IBM is hell-bent on become the preferred technology and services provider for mid-market customers globally.  And in true big-Blue form, they‘ve focused thousands of people and a lot of money to get there.  With nearly 25% marketshare across their broad portfolio in the mid-market globally, they’re starting to gain meaningfully broad traction in the sub-1,000-user customer space.  Fundamental to their route to market approach will, of course, be their broad business partner community. But can IBM truly create the simple product solutions, services offerings and local field engagement to act as one, integrated technology provider in this space?  And, do they really have the right profile of partner to represent complete industry-focused solutions to mid-market customers?

Steve Solazzo, IBM’s General Manager of the General Business Unit admits IBM has long way to go still to truly dominate this market segment.  “But,” he added, “We’re the only company who has it all, and that is our key competitive differentiator.”

Clearly, IBM has the broad resources and pedigree to dominate in this market.  Their massive product portfolio of systems, storage and infrastructure software has continually been reconfigured, repriced and repackaged to be tuned to the down-markets.  Aside from their many “Express” and “Express Advantage” offerings of past years, they’ve accumulated another 22 horizontal solutions built on their leading ISVs’ applications, designed and tuned specifically for the mid-market. Their industry-specific expertise is well-known, yielding product + services combinations targeted at very specific micro-vertical segments, e.g., Food and Beverage Wholesaling, Retail Merchandising.  And, they have plans here to roll out another 10-15 such industry solutions in 2010. Lastly, their professional service sales and delivery capabilities and IP are legendary, albeit historically very enterprise-focused.

So, assets have never been their concern. The real obstacles to widespread mid-market share gains remain the breadth of their product portfolio and level of integration between product families, their complex business processes and the ability of their business partners to harness all their sales and marketing resources to fully represent the “total IBM brand experience” to customers.

Despite the successes IBM has experienced in the past with business partners in this market (remember the AS400 platform and all of its vertical ISV mid-market solutions?), IBM still faces gaps in its partner coverage and capabilities model, product competencies (business Intelligence, SOA application development, virtualization), industry expertise and service delivery capabilities.  IBM is actively recruiting partners to fill those gaps, with 5,000 partners recruited in 2009 just to address the 140 countries represented by their emerging markets focus alone. Several IBM execs I have met with admitted that partners who have been firmly entrenched in delivering industry solutions and IT services to the mid-market have not necessarily been their traditional hardware integrators, in many markets. 

Most company execs admit that their legacy enterprise-level sales and market approaches has made them very difficult to do business with. They continue to focus on a myriad of ways to be simpler, and their “Extreme Simplification” initiative seems to be gaining momentum internally. Taking quarterly incentives for business partners from 36 product sales targets down to 6, making growth incentives “recession proof” by paying out from dollar-one and changing pricing approval turnaround times from days to hours are just a couple of examples of work being done to streamline IBM’s operations.  But, making a mid-market solution easy to get trained on, configure, price, quote, transact and service for a VAR selling to a $100 million, six-store electronics retailer, for example, will require IBM to continue to exhaustively evaluate their business processes and channel program structures for simplicity. There is definitely ongoing work to be done.

The last major risk IBM is facing in broad mid-market traction through business partners is competition with its own, large services unit(s).There is still a dollar-for-dollar quota for every IBM field rep (partner facing or direct) to sell the entire product and services portfolio.  Despite the fact that I was strongly encouraged by the level of unique assets and software being made available by the Global Technology Services (GTS) and Global Business Services (GBS) teams, partners still have to overcome their fear and any past points of conflict around a labor to labor deployment battle with IBM G.S. IBM doesn’t monetize services unless they license some IP, acts as prime or act as sub to the business partner in services delivery. In their most recent financial earnings announcements, 57% of total revenues came from services, 22% from software and 21% from servers.  In a world were partners are increasingly trying to create annuity revenue streams and differentiate themselves based on unique services, I fear it will be some time before the core of IBM’s business partner community is fully engaging across the GTS services portfolio in a truly collaborative fashion.

As Steve Solazzo so eloquently stated, “It takes a long time to build credibility in a market, and even longer to change it.” IBM is more internally aligned and committed to long-term success in this market than I’ve ever seen them be.  And, the resources being poured into sustainable marketshare gains here is enviable for any manufacturer, including HP, Cisco and Oracle/Sun. It will be interesting to watch if all the stars can align this time to finally bring the “IBM brand experience” to this space – and through a partner community who truly believes they can wade through the maze of products, solutions, services, programs and incentives to confidently represent IBM as a mid-market friendly company. 

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Beth Vanni is Director, Market Intelligence for Amazon Consulting.