In-Depth

Channel Surfing: IBM Brings One Voice to Server Group Reseller Channel

• 01/01/2000

The song being sung throughout the IBM Server Group these days is being read off the same page, and that has to be sweet music to the ears of its reseller channel partners.

Working in concert across the key product lines throughout the group has not exactly been IBM’s strong suit in the past, creating discord among channel partners who are trying to develop their own integrated strategy for their respective market places.

Whether the product has been S/390, AS/400 or RS/6000, getting channel information on programs, pricing, certification or support required no small amount of ingenuity in reading between the lines, and has been both a time- and resource-intensive activity for partners.

"The experience with IBM, especially now with the Internet taking off the way it is, is that a business partner might have 20 different profiles with IBM. They have been all over the place," says Teresa Warr, Midrange Brand Manager for reseller partner REAL Applications Ltd. in Indianapolis, whose IBM business cuts across product lines, including the S/390 in the Multiprise 3000 family and storage.

With today’s critical e-business environment providing the impetus for restructuring its channel model, Big Blue is acknowledging that its approach needed improving, and is intent on making it easier for partners to bring in more business and share in the rewards.

"I think they’re doing a better job now," says Janet Waxman, an analyst at International Data Corp. (IDC). "For a channel partner selling RS/6000 and AS/400, they don’t have to talk to 92 people. They’re bringing the programs much more together. They are working really aggressively. They now have all product going through the channel, including S/390. It’s a real validation of the channel model from an IBM’s perspective."

The engine for IBM’s channel strategy comes from its PartnerWorld initiative, announced in 1999. PartnerWorld is fueled by IBM’s desire to permeate e-business, e-commerce, Web server and supply chain solutions through its partners and to Internet-dependent customer sites. By creating a common design for incentives, training and marketing support, IBM hopes that by increasing benefits for partners, they will invest more in the IBM brand.

"Maintaining our relationship with IBM in the various departments has been very cumbersome," Warr adds. "PartnerWorld is putting everything together and saying, ‘REAL [for example], you’re a business partner, and here’s what you do and here’s your description to us. It’s in one place.’ It’s going to just make doing business so much easier."

As the PartnerWorld program further develops in 2000, "you’re going to see more and more of a dependency on our channel partners for all of our products," says Diane Brink, Vice President for Distribution, Channels and Marketing in the IBM Server Group.

That dependency includes expansion into the channel of S/390 server, Brink says. Partners today represent about 10 percent of S/390 revenue to IBM. The AS/400 and RS/6000, already are entrenched in the channel, accounting for 80 percent and 70 percent, respectively, of volumes delivered to customers.

"With IBM placing its S/390 largely in the hands of resellers, partners recognize that they can do well by selling associated software and services with the raw hardware," says Charles Burns, Vice President with the Cambridge, Mass.-consultant Giga Information Group Inc. "While IBM has sold mainframes through partners in the past, placing S/390 in the channel signals a new seriousness on the part of IBM."

"That’s really a major change for IBM," Burns continues. "There was always a lot of channel conflict between the standard blue-suit, white-shirt (IBM) salesman, and the resellers. They’re finally giving the business partners the right kind of pricing and package offerings that make it really attractive to clients."

In September 1999, IBM announced a program to help medium-sized enterprises grow existing applications and add new workloads for S/390 Multiprise 3000, while reducing costs.

The program, say industry observers, is a recognition by IBM that it had to bring mainframe pricing more in line with server pricing, while leveraging the platform’s reputation for up-time and reliability in the Internet age. New S/390 hardware and software pricing is designed to provide customers who have older hardware and operating systems in place with the up-to-date hardware, current level operating systems and maintenance terms for about the same monthly fee. This combination of benefits should expand the market for the platform and provide resellers with serious new opportunities.

"After all, what really matters to the resellers is that they are not philanthropic organizations. They’re in this to make money. Therefore, what they’re really looking for is a large market and a product that has a high-market appeal. On top of all of that, they are looking for product packaging where they can make a reasonable profit on the delivery of that product, and the Multiprise 3000 has all of that," Burns says.

The moves by IBM also indicate that the company is willing to concede that it can’t be everywhere at once. Burns estimates that about 15,000 older, installed mainframes would be candidates for new S/390 contracts.

"Simply doing it through the blue suits is too expensive," Burns says. "They don’t have the worldwide employee base that they had a few years ago. They’re really looking for somebody else to go knocking on those doors. They’re providing to the business partners the names and addresses of where these old machines are installed. And they’re saying, ‘Hey, go get them.’ "

In addition to coordinated reseller involvement in the Server Group, IBM is driving partnerships between resellers and newer partners, like system integrators and independent software vendors (ISVs) across the product lines. "This will be especially relevant in the S/390 marketplace where those two newer partners are influencing placement of the product fairly significantly," IBM’s Brink says.

PartnerWorld integrates more than 50 existing programs, among three membership tiers, allowing partners to achieve benefits based on how they do most of their business with IBM. Software developers, Web developers, custom developers, Web integrators, solution integrators, service providers, education providers and Internet Service Providers are being targeted, as well in PartnerWorld through a sweeping go-to-market e-business strategy.

According to Brink, the program should allow channel partners to mix and match IBM technologies as they see fit, based on the environments that they face.

"One of my key focuses is making sure that the relationships with my resellers create the most competitive offerings in the marketplace. I want to build loyalty between the two and establish real partnerships," Brink says. "My dependency on the reseller channel is great. They are my sales force. So what I focus on is how can I make it easier to do business with IBM."

Key components of the program include:

While the AS/400 and RS/6000 are stalwarts in the reseller channel, IBM sees them as vital to channel strategy, as well.

The AS/400 is considered the workhorse of the Server Group with an installed base of more than 450,000 units and annual sales of more than 70,000 new systems, according to market research firm Dataquest Inc.

IBM is always on guard to protect the machine’s turf from attacks from other vendors. One thing it has done with the AS/400 is to add open systems features, including TCP/IP, and to take other steps to make it easier for UNIX vendors and resellers to leverage the capabilities of the midrange platform.

To further help its channel partners IBM has produced an entry-level server for small businesses, with a starting price tag of about $8,000. While the installed base for the AS/400 is loyal, Brink says IBM will work aggressively to win new small and medium business accounts. And, because of the multitude of application platforms the server can accommodate, it is also looking for resellers that can expand larger industry accounts and department areas.

The company’s AS/400 Partners in Development Program, with 14 centers worldwide, is addressing the need to bring the server’s reseller partners up to speed in network-centric computing and Web-enabled server solutions.

"The AS/400 really is a critical part of our coverage strategy. As we go into 2000, resellers will continue to play more and more of a key role, especially as we work to educate the partners on some of the new applications in the e-business area. What we’re focusing on as we go into 2000, are things that will help them be more comfortable in selling in the new markets: e-business, e-commerce, Web serving and supply chain," Brink says.

REAL’s Warr says IBM made significant strides in 1999 to shore up its certification process for the AS/400 and other products in the channel.

"This has really been beneficial for everybody because it ensures that the partners that are out there doing business for customers are qualified to do so," Warr says. "It’s also enabled partners ... who have the necessary certifications, to be out there in front of the customers and not worry about somebody who’s not qualified to be competing ... for business that they don’t have the right to be competing for. Now there’s a way to prove to a customer that we really do know what we’re talking about."

With its RS/6000 offering, IBM will be extremely creative with its partners in trying to take away market share from rivals like Sun Microsystems Inc. and Hewlett-Packard. IBM’s Brink believes the best way to do that is to team up the best reseller partners with the best system integrators and ISVs. "We will focus very, very maniacally on how we can take share from Sun and from HP," Brink maintains.

In the UNIX environment, IBM remained mired in third place in third quarter 1999 behind Sun and HP. According to estimated worldwide shipments data from IDC, IBM’s share in the space was 13 percent worldwide, compared to 56 percent of the market for Sun and 15 percent for HP.

But new RS/6000 products launched in the fourth quarter, such as the AIX operating system for e-business, makes it clear that IBM won’t concede the market. The purchase of Sequent Computer Corp. in 1999 also signals IBM’s fighting posture.

Industry analysts have complained about product gaps in IBM’s UNIX offering in the past and say even chipping small pieces from Sun’s marketshare will be difficult. The other problem faced by IBM in the UNIX space is the clear and robust growth of the Windows NT platform in the worldwide server market. IDC is projecting that NT sales will reach 30 percent in 2003, up from 13.8 percent at the end of 1998.

However, the fact that IBM is focusing its RS/6000 platform on its e-business initiatives will endear channel partners, according to IDC’s Waxman.

"They have the opportunity to leverage more than just the UNIX marketplace because they have more server operating systems than anybody else. By default, it gives them an opportunity," Waxman says.

As part of its determination to pull UNIX business from Sun and HP, IBM will target reseller partners who carry non-IBM platforms.

"We work very hard to make sure our products are competitive, so the peform-ance of the products based on certain applications areas become very important, especially in this e-business application arena where availability and scalability and performance are keys to the Internet," Brink says.

Jim Faulkner, Vice President of Enterprise Solutions for Tempe, Ariz.-based partner Pinacor Inc., says IBM, nonetheless, has built good momentum going into 2000 with its channel initiatives, like PartnerWorld. Pinacor distributes in the RS/6000 space, in addition to storage and Netfinity systems.

Faulkner sees a vibrant channel for partners, particularly as customers ramp up their spending after being inundated by Year 2000 computer issues.

"I’ve been hearing from customers that they are expecting to make big investments in technology after the Y2K lockdown. Just the fact that it is the new millennium and there’s a lot more functionality out there, they’re expecting some dramatic increases in the year 2000. We are, too."

"As we talk to our customers we’re pretty bullish about it," Faulkner says, adding that having a technology partner that can help them leverage what promises to be a surging demand for enterprise solutions, is going to be key.

About the Author: Marvin V. Greene is a freelance author for the Washington News Bureau, specializing in the business of corporate computing. He can be reached via e-mail at [email protected].