A more attractive proposition: IBM's coming down the channel

Coming soon to a mid-range reseller near you: a warmer, more friendly IBM with a plan to move more - eventually all - of its mid-range systems through its indirect sales channels.

Big Blue is not just talking about selling those mid-range boxes to the estimated 850,000 small and medium organisations in Australia. It is also talking about selling them through its VARs into its largest accounts.

Rory Mack, national business partner manager, and manager of IBM Australia's value-added remarketing program, summed it up thus: "We don't have people hanging out of trees to call on these large accounts. The cost of going to market is not effective through a direct sales force so it makes sense for us to use other means such as direct mail and our network of VARs. It's more efficient to go through channels."

These accounts would number among the largest organisations in Australia and also be IBM's largest customers here.

"These organisations may still need a mainframe but need to get more into client/server computing, for example," Mack said. "There is a large gap there for our AS/400 and RS/6000 computers."

To emphasise the push through channels for the mid-range, IBM is also offering added commission for its direct sales force when a VAR is involved in a deal.

IBM's mid-range centres on two distinct families of computers - the Unix-based RISC System/6000 (RS/6000) series and the AS/400 series, based on IBM's proprietary OS/400 operating system.

The RS/6000 is a scalable family of Unix solutions ranging from the laptop to massively parallel processor market. It was introduced as IBM's flagship Unix system in 1990. Running the AIX operating system, all RS/6000 solutions are binary compatible.

The system is manufactured in numerous plants around the world, including IBM's Australian manufacturing base at Wangaratta, Victoria.

The AS/400 family of business computers was first announced in June 1988. A successor to the System/3X series of mid-range computers, it has since gone on to become one of the most successful mid-range computers the world has ever seen. Over 275,000 AS/400s have been sold worldwide, with more than 2,500 sold in Australia and 700 in New Zealand.

The AS/400's operating system, OS/400, contains a built-in relational database (DB2/400), systems management, security, user interfaces and communications.

While the RS/6000 is aimed at the open systems market, the AS/400 is protecting IBM's massive proprietary mid-range installed base. At the same time it is offering links into the open systems world.

"We've developed a more clearly defined plan for working with business partners to reach small and medium-sized customers as well as large customers," Mack said.

The plan was outlined by Lou Gerstner, IBM's CEO, at a conference for business partners held recently in San Diego, California. This plan includes delivering hardware, software and services, with financial offerings, to all customers. It is based on what IBM calls its Business Partner Charter.

The Charter revolves around five strategic areas.

IBM Business Partners (VARs) will be the primary way to deliver solutions to small and medium-sized customers. IBM will provide sales leads, marketing support, and telecoverage to help business partners reach these customers. As mentioned, IBM will also provide increased incentives to its sales force to work with business partners.

For its large customers, IBM will team with VARs to create and deliver solutions where business partners can more effectively provide offerings that meet customer needs.

On the services side, IBM will team with its business partners to develop, sell and deliver services. IBM's goal is to offer the customer the best services available, "whether they are provided by IBM or a business partner", Gerstner told the San Diego conference.

As its VARs are now the preferred providers of PC, workstation and mid-range software, IBM will work with them to distribute IBM's portfolio of software products for both IBM and non-IBM clients and servers. Support offerings for software will be available from IBM as well as lead generation and market support.

Finally, in the fifth area, IBM is simplifying its relationships with developers to help reduce their costs to develop solutions on IBM platforms. IBM will offer marketing programs to assist developers to launch their product. IBM is also establishing relationship management and technical support for developers worldwide.

In Australia, IBM has about 100 VARs. About two-thirds are in the AS/400 market, rather less than a third in the RS/6000 market and a small percentage are systems integrators. "Our imme-diate job is to find out more about these VARs," Mack said.

With the new model now in place for its mid-range channel, IBM has trebled the number of people in this area. There are 11 directly involved in the mid-range channel with access to scores of others as required. Managing the plan is a dedicated business partner manager for each State.

"We need to cover business partners better and help them to grow," Mack said. "That means making it easier for business partners to win business."

The move is already starting to pay for IBM. This year it expects to see revenues of $100 million from its mid-range VARs in Australia - up from less than $50 million last year. The company also has its eye on other areas where it can expand the channel. Mack sees the systems integration business as the area with most growth potential.

"There's a big demand for business partners to work on the networking side of the business," he said. "They are able to extend the offering of existing business offerings - create more activity on the software and services side.

"We'd love to attract more systems integra- tors as long it doesn't adversely impact the channel," he said. "We recognise that those companies are now aligned with other major sup- pliers. It's up to us to make IBM a more attractive proposition."