VARs, Analysts Welcome IBM SMB Shake-Up

Now that the dust has settled and the impact has been digested, both VARs and analysts have welcomed IBM’s move to realign its SMB business.

Big Blue announced recently that it has split its former SMB business, now called General Business Group, into two; one part to focus on the true midmarket and the other to focus on the enterprise.  

Keith S. Blake, president of VAR Timpanogos Technologies, said it was a good move by IBM to split the SMB business into two. “It allows the focus to be on the business need, rather than on any specific product,” he said. “IBM will expand on working with business partners and this will be one of the keys to the SMB sector.”

Steve Solazzo, general manager of General Business at IBM, said previously sales reps in the SMB group had a core of 10 to 20 larger accounts, but then also dealt with hundreds of midmarket accounts too. “But on occasion, the larger accounts would present large opportunities, which meant they received more attention than the smaller accounts,” he said.

However, since the adoption of an enterprise-focused unit, account reps in this sector will now just have eight to 10 accounts in a common industry. Solazzo said these account reps will still be encouraged to use business partners where they can to fulfill the deals.

In the midmarket unit, Solazzo said partners are the preferred route to market.  The vendor has taken the IBM.com tele-coverage team and focused them onto the midmarket, with less accounts to deal with, so they can establish a relationship with the customer – with demand fulfilled through the channel. A new role has also been created; midmarket territory sales reps, whereby IBM reps will go out and visit customers in their locality. “Any customers who call IBM, or go through IBM.com, will be first validated and then passed through to a business partner,” Solazzo said.  

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Diane Krakora, CEO at Amazon consulting, a channel analyst company, said previously the IBM.com team had been of concern to the channel, because it sold both through the channel and directly. However, she said: “IBM’s restructuring should help provide visibility and focus to the needs of SMBs – and VARs that service SMBs. Of course, it’s all in the execution of efficient processes, particularly at the SMB level.”

Tifanni Bova, research director, IT Channel Programs, Sales & Alliances worldwide at Gartner, said after the last PartnerWorld event where IBM CEO Sam Palmisano stated that the midmarket would be a key focus area for both IBM and its channel, IBM had to look at the way it covered the market. “Clearly defining roles, creating dedicated brand and coverage resources which are tied to specific territories will all help IBM target midmarket customers,” she said.  She added that the change is something that IBM has needed for do for some time to match the way midmarket customers purchase IT.

Solazzo said the changes would be backed up by a $100 million spend in marketing “a healthy percentage of which will be spend with partners for co-marketing,” he said. 

Bova said the channel is always interested in vendor funding, especially if it doesn’t just go to the top performing partners. However, she said that IBM must find the right mix of spend that is ‘brand’ related and done to increase awareness within SMBs. This, Bova said, would create more demand for the channel and allow more partners to take advantage of the marketing spend.

This $100 million amount will enable many additional VARs to work with IBM, said Blake. He said IBM would be wise to spend some of the funding in the education sector. “[Education] has a double bang; it supports an SMB work sector - teachers and administrators - but also supports and ties in to students, the next generation that will enter the work force,” he said.   

Krakora said IBM should make sure it has a coordinated approach, targeting specific regions and specific marketing and sales activities that drive leads. She also said the vendor should ensure that partners are blanketing the target customers with IBM messages and offerings. “Then IBM has to hold the business partners accountable for the lead follow up and reporting – being disciplined about pipeline management in a collaborative fashion with its partners,” she added.

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Solazzo said this latest attempt to focus on the midmarket would also be backed up by financial incentives to encourage partners to target the sector. He admitted, though, that partners would receive more incentives for midmarket business than for business in the enterprise sector. “A very large proportion of our enterprise business is delivered by partners and we want to increase partner participation here. This [reorganization] is aimed at dramatically accelerating partner momentum in the midmarket,” he said.

Leslie Norris, vice president of global channel management, business partner organization at IBM, said the incentives would be based around simplification and rewarding those VARs who really invest. “We haven’t had the best reputation in the industry for being simple and easy for partners to do business with. Now more complex deals with longer sales cycles, especially with new or competitive end users will get better rewards,” she told Channel Insider.

She said VARs would no longer get rebates, whereby they had to wait until completion of a deal to get any rebate; instead, the vendor will have better pricing from the outset, and has invested in tools to help VARs plan for this.  Greater margins will also be available for solutions focused on the midmarket, she said.

She said for both distributors and VARs the number of revenue targets has been halved, and IBM has moved from a make-or-miss scenario for targets. “Now it’s a points system, whereby the more points a partner accrues, the more money they can make,” she said.  

IBM has also launched a program to help the smaller VARs to get rewards and marketing funding and lowered the barrier to entry for this program, to allow more VARs to qualify. “This opens up a whole new market of smaller local resellers who can now get additional rewards,” Norris said.