IBM tried to clarify its business partner strategy at PartnerWorld last month. Agnes King asks Peter Rowley (far left), IBM's general manager for global business partners, and Andrew Baker, director for global business partners in Australia/NZ, what it all means for Australia's channel.
ARN: What's the business partner plan?Rowley: Around the world last year we implemented a new model to cover the mid-marketplace. The model is based on local relationships with independent software vendors (ISVs) and system integrators (SIs) - what we call the "influencers".
The motivation is that customers are relying on other people for advice, not just the vendor. So we have designed the coverage model to put us closer to the influencers and thus the end user.
We consider this initiative to be unique in the industry, very locally oriented and very solution-based. It's about putting together bundles with our business partners, which we've done in the past but which will have extra emphasis this year.
ARN: Who is driving the demand today?Rowley: We spend a lot of time talking about resellers but they're not the ones that are generating the demand today. IBM is embracing the ISVs and the SIs.
IBM made a fundamental decision in July 1999 not to pursue the development of application software. This really locked us in to supporting ISVs. As a result, we've been able to sign strategic alliances with about 50 major ISVs around the world because they know we go to market with them.
ARN: There was talk of bringing together partners with complementary skills?Rowley: IBM is trying to combine ISVs, SIs and resellers. What we'd like to happen is for the ISV to team up with a hardware person from IBM - one provides the application expertise, and the other provides the middleware and the platform expertise.
ARN: Has the presence of IBM Global Services caused conflict for your partners in the sense of competing for business?Rowley: Yes, IBM GSA is viewed by many of our business partners as a competitor. However, Sam Palmisano [IBM's new CEO] in his keynote speech at PartnerWorld, describes GSA as almost a niche player because it has less than 10 per cent share of the market globally. Ninety-two per cent of the services market is out there so there is a place for our business partners to play.
ARN: Would you describe IBM as a niche player in Australia?Baker: Well, I would classify GSA as the leading services company in Australia but I think the point that Peter is alluding to is that the market is rich with SIs, ISVs and other services companies that are also talking to our potential customers. We want to make sure that we're working with them, recognising that the customer has a choice, and, where appropriate, linking them to our resellers to provide more opportunities.
Rowley: To be clear, last year our business partners' revenue from services grew 23 per cent.
Baker: Locally, our business partners participated in twice as much services business in 2001 as they did in 2000 - that's IBM GSA services business. And the same was true for the year before. So while there is some contention in the market between GSA and IBM service partners, there's also a tremendous amount of opportunity. It's not a black-and-white issue.
ARN: How do you aim to alleviate the perceived threat?Rowley: IBM is getting very clear on where we will play in the services market and where we will not play. We sub-contract to business partners, they sub-contract to us. I'm not going to tell you it's all rosy, but it's getting better and we're determined to keep improving it.
ARN: Where does GSA play and where doesn't it?Rowley: On implementation services, which is where most of our partners spend their time, we announced at PartnerWorld that for companies whose revenue is $US100 million or less we would not play. Localities will differ from the global guidelines. Europe is also $US100 million except some smaller countries like Austria and Portugal are set at $50 million. We've yet to figure out where Australia's bottom line will sit.
ARN: How long before you decide the cut-off in Australia?Rowley: That'll be up to Andrew and the team here.
Baker: It was only announced in the States three weeks ago, so it's undetermined as yet.
ARN: Australia has an ongoing battle between direct and indirect sales in IT. Where does IBM want its dealers to be?Rowley: You seem to be talking from a PC point of view. Let me explain how we're organised because it has a lot to do with how we go to market. Our mid-range distribution goes through a value-add network and there's really very little contention in this part of our business - our Z-series, storage, P-series, I-series and even our X-series all go through resellers and disties.
Baker: In Australia, Synergy Plus is a good example of that sort of business partner. They're providing a range of IBM platforms in e-business infrastructure solutions, as opposed to a dealer that is really more about shipping volume.
Rowley: On the PC side of the business, we built our strategy around the end user. The technically savvy people don't want to deal with the dealers, whereas others, maybe in small business, want dealer assistance. Our strategy is really decreed by end-user buying patterns.
Yes, it's going to cause some conflict. Yes, it'll demand some restructuring.
ARN: What happens when the two sectors collide? Solutions sales do include hardware, so which strategy prevails?Rowley: PCs can be distributed by the solutions guys or the customer can buy it directly from the Web. Or the business partner, the one in front of the customer, can buy it in the US over the Web or from a distributor. We've tried to ask, how do people want to buy? As this becomes clearer, there will be some conflict but we've tried to be very clear on what's driving it.
ARN: Where do you see IBM partners offering the most value?Rowley: For the PC partners, Bob Moffat, the worldwide general manager of the PC business, is moving more and more to the value side of the PC and away from the commodity PC.
Wireless and security are the two focal points for this, and we want dealers to learn about wireless and security applications so they can deliver these services around PCs.