IBM on software growth mission

Big Blue's partners will play a significant role as the vendor pushes for a massive increase in software sales over the next four years

IBM is banking on the rise of the software machine, with plans to grow its software business by 50 per cent by 2015.

In 2000, the vendor giant’s software business was worth $2.6bn (£1.6bn), which rose to $5.7bn in 2006 and $9.5bn in 2010. By 2015, the vendor plans to have a $17bn software business.

And the majority of that is going to be through channel partners, Mark Barrett, business partner sales leader for software at IBM, told CRN.

“2015 is about growing EPS to $20 because that is how to measure success,” he said. “[IBM president] Sam Palmisano has given a very public ‘yes’ for IBM to show its growth objective. Software will play a strong part in our profitability.

“The next step, now the decision has been made, is how we are going to get there. For software this means we have to have a massive ramp-up of revenue from partners. We have a very successful channel in the UK at the moment, with our distributor and reseller partners. And the UK has one of the leading partner participation records worldwide.

“The reality is that the sales growth this plan demands means we have to reach between 30 and 50 per cent more clients than we sell to in the UK, and we see partners as key in terms of giving us client access,” he said.

Assuming the Lotus position

Barrett said IBM’s software story began in earnest in 1995 after it acquired Lotus.

“That gave us a mature software channel that we used for other products,” he said. “At that time IBM had an incredible sales engine but not a strong software services arm to offer support. In the mid-90s when we started to create a services capability with IBM, we built a partner network to look after customers and handle sales. A major amount of our mid-market sales go through the channel.”

He said that the percentage is slightly lower when moved up to the enterprise space, but it is still “significant”.

However, in case some partners were concerned that they would be pushed aside in favour of fresh models as IBM strives for new growth, Barrett quickly reassured them this was not the case.

“This is not a ‘new logo’ push. Our 2015 plan does not threaten the status quo,” he said.

“We are keen to find new partners that have the sales skills and abilities to introduce us to new clients, but our existing partners come into this as well and they are vital to keeping our reputation intact.”

Time to listen

IBM is also listening to its partners, he said, adding that some IBM software partners have felt frustrated by the lack of opportunity to take the vendor’s software into new accounts. But Barrett was confident that IBM’s new satisfaction focus will make it easier for partners to attract new business.

“It is a seismic shift for the UK channel to look at this from a client access perspective,” he said. “In the past we came at it too much from a product perspective, but now we are looking at the solution itself and will help new businesses in a technical way.”

Despite some issues with its Software Value Incentive (SVI) scheme earlier this year (CRN, 27 June), SVI will be IBM’s main vehicle for rewarding partners, Barrett stressed.

“A recent study shows our rebate system is the best in the industry, and we have added an extra 15 points of margin for partners that specialise in an industry or capability,” he said.

All they need to do to qualify is provide IBM with three relevant industry references where they have partnered successfully and can demonstrate success. The partners are then certified for that particular industry and qualify for the extra 15 points.

IBM is focusing on a set of skills for accreditation - it currently has six: cloud, information agenda, security, business and analytics, social business/digital media and Smart commerce.

“Every acquisition we make in the future will hook into these six areas,” Barrett said. “Because of the increasingly complex demands of our customers, our partners are undoubtedly the only way we can get to these customers and our existing partners are still a key part of this strategy.”