IBM Works Out Pricing Kinks

First, IBM eliminated the ability to obtain special-bid pricing on xSeries servers designated as IBM Express SKUs. Second, solution providers competing for the same opportunity will no longer get different special pricing, Kennard said.

IBM originally left special pricing as an option for Express products in certain instances, but it was confusing and caused partners to request quotes using Express and special-bid pricing, Kennard said.

“It was churning us and [solution providers] with extra work,” he said. To help solution providers stay competitive using Express SKUs, IBM now establishes Express pricing several times a week, depending on the competitive moves of Hewlett-Packard and Dell, he said. Previously, pricing was examined once a week, which led to more special-bid requests if Express pricing was too high.

“The onus is on us to ensure the product is competitively priced and doesn’t need special-bid,” Kennard said. “We still recognize there might be a large corporate rollout that has a volume that warrants a price different than for a quantity of one. But it is a very tight set of criteria. Hopefully, we have removed that confusion [from] the marketplace.”

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Kennard said IBM, Armonk, N.Y., also is addressing situations in which end users have two solution providers competing against each other through special-bid pricing.

“I haven’t figured out how to stop it yet, but we continue to look at that. We think that [end users’] procurement departments are trying to get two partners to bid against each other. We ask partners to drive solutions and bring value to the equation. If you only want to bid our price, we tell [end users] that’s not our model and there’s probably an alternative out there for you. We’re trying to eliminate the shopping of special bids,” Kennard said.

Eric Williams, executive vice president of the IBM Group at Arrow Electronics, Melville, N.Y., said IBM has worked out most of the kinks.

“One of the strengths of IBM is they are always trying to [find] new ways to increase profitability of the partners. Sometimes when they do that, they end up with inconsistencies,” Williams said. “When they recognize it, they react to it. They saw the workload, they were doing double the work, and are looking to correct it.”

Several solution providers applauded IBM for proactively fixing a problem that had not even hit their radar screen yet.

“Special pricing is not going to go away at a specific time. It will always be an ongoing process because there’s always something new coming into the loop, but they are looking to perfect the business,” said Jay Hakami, president of Sky IT Group, New York. “They’re putting every transaction through scrutiny now. For us, it means now allowing a ninth-inning price quote to go to the customer to get the deal. We are not privy to other [solution providers’] pricing, but at the end of the day, business should go to those that provide value in the transaction.”

Said Jeff Acton, vice president of sales at Alternative Technology Solutions, Orion, Mich.: “We’re not fighting against ourselves anymore. We’re not whittling a solution down because of price. It allows us to focus on what’s best for the customer.”