Winds Of Change At IBM: Will Partners Be Blown Away?

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Change is never easy, whether you are a 36-year-old solution provider or 104-year-old IBM.

"A few years back I realized our traditional VAR business was profitable, but in order to get the attention of salespeople I needed to stand out from the sea of sameness. And in order to do that I needed to transform," said Chris Pyle, president of Champion Solutions Group, founded in 1979. "I realized I needed a whole different mind-set and a new value-add than the traditional system integrator."

To gain that edge, Pyle created Champion's Cloud Division in 2012 and bought MessageOps, a Microsoft cloud services and utilities company, which would be his beachhead for a new cloud arm of his business.

[Related: IBM Streamlines Executives Into 'One Channel Team']

Pyle is also an IBM partner, another company that is undergoing its own cloud transformation. And for IBM, Pyle might as well be the poster child for solution provider transformation -- going from a traditional box-pushing VAR to a company with a diverse portfolio that includes Software-as-a-Service and a deep bench of cloud-based products that rely to some extent on IBM's IT infrastructure.

"We are a perfect example of a VAR systems integrator who is evolving as the market is changing," Pyle said. Today, Champion's cloud business, with its latest Office365 email discovery product called Discovery Scout, represents 10 percent of the company's revenue and is growing double digits year over year, he said.

Like Champion, IBM has arrived at a pivotal moment. It also needs to transform or risk drowning in that "sea of sameness."


IBM's shift to the cloud has been slow to pay off.

IBM Chairman, President and CEO Ginni Rometty, who just received a $3.6 million raise last week, has faced a firestorm of criticism. On Rometty's watch, IBM has had 10 straight quarters of revenue losses that have reduced overall revenue 6 percent from $100 billion in 2013 to $93 billion today.

But there are bright spots. IBM, which paid $2 billion for SoftLayer in 2012, said the cloud business has grown 60 percent since 2013 and is generating $7 billion in annual revenue.

What does Rometty have to say about IBM's downward spiral and areas of success? Not much, other than more change is on the way.

On Wednesday Rometty faces the music. That's when she will address thousands of Big Blue partners at its annual PartnerWorld Leadership Conference in Las Vegas. And just like IBM, many of these partners are feeling the winds of change -- and not on their backs.

"IBM's channel community is evolving," said Mike Gerentine, vice president, IBM Global Business Partners and Midmarket Marketing.

Three years ago a typical partner resold individual software and hardware. Now it sells cloud and SaaS on top of SoftLayer and is moving to a recurring revenue model, Gerentine said.

Next: Shifting The Focus To Higher-Margin Business

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