IBM Business Partner Conference: The Promised Brand

IBM was full of promises to look after the channel at its Business Partner Executive Conference in Miami. Make sure it keeps to them, says Andrew Charlesworth

What is life like as an IBM reseller eh? On the one hand you sell the products and services of the world?s biggest computer company, which gets you to customers who you probably wouldn?t see without the IBM name behind you. On the other hand, you compete with the world?s biggest computer company which has a habit of hoovering up the best customers and contracts for itself.

That?s the conventional position, but having spent years dissing the channel, IBM is determined to do the right thing by its resellers.

Nearly 6,000 resellers came from every corner of the planet and mustered in the vast Miami Beach Conference Centre for the second annual Business Partner Executive Conference at the end of last month. They came to listen to well-choreographed speeches from senior IBM managers who repeated over and over, like a mantra, ?the channel is critical to our business, the channel is critical to our business ...?

But delegates also heard a lot of corporate angst. IBM knows it has been arrogant and domineering, but, like a truculent spouse threatened with divorce, it is repentant now. It is putting into place the mechanisms to make the channel its primary source of sales, and there is a real determination among senior IBMers to make this work.

Any IBMer who wasn?t at the Business Partner Executive Conference in Miami last month isn?t important to the channel. That?s what IBM CEO Lou Gerstner said when he opened the event. The trouble is, it?s just those people who aren?t important, those IBM middle managers who belong to the old pre-BPEC culture, who still treat resellers like something that dropped out of a dog?s bottom, who needed to be there and hear it said.

In just about every session of the conference, when a business partner summoned the courage to suggest that all the fine words he had just heard weren?t being put into practice, the reply boiled down to ?tell us about it and we?ll change it?.

So if you don?t get good sales leads, if you can?t get co-operative marketing funds, if dealing with IBM is difficult, go to the senior managers and tell them. They are determined to change and have a universal mandate to kick the butt of any subordinate who isn?t.

And they mean it. They said it in every seminar. If you were there, you heard them. If you weren?t, believe me, they did. If you don?t believe me, find business partners who did go, and ask them. Big Lou wants you to help him run the company.

IBM first made its commitment to the reseller channel at Comdex in November 1995, fleshed that out in the Business Partner Charter at the first annual BPEC last year and reviewed and renewed the commitment in Miami.

The charter was a set of promises IBM made to its resellers, so reviewing it a year on was a useful exercise.

For example, there used to be over 200 different contracts for resellers, depending on product and territory. They have been reduced to six, making it much easier for those partners who operate across product brands and in more than one country.

The charter also promised $1 billion of sales for business partners, generated by IBM?s direct marketing machine. They fell short by $80 million, but Europe, the Middle East and Africa (EMEA) generated $500 million of the total.

The generating of sales leads for business partners was a contentious issue at BPEC. But then for a company with a reputation for scoffing the best food for itself and leaving its resellers to pick up the crumbs, that is hardly surprising.

This year, IBM has budgeted $261 million for advertising and direct and co-operative marketing and intends to generate $1.5 billion of sales for business partners. The telemarketing team in EMEA alone will grow to over 400 people.

Even before the co-op marketing plan has been finalised, IBM and the business partners have agreed on how the leads for a campaign are to be distributed. IBM is putting into place a Notes-based lead-tracking system so that both parties can track a lead as it progresses from initial call to closed sale.

?We give you leads, you give us the status of those leads. Business partners who close leads quickest will be given all the more,? said Robin Sternbergh, IBM general manager for global general business.

At least, that?s the way it?s supposed to work.

?IBM keeps the best leads for itself,? said one of IBM?s top six Spanish business partners. ?Or the person who gets the lead has a favourite reseller they pass it on to. As a large reseller, we get inappropriate leads, such as the upgrade of a single hard disk.?

One German reseller complained he had received no leads at all, whereas a British partner received over 40 in a month. And it?s not just EMEA where the generation and distribution of leads is patchy: ?Right now, leads are handled in a haphazard and disjointed way,? said Jay Haladay, a US business partner.

Much of the marketing effort is to be aimed at the SME and very small business sectors. ?In Europe, the SME market is even more vital to IBM than in North America, because it is a greater percentage of the total market,? says David Winn, general manager of the PC Company in EMEA. In the US, SME is 40 per cent of IBM?s market; in Europe it?s 60 per cent.

This means a large chunk of customers ? about 300,000 in Europe ? and potential customers are beyond the reach of an IBM salesman, so the channel is vital.

?What we call a solution is application software designed for the business the customer is in,? says Jean-Claude Malraison, the general manager of IBM?s EMEA general business division.

?But customers are telling us they only make that kind of buying decision every four years, and in between they have lots of business problems to fix. They dream of someone who can enclose their business problem and have an ongoing relationship. This is the true definition of a solution.?

Hence IBM has designed a series of print ads intended to appeal to very small businesses at ?the moment of truth?, at the transitional period between being very small and growing into a larger business with larger IT needs. These ads are industry-specific; they highlight a particular business problem, for example inventory control in a small manufacturer, and suggest the IBM solution.

Often those solutions will use software or services from a specific business partner, so it is obvious who will get the leads from such an ad.

IBM wants to be easier to do business with, but it is a big company, it takes a long time to turn. It started signalling at Comdex 95, but don?t expect it to turn the corner until the end of the year.

One of the areas in which IBM has been notoriously difficult to do business with is co-operative market development funds (MDF). Previously, the system has worked so that a percentage of revenue from sales of, say, RS/6000s, has been held in an MDF account to fund co-op marketing. But it can only be spent on RS/6000 marketing, when what you would really like is a few quid to spend on breaking into a new IBM product market, Raid storage systems for instance. That fact, and the painful administration process of extracting funds that are rightfully yours anyway, made business partners wonder why they ever bothered with co-op at all.

IBM is changing that with a new scheme called Partner Rewards, which is piloting in EMEA from this month and will be fully implemented by November ? three months ahead of the US. Now one per cent of revenue across all brands goes into an MDF and can be used for co-op on any product, which means you can use it to break into those new areas.

?Certainly there will be pressure from IBM to spend it in specific places, but it?s your choice where it goes,? said Nick Coutts, IBM VP for global distribution strategy.

And to ease the admin burden, an MDF tracking system based on Notes (hence the eight-month hiatus between pilot and full rollout) will enable resellers to pitch and develop co-op ideas, have funds approved and claim the money without quibble.

Anything above one per cent is still brand-specific, and it has to be spent by June of the year after you earned it, otherwise it disappears, but it?s a start.

IBM?s commitment to the channel shouldn?t be that difficult for the company to achieve. In 1996 it made 30 per cent of its sales through business partners and it wants to double that by 2000. Much of that will come through high-growth areas such as PCs, networking and Web servers, which are 90 to 100 per cent of channel sales already. The company isn?t going to lay off vast numbers from its direct sales force, nor do its managers expect it to be more profitable by increasing channel sales.

The UK resellers who attended BPEC were generally pleased with what they heard. IBM?s willingness to listen to them was alone a vast improvement on the situation little more than a year ago. ?They?re beginning to do what we?ve been nagging them to do for about five months,? said one UK business partner.

But they recognise that much of what they heard from IBM is still theory and needs to be put into operation. ?It?s all very well for the lord high admiral of global dooh-dahs to get up and say this stuff, but what happens if my account manager is an obstructive git?? asked one reseller privately.

IBM wants to be easier to do business with, it wants to provide channel-ready products and services, it wants to fulfil through the channel, because, quite honestly, it can?t afford to fulfil any other way.

It costs far more to send out a salesman to a prospective customer than it does to make a telemarketing call: that?s why IBM is doing the telemarketing calls and you?re sending out the sales people.

IBM can?t afford to keep enough sales staff to look after every customer in the way that customers demand these days. So it doesn?t get to understand customers? day-to-day business needs and can?t produce the solutions to fulfil those needs. But channel partners can.

Without the channel, IBM would be left with a small number, a shrinking number, of big system customers and no PC or network business worth speaking of. That fact, and the determination among its most senior managers to change for the better, puts business partners in a powerful position.

IBMers have made the promises, now ensure that they fulfil them. Even if it means beating up on them now and again, you can help IBM to change its culture.

Your business and the IT world in general will be a better place for it.