Big Blue in the driving seat
IBM was in fighting mood at the recent PartnerWorld summit in Las Vegas. Sara Driscoll reports.
Instead of circus acts at this year's PartnerWorld, delegates in Las Vegas were treated to an inaugural show featuring men and women in black leather with Matrix-style coats and dark glasses. The message: Big Blue is back, and it means business.
Two main themes dominated the event, and Sam Palmisano, IBM's chief executive, stressed both in his keynote.
One was the company's much-touted On Demand strategy and the other was the SME market. But it was no longer a question of On Demand logos and marketing puff; this year wasn't just about strategy, it was about 'winning' in an On Demand world.
And the SME market was more than just a target. Big Blue executives at the event repeated the mantra that it was a "must-win" market time and time again.
Palmisano opened the PartnerWorld event by clearly outlining his view of the company's strategy. "On Demand is a new era of computing. It is not a marketing programme," he told the 5,500 attendees.
"Make no bones about this: it is the most fundamental shift in 15 years. The value proposition of the last decade failed. The customer is forcing us to focus on solutions.
"Customers are not looking for piece parts. Everyone is looking for that one thing. But it's not about just one thing, its about innovating."
Clearing up confusion
Palmisano said there are three main elements to On Demand: the business model; the open infrastructure; and giving customers flexibility to get global scale.
"There has been a lot of confusion surrounding On Demand, so I will try and simplify what we mean by it," he explained.
"It's about end-to-end integration, horizontal integration [of customers' infrastructure] to connect the seams between the gaps, and it's about linking customers electronically, giving them a global cost advantage."
Palmisano was upbeat about the industry as a whole, a view that was reflected throughout the conference. "The world is improving. The overall economic envelope we operate in is improving," he said.
He pointed out that 50 per cent of IBM's SME turnover was through business partners, and 60 per cent of its servers and 23 per cent of software was sold through partners. Over $29bn, almost one-third of IBM's overall turnover, came from the channel last year.
Speaking of the recent changes in Big Blue's channel and structure, Mike Borman, general manager global business partners at IBM, said the three priorities announced last year - increasing growth and profitability, enabling with the IBM value proposition, and improving ease of business with IBM - would continue to be a priority this year.
Banning the branding
Borman added that Big Blue is looking to enhance its SME focus, pledging "more dollars across all elements of the SME programmes", and announced certification and registration changes in the SME programmes.
One of the key changes is that IBM is eliminating its Premier specialisation brands. Previously, if a partner was a certified WebSphere or i-series partner, it would be known as a Software Premier Partner, or Servers and Systems Premier Partner. Now Big Blue intends to call all of its higher status VARs Premier Partners, no matter what their speciality.
Mike Kozel, director PartnerWorld global channels marketing, said the new system would be based on points, and that each reseller would still have criteria to fill.
"We wanted a structure that recognised resellers for their total IBM contribution, not just one thing," he said.
Kozel said he doubted that the scheme would lead to major readjustments, with partners sliding up or down the value chain, or Premier Partners suddenly finding themselves back with only Advantage status.
The changes will be rolled out through 2004, with the specific brand titles being completely phased out only at the beginning of 2005.
Ian Stewart, managing director of IBM partner Infosys, said the changes could be seen in two ways. "If a reseller just sells on one specialisation, such as storage or hardware, then it may not be a good change for it," he said.
"But most resellers are like us: they sell both hardware and software and build solutions. It will be better for us because we will get more customer recognition. It is focused on our generic ability to do IBM, as opposed to focusing on just one element of the technology we do."
The walls come down
Borman also mentioned other changes to IBM's channel, including an updated Business Partner charter, new IBM Global Services rules of engagement, online training and the introduction of IBM Innovation Centres (see below).
He said the reorganisation of the PartnerWorld programme, the umbrella name for all of IBM's channel initiatives, means resellers have just one point of contact and a single sign-on for IBM's partner website.
"Our programmes are designed to break down internal walls to help our partners sell end-to-end," he said.
Part of this end-to-end selling would involve resellers drawing closer to IBM's ISV partners, Borman stressed. IBM has been encouraging partners to join together since the launch of its ValueNet programme two years ago.
At the event IBM ramped up its ISV support, pledging to give $1bn to its new PartnerWorld Industry Networks for ISVs (PWIN) programme.
One analyst questioned how much this $1bn was really worth, considering that business partners, including ISVs, made up $29bn of IBM's revenue last year, only a third of what Big Blue made overall.
But Buell Duncan, general manager IBM ISV and developer relations, responded by claiming the money was "not exhaustive, but in addition to the huge level of investment we have made already".
ISVs are the fastest growing segment of IBM's business partner community and the ISV Advantage Programme has acquired 200 members since it launched 10 months ago, Duncan added.
He said Big Blue is also aligning its ISVs vertically under the PWIN scheme, mirroring the move it made with its software division last year. Buell said the PWIN initiative is closely linked to IBM's overall On Demand strategy.
Other executives said two key needs had emerged for ISVs attempting to deliver On Demand capabilities to customers: business management and performance, and using a firm's existing computing power.
To help its ISVs fulfil these customer needs, IBM launched its Orchestration and Provisioning Automation Library (OPAL).
It claimed this tool will help ISVs to build workflow processes using Tivoli provisioning and orchestration software, and hence automating processes for end-users.
In a report released this week by analyst RedMonk, the report's author, James Governor, said business application vendors were among the first to participate in OPAL.
He claimed this was because there are few competitive worries about working with Tivoli, and because it presents an opportunity to drive sales.
"It is an initiative to transform IBM's On Demand provisioning product - based on Tivoli's ThinkDynamics acquisition - into a platform in its own right by forming a coalition around application and infrastructure provisioning," he said.
IBM has already partnered with Citrix, Cisco, Siebel, SAP, VMWare and PeopleSoft, among others.
Although the PWIN programme is aimed at ISVs at the higher end of the market, IBM continued to emphasise throughout the event the importance of the SME space.
IBM told the same message last year, but this year partners welcomed new initiatives, including more Express products.
Marc Lautenbach, general manager global SMB IBM, said the vendor has been working with its SME partners to have 50 Express products in its portfolio by the end of this year.
"Express is not just a marketing campaign. It is a set of vigorous attributes that resellers have to agree with. The products must be channel-ready and friendly and at the right price point," he said. "[Partners have] scratched only the surface of what we can do. We have a minuscule share of the [SME] market."
To remedy this, IBM launched its Solutions Builder Express programme, with the aim of helping smaller resellers to design SME offerings, aligned by technology and vertical market, around IBM's Express portfolio.
It gives resellers a blueprint in the form of pre-defined customer scenarios, or Customer Starting Points, to which VARs are expected to add customisation and value-add.
Kevin Drew, managing director of VAR Triangle, said: "IBM is putting continuous investment in things that are going to matter.
"The Express and On Demand strategies might not be new, but it is a continuation of a theme, which is healthy. A business that has knee-jerk reactions to the market is not a good business."
However, other parts of IBM's business have gone through a complete change. The vendor came across as unusually aggressive at this year's PartnerWorld, openly criticising its rivals.
In his keynote, Palmisano referred to IT companies still having problems and "merger troubles".
Borman called competitors "noise makers", and showed slides of speeches by Scott McNealy, Carly Fiorina and Bill Gates, in which all claimed there were only two players in their respective markets: themselves and IBM. "Well, they are half right," Borman quipped.
Other executives referred to "that printer vendor", and criticised Microsoft, making jokes about how many patches their PCs needed each day. One US partner who came on stage with a broken leg claimed he had broken it "while kicking Microsoft's butt".
All of this despite the fact that Microsoft was a Silver sponsor of the Solutions Centre at the event.
Palmisano sets the tone
Stewart said he saw IBM's more aggressive attitude as a positive thing. "It is good to see IBM hit back at competitors. The confidence is good, as it helps to foster belief. If IBM believes in itself there is a better chance that customers will," he said.
Some analysts and partners wondered whether the arrival of Palmisano was the reason for the new mood.
"In [Lou] Gerstner's reign IBM never talked about the competition. The tone of a company is set by the chief executive," Governor said.
"Palmisano wants to go toe-to-toe with its rivals, which is quite a shift. But the channel is an aggressive place, so there could be an element of behaving as expected. IBM was unusual before in that it didn't rubbish the competition."
Jeremy Davis, senior partner at analyst Context, said IBM was buoyed by the fact that it has performed quite well compared with its competitors.
However, he warned: "[It's a good thing] provided IBM doesn't go overboard and focus too much on its competition. That was one of the downfalls of Compaq. It focused so much on Dell that it lost sight of its own business.
"But I don't think IBM will do this. The industry is feeling more upbeat, and IBM is just giving its partners a feeling of 'go for it'."
INFOSYS OPENS FIRST NEW INNOVATIONS CENTRE
Launched at PartnerWorld, IBM innovation centres are designed to help resellers team up with other partners, sharing opportunities, client events, demonstrations and joint marketing activities. At the end of last month, the first of these centres opened in the UK.
The IBM Business Partner Solution Centre, run by VAR Infosys, was opened by David Stokes, IBM vice-president software group northern EMEA, and the Mayor and Mayoress of Swindon.
More than 100 IBM customers, including Philips Electronics, Sharp Electronics, Colgate Palmolive, P&O Cruises, Safeway Supermarkets and Dixons Group, were also represented.
Ian Stewart, managing director of Infosys, said the centre had been specifically designed to help SMEs find out which business environment would suit them.
SME FACTS AND FIGURES
- SMEs are growing one per cent faster than enterprises.
- There are 19 million SMEs in Europe.
- They account for 55 per cent of the total GDP in Europe.
- SMEs account for two-thirds of European employment.
- SMEs file more than 10 times more patents worldwide than large enterprises.
- The SME market is worth $300bn a year.
Annual technology growth in the SME sector:
- Linux: 33 per cent.
- Wireless: 18 per cent.
- CRM: 10 per cent.
- ERP: 8 per cent.
CONTACTS
IBM (0870) 542 6426
www.ibm.com/uk/
Infosys (01793) 513 844
www.infosys.co.uk
Digital Union (01483) 889 483
www.digitalunion.com