In Business: Web Behind the Ears
Has Big Blue really changed its spots when it comes to signing up Internet channel partners? Channel manager Kathy Luck tells Bobby Pickering that she?s prepared to take risks on the young ones
They?ve taken out the big reception desk at IBM Southbank and replaced it with little plinths to the side of the entrance, on which perch IBM Thinkpads. Receptionists now wander around the foyer making sure they intercept anyone who wanders in. Like prim and proper BA hostesses, they usher you back to the portables and check out your meeting on their Notes systems. Everything?s upfront and personal.
But it still doesn?t hide the fact that the Southbank is still the same old airport lounge, where Big Blue workers fly in to take a room for a few hours and do the business with clients. Internet Dealer has come to meet Kathy Luck, channel manager for IBM Global Networks, though we discover her job title?s just changed. ?It?s now channel manager for IBM Global Services (Network Services),? she points out. ?Network Services is like a sub-brand.?
Good old IBM, nothing ever really changes. There has always been this instinctive urge to define structures, define roles and define relationships. Semantics rule. The company seems to think that getting the right collection of words together gets half the job done. Actually, it only gets you half-way to defining what the problems are.
We?ve come to talk about IBM?s Internet service provision and its new agent programme because we?ve heard that, try as it might, IBM still hasn?t quite got the right form of words ? the right kind of terms and conditions ? to attract partners in this area of business. ?They want a stranglehold on their partners,? says one rival. ?IBM?s the same as ever, it?ll never change.?
?On the contrary,? insists Luck. ?Everything?s changing at IBM, it?s not the same as it used to be at all. We?re moving more and more sales into our reseller and distribution channels, separating out the fulfilment from the sales and marketing functions. In areas like Internet and Web services, we?re starting to take risks by taking on much younger companies. They?re the people with the skills that we want to work with. We need them now, we can?t wait for our old established partners to get into it and get up to speed.?
Luck says that Lou Gerstner?s ?listen to the customers? philosophy relays this ground-breaking change in its attitude to potential business partners. ?We?re market driven now,? she says. ?We identify what it is that customers want, and then identify the most cost-effective route to market.
?These days a lot of our customers want Internet access and Web services, but it?s not cost effective for us to wait for established partners to get those skills up to scratch. We have to take on people with the skills now. That means being more flexible in our authorisation processes.?
The Internet Channel Partnership (ICP) programme that IBM is putting together has a variety of areas in which agents can opt to work (see box). But the company isn?t looking for a huge number of partners ? it has seven at the moment, and wants a maximum of 12 to 15 ? and it wants a good mix in terms of location and skills. The current list includes existing AS/400 agents (like Byford) and RS/6000 resellers (Anix) which have moved into Internet services. The geographic spread includes Indigo in Hull and P&P subsidiary Space in the West Midlands.
But most surprising of all is IBM?s willingness to take on fresh young players ? even those that have been in business for just a few years. ?We are taking risks,? says Luck. ?We have traditionally dealt with partners that are well-established and that we felt confident about representing us. But we?re finding increasingly that the skills are concentrated in some very talented young companies.?
Xtranet in Reading, a 10-strong company that specialises in second-generation Web sites, was only set up in July 1996, but even without a set of first-year trading accounts it?s already on-board. Xtranet MD Andy Krafft says the Internet channel partnership programme will be a marketing boost to help the firm establish its name.
?We?re a small company, newly set up, and we have very specialist expertise to sell. When we go into a company of any reasonable size, they have got a huge IT infrastructure ? maybe mainframes to PCs ? and we like the comfort of having IBM alongside us. The Big Blue name opens doors and reassures customers.?
Krafft says IBM Global Services wasn?t the only ISP his company looked at. ?We looked at a lot of the others, but the problem was that most of the big players, like Demon and Pipex, started out small and became big. They moved up into the corporate world, it wasn?t their natural background. IBM understands big business, it?s got the international backbone and its prices are good. It seemed the best choice.?
Krafft is not at all worried about being tied in to selling other IBM products. ?Having that integration with other parts of IBM is often a strength in the corporate market,? he says. Nor is he bothered about elements of the Ts&Cs that promote other Big Blue products ? like a compulsory Lotus Notes link-up.
But other young Web design houses that are slightly more established do find the Ts&Cs prohibitive. Net Position, the Putney-based Internet applications developer, recently looked into the IBM Global Network offerings, but held back from signing up. Formerly known as The Knowledge Pool, the company designs sites for the likes of Royal Aeronautical Society, Serco and Reuters, but it wasn?t keen on some of the finer print in the agency programme.
?We already have our own Net connection with BTnet, and we don?t necessarily want to change to an IBM leased line,? says marketing manager Dominic Murphy.
?We?d like to do business with IBM, sell their leased lines and have access to their infrastructure, but we don?t want them to claw back money from us for a connection we don?t necessarily want.?
The sticking point in the Ts&Cs here is that ILA agents get no commission on the first #72,000 of invoiced sales they do in the first year, and the first #60,000 in the second and third years ? that commission goes towards the cost of a leased line link to the IBM network?s backbone. IBM pays the 15 per cent commission only on invoiced sales above those two tiers, and it penalises agents if they don?t reach those thresholds, charging them a sixth of the difference between the cost of the leased line and the amount of sales they achieve.
Murphy says: ?The average cost of a leased line sale is about #20,000, so you need to have about three or four new customers in a year before you even start to make money. We don?t want to be shackled to finding #72,000 of business in the first year, and #60,000 in the second year ? without making a penny on that business ? to pay for a leased line we don?t want.?
Luck says that if anything has changed at IBM, it?s the way the company listens to its customers and listens to its resellers. Yet IBM is finding it hard to sign up Internet agents, and unnecessary restrictions on Ts&Cs ? the old bugbear as far as many IBM dealers have been concerned ? could be the key to that.
But Big Blue may have to listen a bit more to what the channel is telling it. Otherwise, Murphy warns: ?IBM may miss the boat, if they can?t motivate and sign up the Web community that owns the customer base.?