IBM's Glowing Report Card

And so it should come as no surprise that consistency is one of the big reasons IBM cleaned up in VARBusiness' 2004 Annual Report Card (ARC) rankings, winning eight of 18 total categories. Big Blue, particularly during the past couple of years, has anchored its partnering approach around steadiness. And it has further augmented its channel strategy with much-improved communication, sales support and go-to-market commitments, according to solution providers who decry the about-faces they have experienced partnering with other vendors.

IBM posted remarkable results, building on last year, when it captured five category wins in the same study. Partners say the company is on the right track. With IBM, there are no blindsides, no sudden shifts in the rules of engagement.

"Back in the mid-'90s, [IBM] embraced the channel and that strategy, and they have remained consistent with it," says John Iffert, IBM pSeries brand manager for Solutions Technology, one of IBM's top 10 business partners. The company was acquired by Logicalis in September. "It makes for a healthy channel when [your vendor] doesn't diverge from basic fundamentals in going to market."

Such comments please Steve Mills, general manager of IBM Software Group, which garnered top ARC finishes in the data management software, Web infrastructure and software, and enterprise storage management software categories. Although IBM has traditionally done much more hardware than software business through the channel, Mills says he counts on partners as intrinsic allies in his overall strategy to win customers.

"Our partners are helping customers transform their businesses by offering world-class applications running on IBM's open middleware," Mills told VARBusiness. "This benefits both the partner and IBM. Our partners build a profitable business for themselves by providing this value to their customers with our industry-leading middleware, and it continues to help IBM increase our market presence and gain new customers."

Yet for all of IBM's channel consistency last year, there is some recent irony in play. Eighteen months into his successful tenure, IBM reassigned Mike Borman from the channel group to run IBM's ailing iSeries group in a series of executive moves that appear on the surface--though not IBM's official line--to be triggered by poor results in certain areas of the business, namely Mills' Software Group and the aforementioned iSeries unit. Donn Atkins, a 27-year IBM veteran who, until recently, headed the software group's direct sales army, replaces Borman as general manager of global business partners. To many in the industry, such executive shuffling is just IBM being IBM. It moves managers around all the time. But Atkins is now in a somewhat awkward position succeeding Borman, a popular figure in the channel who is credited with bringing about new levels of communication between IBM and partners, and with streamlining PartnerWorld into a predictable, more navigable set of programs and services. Clearly keen to this, Atkins repeatedly has pledged no big changes to PartnerWorld programs and initiatives.

So far, most business partners seem to be taking the switch in stride.

"To have Mike Borman change positions is a disappointment, but when IBM does this kind of thing, it gives the executives perspective," says Terri Kershner, IBM channel manager at Haverstick Consulting in Carmel, Ind. "They can see the big picture, so I don't have problems with them moving around like that."

Kershner agrees the past year under Borman has been a positive one. In particular, she lauds him for driving the consolidation of the PartnerWorld program around three partner business models--ISVs, systems integrators and consultants, and resellers--and for providing a single sign-on for entry into the partner portal. A major complaint in the past had been the disjointed nature of PartnerWorld, leaving partners to access different sites for each brand they sold. With one point of entry now, Kershner says she is able to take better advantage of the array of resources and tools online, and she can get more done on a self-service basis.

Winner Takes All
Executive shuffling aside, IBM is doing a lot right, according to partners participating in this year's ARC survey. In all, IBM took top honors or tied for first across eight categories. Its two ties, in advanced desktops and workstations, and mobile computers, were shared with Hewlett-Packard. Otherwise, IBM swept the three ARC software categories, along with entry-level servers, midrange servers and network storage.

In the midrange server category, IBM took both first and second honors, with its iSeries and pSeries product lines beating out HP's High-End ProLiant (x86) and HP-UX servers. Despite its legacy nature and flagging sales of new systems, iSeries inspires tremendous loyalty among partners, who gave IBM a score of 90 on the survey. The iSeries also scored big on product quality/reliability, at 86, demonstrating just how well the boxes have stood the test of time. Customers tend to keep them running forever, it seems. Yet Borman and, by extension, the channel, face the biggest task: finding new blood to boost growth in iSeries sales. IBM is pinning its hopes on its nascent Power5 chip architecture to provide incentive to buy boxes anew. But with a 35 percent drop in year-to-year quarterly revenue in Q2, the company has a long way to go.

At Sirius, IBM's largest eServer VAR, the pSeries systems are in hot demand, according to Susan Griffin, a communications specialist at the San Antonio-based company. Part of what has contributed to Sirius' success has been IBM's sales and technical support, she says. Sirius is connected to its own IBM territory manager, along with channel reps and a brand specialist for each of the products they carry.

On the enterprise storage management side, IBM's Tivoli Storage Manager ran away with top honors overall and also placed first in all 15 category criteria, from product quality/reliability to revenue/profit potential. Veritas, HP, EMC and Computer Associates rounded out the field.

Not All Roses
But before anyone goes popping too many champagne corks, IBM is a company that has its challenges. Despite making great strides toward simplifying its interactions with partners, the company still falters a bit among partners when it comes to ease of doing business. Of all the scores in the various criteria in the ARC categories, IBM's poorest showing (though by no means terrible, and in some cases very good) came in that very area. In particular, partners who sell IBM's advanced desktops and workstations gave the company low marks for this criterion, ranking it third behind HP and Dell. Likewise, these same partners placed IBM third for revenue/profit potential.

On a more macro level, partners should consider this sobering reality: The company is coming out tops on the ARC among a vendor community where the bar for partnering is presently set very low. IBM is best of the bunch among those it competes against: Rivals like Oracle and Hewlett-Packard have notorious problems with channel conflict, and a player such as BEA, until recently, typified inconsistency, at once embracing the channel, then turning its back, then attempting more recently to reconcile. It's not unlike comparing college SAT scores: A 1,000 total on verbal and math is far from Ivy League, but it sure looks brilliant next to an 850.

For example, in the data management software category, database giant Oracle mustered an overall score of just 50 out of 100; in some criteria, such as marketing support and channel conflict, it only posted numbers in the 30s. IBM, the winner in the category, earned a score of 68 overall. Neck-in-neck middleware rival BEA, meanwhile, eked out only a total of 53 in the Web infrastructure and software category and a pitiful 48 in the loyalty column.

"The standard against which IBM is compared is against companies, particularly large enterprise software vendors, that have much less mature partner strategies," says David Marshak, senior vice president at the Patricia Seybold Group. "[IBM] is doing a good job comparatively, but there is always room for improvement. And someone else could always come in and do it better."

That someone could be Microsoft, Marshak says. The Redmond, Wash., software behemoth came in second to IBM in the ARC categories of data management software, for its SQL Server database, and Web infrastructure and software, for its Visual Studio.Net compendium. On the partner loyalty front, one clear vulnerability for IBM lies with its Lotus partners, a channel group that Microsoft has managed to lure successfully over to its own Exchange Server business. IBM has made strides in bringing some of the defectors back into the fold this past year, due in part to the introduction of the new Workplace collaboration products, but it's a battle where the company will need to remain vigilant.

Marshak also says that IBM will need to focus on the details, such things as making sure that its direct sales teams--who are compensated equally for sending business through partners--don't play favorites among the solution providers. And IBM will have to watch the overlap between services partners and its own global-services giant. When it comes down to it, however, one major benefit that IBM brings to the channel is its commitment to making partners an extension of the company itself, not a fulfillment center, he says.

Loyalty Pays Dividends
Beyond consistency, a huge part of IBM's ARC story hinges on the loyalty of its partner base. Across the board, IBM scored high marks in the loyalty category, which measures how committed partners are to doing business with each vendor. IBM commanded the deepest devotion in all but two of its eight categories, coming in second to Microsoft in the data management software and the Web infrastructure and software categories.

The loyalty, according to one business partner, runs both ways.

"[Vendors] each have their struggles, but of all of them, IBM has probably been the most loyal to their partner base over time," says Brandon Harris, director of IBM solutions at Logicalis. "With the HP/Compaq merger, there with issues with loyalty. EMC has never been very loyal. And Sun has had its problems of late. IBM has been most aggressive, so yes, they are one of the better partners to go with right now."