Partner Focus: IBM Moves to Solidify Advantage

No company with an enterprise focus can operate effectively without partners, a fact that IBM appears to clearly understand.
Posted January 24, 2012
By

Rob Enderle


One of the advantages of being one of the most stable companies in the enterprise segment is that IBM is able to focus on strengthening relationships to broaden their sales channels. This was the core of a presentation they made to a group of us this week and I think it bears covering, because the more people you have actively selling your products (assuming they are qualified) the more sales you are likely to get.

However, an even more important aspect is that partners can be very powerful in terms of capturing customer feedback on what is and is not working through aggregation, and can be a better source of market intelligence than the customers themselves.

Let’s chat about IBM’s Competitive Advantage with Partners this week.

Background

I was, years ago, a competitive analyst at IBM and was placed in their executive resource program as a result of my work with partners. I used partners like the ones IBM is nurturing to look underneath the feedback we were getting from field sales to determine why our unit was losing revenue.

Field Sales argued it was because our products weren’t competitive either with features or price. But the partners strongly suggested that these losses were instead due to incomplete and ineffective sales training.

In fact, we were able to determine that the technology was competitive and we were already bidding well below the competition, which made our wins often more expensive than our losses because many were below cost. Through this process I gained a healthy respect for the value of partners who were, during that time, more effective than our own people in closing business and a better source of market intelligence as well.

IBM’s Partner Program

No company with an enterprise focus can operate effectively without partners. There is simply too much complexity in the segment. And in the mid-market in particular, large firms like IBM can perform very badly due to their size and inability to resource relatively small deals.

Smaller firms are much better able to learn the nuances of customers who have mixed shops and operate in the mid-market as a result.

IBM represented a compelling model where they acknowledge that these partners are critical to their own success and vital to the health of their markets. This hasn’t always been true and there have been several times in IBM’s past where partner focus hasn’t been that great and the company suffered for it.

This earlier lack of partner focus contributed to the company’s decline in the late 80s based on a study I did inside IBM at that time.

Part of the problem for a firm dealing with partners, particularly one as large and complex as IBM, is ease of doing business isn’t ideal. IBM has been working on this problem since Louis Gerstner’s time in the mid-90s and has made substantial progress in addressing it.

Uniquely IBM has recognized that marketing has to be a major component of success. Even going back to Louis Gerstner a major part of his turn-around team was Abby Kohnstamm, who came out of industry and was put in charge of marketing.

If it hadn’t been for Abby’s excellent recasting of IBM’s image, IBM likely would have failed in the 1990s. The company came out of that decade with a firm belief that marketing was a critical part of any effort and they’ve built it into this partner effort.

IBM has been ramping up this effort sharply and since 2011 represents that they have run 5,000 deal clinics on closing business, and passed on 22,000 qualified leads to partners. They have grown their partners to 5,000 and these partners are connected to the majority of IBM’s 2011 business, showcasing just how critical this effort has become.

IBM has reported strong results from this effort that include an 80% increase in partner software certification and a revenue increase from partners of an impressive 50%. In addition nearly the same percentage of partners reported to IBM increased profitability from last year’s program.

2012 Enhancements

The IBM Business partner program is slated to undergo enhancements in 2012 based on the feedback from partners, who said they wanted improved incentives, technical enablement, and technical support. As a result IBM is enhancing their program with better tools and new incentives, better access to IBM technical human resources. It will be making another pass at simplifying the process, raising the marketing co-funding availability, and will be targeting a higher number of leads passed through to partners.

One of the incentives is from IBM Global Finance and it provides funding options that result in a 1% financial incentive to the partner and provide customers with a better suite of payment alternatives. These alternatives should reduce the need for expensive discounting (margin erosion) to close deals. Another incentive as targeted at the $191B Could Opportunity and it provides financial incentives from 5% to 20%, showcasing just show serious IBM is about this business.

Partner Testimonial: Portal

IBM has been more successful than most in terms of getting third parties to come in and talk to them about their success. In this case they pulled in IBM Premier Business Partner Portal, which won the CRN Mid-Market Reseller of the Year award last year.

Portal resells into the Public, Banking and Financial Services and Manufacturing/Industrial/Transport market segments. They are certified across IBM’s software portfolio and they specialize in IBM ICS, WebSphere, IM, and Business Analytics product lines.

They also have their own software lines, as is the case with most resellers in this space, and represented that the relationship with IBM had proven to be very successful. They had a second partner showcased, public company Perficient, who supported Portal’s feedback that this program was working very well for them.

IBM Business Partner Virtual Summit

This presentation was in advance of the IBM Business Partner Virtual Summit, which will be held at the end of the month. It will both promote the summit and make analysts aware of how successful this effort has been for IBM.

The fact the company is doing this virtually showcases they understand that partners don’t have the time to travel to events but still need to be made aware of the IBM products and technologies they will be selling in the coming year.

The Summit will have 18 On-Demand sessions covering each of the key software initiatives from WebSphere and other products, to services like Subscription and Support. They’ll have 14 booths so that attendees can chat with real experts. Four moderated discussions will help partners learn best practices, from managing the sales pipeline to using market intelligence to create a successful strategy.

Wrapping Up: The Importance of Partners

Large companies often take partners for granted and then wonder where their business has gone when these partners get frustrated and give up, moving on to other things or just shutting down.

While this was a problem for IBM in the late 80s, today’s IBM has clearly learned from this lesson and is working aggressively to both assure and build this incredible asset for the company. In the end IBM recognizes its future success will likely come from these partners and this focus on them helps assure IBM’s long term future and success.

It also showcases that even though IBM recently changed CEOs, it continues to operate at the highest level of excellence, which is what its founders designed it to do. There is something to be said for stability and the ability to therefore focus on partners and IBM is saying that with its efforts here.




Tags: IBM, resellers, Partner Advantage


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