albert's analysis: Business Partners: A Critical Link in the SMB Chain

For a very long time, IBM has coveted small and medium sized businesses (or SMBs) – at least as far back as the late 1960s, when I was IBM's marketing manager for small businesses in Queens, New York. IBM still recognizes the growing value of this segment.

These smaller customers – defined by IBM as those with 1,000 or fewer employees – don't generally have internal staff or resources dedicated to IT issues. Instead, they favor "one stop shopping" and total solutions. The folks in IBM's Global SMB Division say they can do that -- but how, exactly? It’s a heterogeneous market.

What about companies with 50 or fewer employees? The "blue suits" of yesterday just aren't there to go out and make those sales. IBM is lending muscle to its business partners – including distribution channel partners and VARs -- to help them do the job better. Not just sharing its expertise, IBM is lending its muscle to marketing and promotions as well.

The strategy is straightforward. Through the launch of several new programs, IBM helps its business partners sell more easily and increase their revenues. In exchange, business partners provide developed distribution systems, market feedback, marketing plans, customer service and support on a local level.

Statistics support such an initiative: SMBs represent the majority of all global companies, and they employ 80 percent of the world's work force. Small businesses alone contribute half of our nation's gross national product; and the segment is still growing at an average clip of 11 percent each year. Already, it accounts for nearly half (45 percent) of all spending in the multi-billion dollar IT global marketplace. Additionally, IBM tells me that one-third of its revenues in 1997 came from SMBs.

The downside, of course, is that IBM can't build or sustain those relationships on its own. So its marketing decision-makers have begun creating a "channel-centric" model to rival competitors.

Two years ago, IBM created a Business Partner Charter, with a goal to empower business partners as its primary means of delivering solutions to SMBs. When you consider that IBM's distribution channel remains critical to delivering hardware and services, and that business partners contribute over half the total revenue to the SMB Division, such a charter makes sense.

Peter Rowley, general manager for IBM's Global Small and Medium Businesses, says, "Working with our business partners, our strategy is to provide them with consulting and educational programs, as well as affordable information technology (IT) solutions." In other words, give business partners the best support and service possible that IBM can, and both sides will be stronger for it.

The company is also working to consolidate from 47 different marketing/communications programs to one value-based model for all its 45,000 Business Partners.

To counteract fierce competitors such as Microsoft and others, IBM must continue on its track. At its Business Partner Executive Conference held last February, IBM stated "increased business partner profits" as one of its goals going forward. It's easy to see how this can become a win-win for both sides. If IBM co-markets with its partners, helps them lower their costs of doing business, and helps them increase their IBM software revenue, both sides stand to gain.

IBM can't afford to be shortsighted. Today's small and medium accounts are tomorrow's big business; and it takes the investment of money today, to make money tomorrow. I see those joint marketing initiatives with IBM's distributors, resellers, systems integrators, product agents and sales agents as a necessary step forward.

The whole world is going after this marketplace. Now let's see how IBM executes on this strategy.

Sam Albert is president of Sam Albert Associates (Scarsdale, N.Y.), a consulting firm that specializes in developing strategic corporate relationships.