IBM Channel Frozen by Federal Contract Ban

FLASH UPDATE:  The GSA has since retracted its statements and informed Channel Insider that IBM partners will not be affected by the ban.  To read the full story click here

FLASH UPDATE: The GSA announced the IBM suspension has been lifted.  To read the full story click here.

VARs and systems integrators are banned from selling IBM products and services to the federal government by the same ban that suspended the company from bidding on new government work while the Environmental Protection Agency investigates a bid rigging charge.

The General Services Administration confirmed that the suspension applies to all new indirect and direct sales by IBM. A GSA spokesperson said that the government cannot buy IBM products, regardless of the source, unless there is a compelling need that cannot be met by another vendor. Ongoing contracts or contracts that have already been signed will remain intact.

Ray Bjorklund, senior vice president and chief knowledge officer with market research firm FedSources, said that his understanding was that if VARs had IBM products in stock, and delivered that as part of a solution, then it would be permitted, since the suspension does not apply to existing contracts. Bjorklund cautioned, however that many gray areas exist in the interpretation of the suspension, and that each agency could interpret the terms differently.

"This is going to have a massive impact on IBM's partners, who will also face the ban," said Melissa Smith, director of research at Input. "Although in some cases partners may have relationships with more than one prime [vendor], it's likely that some will just be with IBM." 

Asked whether she thought the suspension could drive some partners out of business, Smith said, "There is a remote chance, for partners that rely on IBM and for whom federal business is a big part of their business."

Bjorklund added that one of FedSources' clients is an IBM VAR, and he "strongly encouraged them to talk to each agency individually before they start pushing IBM products."

Mark Rodriguez, vice president of the advanced technology services division at IBM VAR EduCorp, said that although his company did not deal with federal contracts involving IBM, that he was concerned about the wider impact the ban could have on the industry.

"It's more about whether IBM's stock price goes down as a result, which will then put more pressure on guys like us to get out there and sell more," Rodriguez said.

Smith said it is unusual for the EPA to take action like this, especially, she said, as IBM claimed to know nothing about the suspension until it received a letter on Friday, March 28. The EPA confirmed that the suspension took effect on March 27.

"It's extraordinary because normally before this type of action there is some kind of negotiation; this is a last resort," she said.

However, she said it would be difficult to know what IBM told partners about the suspension, due to confidentiality agreements and the difficulty in discerning what IBM itself actually knew.