moving industry standard server market.

"Several days is forever [with] the xSeries," he said. "If you're slow [at closing the deal], it gets all over the world [to competitors]."

Nevertheless, IBM is moving to extend its bid certification beyond pSeries, iSeries and high-end xSeries servers to blades.

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"We are looking at expanding bid certification for blades," confirmed Towney Kennard, vice president of IBM Business Partners, Americas. "Where our partners are going after incremental blade business against Unix boxes, that's a little heavier lifting. What they tell us is that they don't want to go in and do the heavy lifting and not be protected for their efforts."

Bid certification is designed to preserve margins for the partners that develop business opportunities by locking out aggressive 11th hour bids from other IBM solution providers. Under the program, a partner first registers an opportunity, then submits documentation proving that his or her company actually generated demand for the IBM solution. The certified partner then is the only one that receives the full discount for the product, effectively locking out low-margin bids from other solution providers.

But IBM business partners point out that a blade deal in an account could take months to develop. And once the initial Blade Centers are installed, the customer populates the chassis with individual blade servers over time as needed. Because of this, while the initial deal would be protected under the current bid certification plan, the back-end blade server business still would be vulnerable to commodity competitors.

"This is a major issue for us," said Bill Larsen, CEO of Computech Resources, an IBM partner in Green Bay, Wis. "In trying to convert customers into an enterprise-level [blade] deal, sometimes that's a year or two effort, and after that, it's a commodity and the customer just orders it from CDW."

Larsen said he would like to see some time extension attached to blade deals that would protect him beyond the initial sale. Rollout for a large deal could take six months or a year, he said. "If it's [bid certification] on every little deal, it creates an administrative nightmare for us."

Kennard, meanwhile, said IBM is sensitive to the add-on issue in blade server projects and is looking fora solution before extending bid certification to blades. "Once you're certified and win one of these [deals], for a set of upgrades and additions, you'll be protected for a period of time," he said. "We haven't decided whether it will be 60, 90 or 180 days, but it will be something like that."

Business partners said adding time to the blade certification will help but won't solve all problems. "If I close the deal, there are going to be some add-ons and growth,[so] I think it's fair to give me 90 days or some kind of lock on my costs," Vaught said.

Figuring out how to protect business partner margins in the blade market is a critical issue for IBM because of the explosive growth in blade servers. IDC reported the worldwide blade server shipments grew more than 68 percent in the first quarter of 2005 compared with the first quarter of 2004.