IBM Paying Partners Upfront on Deals

In trying times like these, cash is everything

As part of its ongoing effort to dramatically simplify doing business with solution providers, IBM is reducing the number of channel programs it support by 70 percent and altering the terms and conditions around each deal to put more cash in the hands of solution providers on the front end of the deal.

IBM channel chief Rich Hume says that one of the long-standing issues that channel partners have had with IBM is that they historically received much of their compensation on the back end of the deal. That meant they needed to come up with most of the cash required to fund the front-end themselves. In IBM ’s new approach, starting Jan. 1 worldwide, solution providers will receive more compensation at the front-end of the deal to help reduce strains on their limited cash resources.

IBM is placing less emphasis on specific product areas when it comes to providing incentives and plans to create more visibility into the incentive process by making rewards for selling solutions more linear. The core idea, says Hume, is to give solution providers more ability to predict how much money they will make from any given deal.

IBM is dramatically cutting the number of channel programs it supports as part of a bid to cut costs for both IBM and the solution provider. The administration cost of these programs for both IBM and the channel partner represents significant costs. And in too many cases, the return on investment for the program is dubious for both parties.

Big Blue will also extend the principles of engagement that the company first developed for X-Series partners to all the partners working with the Systems Technology Group. Those principles of engagement are extensions to IBM ’s Business Partner Charter that specifically spell out IBM ’s commitment to channel partners and, vice versa, what IBM expects in return from partners.

The good news is that under Hume’s tenure, IBM has mad significant strides toward reducing one of the most complex channel programs in the industry. According to Hume, the relationship between IBM and its channel partners needs to revolve more around mutual trust and self interest. In recent years, Hume says too many people with excess brain capacity came up with too many channel program nuances trying to limit every possible potential abuse of an IBM channel program. But in so doing, they created a Byzantine set of terms and conditions for channel programs that left most solution providers bewildered by a set of onerous processes that would ultimately serve only to drain profitability for both parties.

Most vendor approaches to the channel are not as complex as IBM ’s have been. But most of them by any measure are more complex than they need to be. And in these trying times, neither the vendor nor the channel partner needs to additional overhead associated with trying to navigate complex terms and conditions in order to figure out if they can make money.

So with that in mind, the time has come for the entire vendor community to resolve in the New Year to make it a lot easier to sell their products. After all, a solution provider shouldn’t have to pay for the privilege to make money on behalf of the vendor.

Mike Vizard is regular contributor to Channel Insider and head of Ziff Davis Enterprise’s market experts group.