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Mike Vizard:For years now, we’ve been talking about the potential of the IBM ecosystem with all the ISV partners, the solution providers and the distributors and the whole network. There’s a lot of value in it today, but it always feels like IBM’s trying to get a more systematic approach in place. So what are the challenges you see on the part of the solution providers to get them to participate in that ecosystem?

Ravi Marwaha:Well, first of all, you’re right that we’ve talked about it for a long time, but frankly, we’ve had a success for a long time, too. You know, it’s like any change that is happening, it is evolutionary. There is no doubt about it that people are more interested — more of our customers are interested solutions. And that becomes a great driving force to get to an ecosystem. It’s also true that our partners can’t do everything. So when you take those two things together, making sure that our partners can access the right ISV or the right system integrator becomes very important for them to be able to provide the solutions that their customers need. The challenges that we have, frankly, are in ensuring that we have a system that can do it regularly in a replicated way, so that it is efficient. And that’s where we have been trying to focus. We know this can be done. We’re doing it all the time. What we would like to do is do it 10 times as fast on behalf of our partners.

Vizard:So given that, it feels like solution providers need to change some of the ways that they do their business. Frankly, when I talk to them, it’s not top of mind to go out and create their own mini channel of ISV partners. It’s not top of mind to reach out and create a network of IBM partners, per se. So how do you kind of get into the mindset of the solution provider to help them change the way they’re thinking about it?

Marwaha:But Mike, I think that our solution providers are changing. I just came back from Europe, and I was talking to one of our solution providers and immediately in the conversation they say, these are the ISVs that we have made an arrangement with that we are basically going to market together, and then using their platform in order to go to market. We had a case when we talked to PartnerWorld about a particular partner and they said they talked about the fact that they have 16 ISV partners as a part of their award presentation. If I look at some of our U.S. solution providers, also I think this is happening. The question, therefore, is not that partners don’t think this is important, it’s how quickly can we get it done. And that’s where we are really focused. So I think partners agree. But once they agree, they say, “OK, I got it. Now what do I do at 9 tomorrow morning?”

Vizard:When you think about the ISVs these days, are they becoming more channel savvy? You know, every time I go visit an ISV, it’s rare that I find somebody who acts as a channel chief within that ISV. A lot of them grew up with a direct culture.

Marwaha:Very true, very true. If you think about where it started from, the ISVs are often, in fact, the resellers themselves or some combination thereof. And so people combined the fact that they were reseller system integrator and an ISV. That is less and less true now, you know. People have specialized, and therefore, in fact, the need for collaboration comes up. I think ISVs definitely would like to do it, and they would definitely like us to help in that process. And what we are finding is that, in a very large number of ISVs that we have that are our partners, they’re really looking to ask to see if we can have a process that does it. And we have invested, as you said rightly, significant resources in being able to facilitate it. We believe these resources are well spent and absolutely justified.

Breaking down IBM’s channel ecosystems.

Vizard:It almost sounds like you’re moving toward a model where an ISV can essentially think about outsourcing their channel management strategy to you guys if they’re a dedicated IBM partner.

Marwaha:I think that’s one way of putting it, yes. I think they can if they are an ISV partner of ours, and if it makes sense for them to link up with a solution provider or a reseller of IBM, then we can certainly facilitate. Absolutely. And basically, we are doing it in two ways. Earlier, we were doing a lot of this facilitation ourselves. We are in various forms of speed dating and various industry networks that we have created. We’re also finding that our distributors are very keen to play that part. And so we are now looking at programs where we can help our distributors because, if you think about it, it makes a lot of sense for them to use this as one of the values that they can add to their customers. So we basically now have two avenues: the distributors doing it and, of course, IBM doing it itself.

Vizard:Within the IBM partner community, there’s a lot of loyalty to IBM, and a lot of guys that just sell IBM. And yet, a lot of them are also conflicted because they’re trying to get to a revenue growth number and increase the valuation of their own companies. And a lot of them feel like they need to carry multiple brands to make that happen — because you can’t become the next billion-dollar solution provider off the back of one vendor. As the economy continues to grow, how do you balance that requirement from your solution providers who, on the one hand, are talking about loyalty and on the other, need to talk about growth at levels that are beyond what one vendor can support?

Marwaha:I think it’s very simple. If IBM and our partners together continue to grow at a rate that is faster than the market, I think we create enough opportunities within the ecosystem that we have. For our partners to feel that there is plenty of opportunity to grow, and be loyal to IBM, that is our desire. That’s what we expect; that’s what we plan for. And we believe it’ll be successful. All my experience here says that, in fact, diversifying can be a distraction and is not necessarily a growth strategy. Now having said that, there are companies that have organized themselves around that and put the resources toward managing that. And many of them are good partners of ours. But you know, I would question an assumption that says that diversification necessarily leads to growth. I’ve seen enough cases where diversification led to a significant reduction in growth. So both are possible.

Vizard:If you are actually recruiting new solution providers — which I don’t know if you are or not — how do you overcome the perception that IBM is difficult to get your arms around and therefore it’s difficult to figure out how to do business and become part of the “family?”

Marwaha:Well, first of all, you have to address any perception. We spend a lot of time on that. And it basically goes in two areas. Let me talk about the reality and then I’ll talk about the perception. First of all, we have to address the reality that asks, is IBM too difficult, and what it is, and what do we need to do about it? We are clearly looking at it in the way of demand generation, which is very important, and we also look at all the interactions that we have: payments, our programs and incentives, terms and those sorts of things. We have a major exercise on looking at simplicity on both those fronts, because we absolutely have to. And the reason is a lot of the programs that IBM has developed over the years have been brand oriented, or coming out of a product site. And to some extent the complexity comes because of that. One of my main jobs is to go and minimize that complexity. That is my mission. It’s important for our partners that we do that. So I think that is an absolutely key strategy that we do it. On the second side, it is important that as people come to the “family,” as you call it, that they do feel a part of the family. And again, that is important. We have programs in place that say when we recruit new resellers or solution providers we now keep track of how do they do after six months or after one year, which is a critical period, because it is very easy to sign up. It is not necessarily as easy to be successful. And I think if we take the trouble to sign up, then it is important that we both make the commitment to make that relationship successful, and that requires management and metrics, and we are putting that in place.

Breaking down IBM’s channel ecosystems.

Vizard:And I’ve notice Sam Palmisano said that, “SMV,” or at least what IBM calls SMB — what everybody else calls mid-market — is probably going to be the single largest customer five years out from now. Does that mean you’re going to change the way you go to market into those segments where, instead of showing up with a Tivoli over here, and a Lotus over here as a solution provider partner, I’m going to sign up for the SMB channel program. And my points and all the things I get credited for will be credited as part of some combined mid-market ploy rather than just, “Here, I am a member of the Lotus group, or Tivoli group over here, and an X-system group over here.”

Marwaha:Directionally, that’s where we have started and, basically, we need to make sure we come together so that we are successful in SMB. A practical example of that is our Express Advantage program, where we basically have brought together a solution where partners don’t have to have innumerable options in terms of configuration, and they can do all the demand generation, as well as the installation and skill development, around a specified set of solutions. As you know, we significantly increased the Express Advantage offerings at PartnerWorld, and we also expanded the coverage from two countries to 11 more countries with a desire to take it right across the world. So that’s one example of something that we will increasingly do. So that we can, as you said, bring people together on SMB. Having said that, if they don’t need to add software and hardware, that can also be done. But we need to look at it and see whether the terms and conditions come together.

Vizard:So in theory, though, the channel programs could follow the way the product architectures are moving, and I become a member of the Express channel set rather than a specific brand?

Marwaha:Yes, though now we haven’t taken it to the extent of making an Express channel partner. What we’ve done is to facilitate having the Express offering to our partners. Whether we take it to the next step or not, frankly, we have not decided. I’m more interested in making sure that the Express thing works very well with our partners, and if creating that helps, then we will consider it. At this moment in time, we are much more focused on getting the offering successful in the partners we have, rather than necessarily renaming our partners, if you call it that. Frankly, I wouldn’t be averse to doing that if it helped.

Vizard:We are at the end of the second quarter, so everybody will be looking to the next two quarters, at least for the calendar perspective, and everybody will be taking a mid-year gut check. What products are really selling well in the middle of 2007 that people should be thinking about and saying, “Hey, this is where I want to put the wood behind the arrow?”

Marwaha:I don’t want to talk about our results in advance, but I can tell you some of the products that I think are very strategic to us in that space, and are important and that we focus a lot on. Clearly, we focus on Blades a lot. The reason for that is very clear; we think this is a technology that has a very important position as we move forward. As you know, we made a very, very major announcement as recently as last week on this easy, environmentally friendly and open type of team. I think this very clearly indicates the direction that we were going in that technology, why we think this is going to grow and why this is an area where we clearly want our partners growing along with us. And Blades, of course, is just a product and, clearly, storage goes along with it and, clearly, where we are having a lot of our solutions sit with our system-wide partners, etc., etc. So I don’t want to say that any one of them is singled out, because they all represent clear offerings that make sense for our customers and therefore make sense for our partners. And frankly, they’re all successful. But if I were to choose something that I’m trying to make sure we are investing to grow in, then I think a Blades/storage combination becomes very critical going forward purely because of where the technology is likely to be successful as we talk about virtualization and also some of the solutions that are becoming more and more critical as we go forward.

Vizard:As you look to push more into that SMB space, do you guys miss the weight that the Lenovo product line used to carry in terms of what the ThinkPad used to bring into the channel play for you guys? Because it feels a little bit at the moment that the IBM channel is a little heavy on the enterprise side and maybe not enough down on the SMB side.

Marwaha:From a product point of view, I don’t think so, you know? The number of people who’re making a combined decision is frankly not that high. So people are tending to buy separately, and when they do make a combined decision, we can always come together if that is appropriate. However, we did find something that we needed to take action on. We had a whole set of partners out there, resellers and people, who’re primarily selling PCs, but also selling servers. We did find the need to reconnect with these people and, in fact, develop our business with them. We made significant investments in coverage and support of that group and a clear program to go and sign up these partners and make programs with them. We set up a program to add new partners primarily to address that set of people that we needed to connect to. It was not so much a requirement from the customer to get a solution together, but it was a question of making sure we had partners where we were relevant to them, and they were relevant to us. And I think that program is going very well. Behind that, we put together a sort of a marketing program that we call Express Seller, where we created some very unique small number of configurations that we could sell into that marketplace. The Express Seller program is very successful right across the world. It’s not only a question of having the partner, but the real question was, you know, how do we make a very simple system here that does not involve complicated special bids, etc. So this was around creating the sweet spot standard configurations and making them available to large number of partners. I think we’ve got the right offering, whereby we’re in the process of expanding this offering in every direction. And now we have the partners, the numbers are increasing, so there’s daily vitality in that channel. And we will grow that and go downward. Yes, you’re right. We felt that there was a need to really put some emphasis on reconnecting with these partners and making sure that we were working with them.

Breaking down IBM’s channel ecosystems.

Vizard:So a big part of the general theme then of making it easier to do business with IBM is also reducing the complexity of the number of skus that I have to sort through to find my way to build a solution.

Marwaha:In that part of the market, yes, absolutely. People are making decisions, and they want to make decisions quickly. And you know, and they know and our partners know what the customers want and they want to put something before it, and make a decision in a short space of time. You can’t have an infinite number of skus because it’s just not an efficient way to go to market.

Vizard:So, it’s almost impossible to talk about IBM channel without bringing up the letters IGS, which is always on people’s minds. What steps have you guys done and where are you in terms of progress of bringing IGS closer to the channel?

Marwaha:Well, actually, I am quite excited about it. In fact, we think of it as the single biggest opportunity. And it’s in two directions. We are working with our colleagues in a way that I would call productized services. The real idea is that you should be able to make standard service offerings that can basically be given a product number so that you can think of them as something that is attached very closely to the product. If you do that, you can bring it together and the partners themselves can become the people who sell not only the hardware, but also the services at the same time. So productizing services, making it a very important part of the selling offering to partners is one side of it. The second side that IGS is also working through — and this part of it is working very well — is how do we interact with our partners where they could perform some of the work in a complementary fashion. I’d like to break this into two parts. One is, how do we create offerings that our partners can sell, which is going very well! The second part is, how can we actually create complementariness between our GTS or IGS offerings and our partners? This is something that we clearly, on both sides, are really determined to do. But this is work in process. How do we, in fact, not only sell but create an environment where we can support each other?

Vizard:So part of that then is, I, as a solution provider, have to get comfortable with figuring out where I’m going to add my value in relation to IGS, and I need to understand that investment strategy.

Marwaha:That’s correct. And then, of course, there’ll be solution providers who clearly have a large critical mass and basically are in this business. They can go ahead and support their customers themselves. So I see this as three things, you know? People who can sell our services; people who we work with so that we can work together; and people who basically provide the complete range of services to their customers.

Vizard:This question comes under the heading of the cobbler’s children. It feels like within the IT community, we use the technology less than the customers who actually buy the technology from us. IBM has been promoting the concept of e-business now for seven or eight years. And yet, within the channel, we’re just getting around to this whole notion of automating the transaction processes and the systems and connecting everything back. So what’s taking so long for us, the people closest to the technology, to change our business processes?

Marwaha:Well, you’re right. If I had a magic wand, I would certainly go out and change things dramatically. I think we can do things significantly better. But we clearly have decided, and I think we mentioned this at PartnerWorld, that we increase our spending in this area by something like four times, a factor of four relative to what we were doing just a couple of years ago. And that is because we do recognize that on the process side as well as the IT side, we can do so much better. What’s stopping us? Frankly, absolutely nothing in terms of desire, intention, strategic commitment or anything. It’s just that when you work off your legacy system, it just takes some time. Apart from that fact, there is absolutely nothing stopping us. I think we have a very clear blueprint. I don’t talk a lot about our blueprint, because you know, our partners are not so keen on knowing what we’ll do two years from now. They want to know what we’ll do six months from now. But we have a very clear blueprint of where we will be when we grow up, and all we need to do is make sure that the steps we have in between growing up, which is every six months, are such that people are seeing incremental improvement. I think our partners are beginning to see that. We brought all our sign-ons together on PartnerWorld, every type of partner, etc. And for the first time, I actually got e-mails from partners commending us for doing something around IT. Similarly, we are looking at our opportunity management system. We just installed a new opportunity management system. So I think people will see incremental improvements. But like all IT systems, they don’t change overnight. I think we know where we’re going. I think you’re absolutely right. We clearly are not satisfied with where we need to be, and it is a very high focus for us to go fix that. You know, we have, as you said, very loyal partners. We have partners who say that they’re delighted to do business with us. They make money doing business with us. They grow with us. But they always say that there’s one thing that we could do better: we could be easier to do business with. So removing that, to me, is a very important part of what is one of our fundamental strategies. And the fundamental strategy is to be the partner of choice. I don’t think we will be the absolute partner of choice right across the board until we get a little bit farther down this track. But that we are determined to do.