IBM admits it has been too quiet in channel as it beefs up partner business

Big Blue plans to grow its partner business twice as fast as its direct arm

IBM is looking to make a big noise in the channel next year - growing the business twice as fast as its direct arm, and simplifying how it works with partners - after admitting it has been too quiet and too complex in the channel recently.

IBM currently has around 7,500 UK partners and adds a new one a day to the list. The vendor does not break out exactly how much of its business goes through partners, but claims it is channel-friendly and takes business direct only if a customer insists.

IBM vice president Paul Brown told CRN that although IBM has always been partner-friendly, it hopes to become even more so in the future.

"Next year our channel growth target is twice our direct [target]," he said. "We're increasingly a partner-enabled business. Part of that is ensuring we pass the leads we have - we generate 10 leads a day - to the right partners quickly enough. It's very much about how we drive opportunities into the channel. The majority of everything we generate we want to go to the partners. Everything in SME, 100 per cent, is for partners. We're only direct where we have to be.

"We've been on that track for a number of years in terms of the partner business growing faster than direct, but next year, doubling it is [a new] target".

This year, HP and HPE have been very loud in the channel as the duo completed their first 12 months as separate companies, while Dell EMC has been equally vocal, talking up the channel credentials of the combined company. IBM, meanwhile, has been quieter, admitted Brown.

"Our doors have been wide open for years. But I am not sure the signposts have been quite where they should have been. And when people get there, sometimes it has been confusing as to how you unlock them" - Brown

"It has been a big year for them and they've had a lot going on, meaning they've had to be more visible," he said. "We have not been as loud in the market, I would say. We're very much open for business. Our doors have been wide open for years. But I am not sure the signposts have been quite where they should have been. And when people get there, sometimes it has been confusing as to how you unlock them. So we're simplifying."

He said that from next year, IBM will focus on becoming simpler for partners to do business with, specifically on competencies.

"In all our partner forums and steering committees, I have never, ever had anyone say our margins aren't right; I have never had anyone say we don't have the right offerings in the market and that we're not channel-friendly," he said. "However, the journey to understand IBM has not been simple enough. We are large, we do have lot of different products - all of them are fabulous - but it's sometimes not easy to understand how to access them."

Why now?

Big changes have hit the IT industry in recent years, with trends such as cloud, big data, social media and mobile prompting vendors to make sweeping alterations to keep up with customers' needs. Brown said that the fast-changing industry is behind its renewed channel efforts.

"Look at the way the market is going: front-office digitisation and data are everywhere," he said. "The requirement is very much more for a high-value outcome-based engagement. But we don't have all the answers to all those challenges and we never claimed to. We need partners much more now to help us maximise the value of the products we have in the market. The other thing is, if I think back to [the past] the products we have, as we move to higher-value products, partners become much more interested.

"Any partner wants value - it's value to the client, it's stickiness and it's high margin. Some of the margins we have on our products are 60 per cent plus. On top of that they can earn for services wrapped around that. So we're seeing a desire from partners and we need them because [the products] need more integration. One of the things we're actively working on is that 60 per cent of nothing is still nothing. So you need to see the engine. We're remixing a lot of our marketing funds to help at that front end to get the engines going. We're putting a lot of funds into generating leads for those guys and a lot of free training and skills to get them skilled up."

One trend which has emerged thanks to the boom in cloud, big data and mobile is that of individual lines of business procuring IT - such as cloud services and other digital offerings - rather than the IT department. IDC claimed in 2013 that at the time, the majority (61 per cent) of enterprise IT projects were funded by the business, rather than IT.

Brown said this trend means that IBM and its partners need to focus on industry-specific solutions, rather than general offerings for everyone.

"The pendulum has swung back again," he said. "In my view there are four things [a business] needs to be successful: save money, make money, stay out of jail, or all three of those. Going back a few years ago, there was a big focus on saving money. There was a lot of focus on operational efficiency, outsourcing, strategic buying, lowering the cost of purchasing. When that happens, you don't need to be industry focused because somebody buying something cheaper is the same across all industries. But with front-office digitisation [it's different]."

Brown relayed a quote he recently heard which said customers do things which make them feel in control.

"For us old fogies, we're used to being treated badly and having to go to the bank at 3pm [for example], but most of the people who are relevant to the market today aren't; they are used to being in control," he said.

"They're used to shopping when they want to, where they want to, and having a personalised experience when they do it. It doesn't matter what you tell people to do, they'll go where they feel they get the experience they want. So the market has moved, because of that front-office digitisation and the explosion of data, so they want to extract value. There is a decreasing benefit of [saving money] because you [can only save so much].

"The question now is how to make money and increase value. It's not done on a generic basis. You say 'as a retailer I want to be better at managing my inventory' - all the things relevant to those industries are driving it. Therefore, that's where more of the cash is going. More spend is going to industry-specific areas of the business. So everyone is going there because that's where the value is, and where the profits are. IBM are ahead of the market having gone there very quickly, given our heritage in data."

Golden oldies

IBM in the UK signs up one new partner a day, claims Brown, adding that most of them are new digital-focused start-ups, rather than decades-old resellers. But although most of the newbies in the IBM fold are new themselves, Brown said that having a mix of established giants, such as SCC, as well as newcomers, is essential for IBM's success.

"If you look at the traditional partners, I would call out SCC, who were our partner of the year this year, and Portal who have just been bought by Bell - they are very much aligned with the journey we're on," he said. "Look at SCC and they're traditional very much a volume reseller. Now our relationship with SCC is totally different: we do joint services engagements and they use Watson with some of their key clients. We're working hard with them in terms of developing new value-based offerings. They're totally up for it. From that end, partners like that are really on the journey with us.

"Then you've got the likes of Sunrise, who you've probably never heard of, which is a start-up with a relatively small business but is launching an as-a-service offering and reinventing itself for the modern era. We have loads of those partners. I said [we recruit] one partner a day and most of those we're recruiting are in the new, digital arena.

"Some of the margins we have on our products are 60 per cent plus. On top of that they can earn for services wrapped around that. So we're seeing a desire from partners and we need them because [the products] need more integration." - Brown

"We need both. [SCC and Portal] are gorillas and they attract these other guys around them. One of the benefits IBM has is we can help these [new] guys access markets they could never reach."

When asked why new start-ups would choose to partner with IBM, not a fellow digital newcomer, Brown said its size matters.

"There are a few things a start-up needs: some of the best technologies - and I will argue until I am blue in the face that with Watson and BlueMix and some of our [other] products, we have got some of the best products in the market," he said. "That's great, because they need those. But they also need access to markets. And IBM has that. The brand is very useful in helping them get to that."

Last month, CSI snapped up IBM partner APSU. The former's executive chairman Alan Watkins (pictured) said he welcomes IBM's renewed channel focus.

"I would say on a scale of one to ten for ease of doing business, they're about a seven or an eight - they're up there," he said. "Clearly we are all going through this incredible transition in our marketplace - from hardware and software capex sales, to cloud and other services, delivered in a different way. We're all wrestling with all that in terms of how to satisfy customer requirements. IBM have gone through that alongside everyone else. Any realignment of focus is welcome."

Chris Gabriel, chief digital officer at IBM partner Logicalis agreed and said:

"They've been making the transition from a hardware business to becoming a software and analytics business and we have been on that journey with them. They've made the transition and with Watson, they have a very strong pitch. We're strongly engaging on the new things. They've made a fairly big transition and have probably been working out what to say [to partners]. Now it's very clear. We're very clear and we're strongly engaged on that."