VARs Say IBM Software Strategy Is a Win for the Channel

With 3,000 customers on non- IBM legacy products and no WebSphere experience, Chadwick said the move to IBM was a make-or-break decision, but one that has contributed to his company averaging 35 percent year-over-year growth for the past seven years.

"Back then, IBM just had a reseller program that was an OK program, but as a reseller, we were often undercut on price by large software wholesalers," Chadwick said, and that fact led him to focus on shifting his company's core competency to services, consulting and integration. 

When IBM shifted to a software focus in 2004 and boosted partner rebates and incentives, Chadwick said it made a huge difference for Prolifics.  Adding incentives for partners who identified and registered deals or who did extensive pre-sales work with clients took Prolifics from a "very modest resale software products shop" to a company that last year earned $18 million, Chadwick said.

In 2007, Chadwick said his company's IBM business showed 66 percent growth, and in 2008 he expects to beat that growth number. He said focusing on software integration and SOA (services-oriented architecture) is a forward-thinking strategy; as products become commoditized, prices drop and margins shrink.

"If a vendor only gives you incentives on resale [of products or software], then it just becomes a discount program, where customers go to a reseller to get the cheapest price," he said.  Wrapping services and consulting around middleware and focusing on SOA is where the real revenue gold mine exists.

Sam Fatigato, CEO of Ascendant Technology, agrees.  "SOA is a big buzzword, but IBM is committed to open standards, and we feel it's not just hype," Fatigato said. Working with IBM middleware to drive Ascendant's ISV practice has allowed the company to double in size each year for the past four years, and Fatigato said in 2008 he hopes to grow IBM business to more than $100 million, despite economic fears.

"We feel confident that we're going to keep growing, even in this economy and with IT spending slowing down," he said.  Last year, Fatigato said Ascendant made just under $40 million, and that 80 percent of the solutions he crafts for clients are based on IBM components.

"We are really confident when we go work with a client that we aren't restricted; we can help them with almost any challenge.  We can put the IBM platform on top of anything—Microsoft, Oracle, you name it—and they can work together," he said.

Big Blue’s shift toward a software-focused business strategy began when IBM sold its PC business to China's Lenovo in December 2004, said Hanny. Since then, the vendor has emphasized the importance of open standards and of SOA to help customers get the most value out of their existing legacy hardware and software, he said.

Hanny said IBM's software strategy attracted 10,000 new partners last year.