5th July, 2012
From an overall IBM strategy, its channel ecosystem plays a very important role. One side the organic growth and the other side the acquisitions, on which IBM has been pretty stressful. But the channel ecosystem is the right glue that puts the things together gives the company a peace of mind.
The entire Indian IT industry knows that IBM is very strong in its channel strategy from its STG perspective but one should also know that IBM Software Group is also trying to catch up with its counterpart in terms of channel penetration. If you look at IBM Software Group’s channel strategy, it is based on 3-4 core areas. The first is that the company would like to expand and proliferate into the new markets. Secondly, the company wants to make its channel partners more enabled in terms of skills so that they become independent in terms of technology offerings, identifying opportunities and progressing on the opportunities. Kalyan Sridhar, Channel Head, Software Group, IBM India, says, “We have been doing that in the past but now our strategy is to increase the penetration. We are focusing on making the partners enable faster so that they can integrate our acquisitions quickly to offer those as their solutions.” He adds, “We fall under the middleware and we are the glue between the operating layer and applications layer. It’s about how do our customers address their core business problems. Broadly there might be 5-6 areas that we have identified in terms of customer problems.”
The first one is about information over load. Today if you look 15 petabytes of data gets generated every day. That is an awful load on storage and the analysis says that 80-85 per cent is unstructured. It means the customers want to turn these data into useful insights for business gains. This is what IBM Software Group addresses through a combination of products including database, data warehousing, BI, in terms of being able to turn these data into useful information. This is a common problem across industry -whether it is large or small customers.
The second part is around people. Today, the industry is facing challenges as to how to communicate and collaborate with their employees. With 15 petabytes of data generated every day and most of them unstructured, how do the organizations ensure that their team members get the data rather than going around searching for information and not able to get that correctly. This is where IBM Lotus portfolio comes into play – whether it portal, instant messaging and collaborate with social media etc.
The third is how to optimize the core infrastructure. Today, there are islands of information available, so the organizations need to optimise the information to make sure that core areas are addressed. The fourth business problem is integration. Here comes the role of IBM WebSphere and integrate and modernise applications. Even using its Rational portfolio, the company takes age old applications and make them web enabled and modernise the applications to put them in to the current requirements.
The fifth area is risk and compliance. Everyone knows that security is coming up as a huge factor for organizations to take care of. Similarly governance is a very big concern for the customers. The policy that the government brings changes every now and then. Here comes IBM’s security portfolio in terms helping the customers embrace such changes.
Kalyan maintains, “Overall, these are the common set of challenges our customers face. If you look at IBM middleware portfolio, it helps customers right from setting up messaging infrastructure to risk and compliance, and governance solutions. On top of it, if we add solutions like Smarter Planet, we talk about smart traffic, smarter cities, smarter waters, smarter electricity and the list is endless. So if you combine both the offerings, the things can be different.” The aforesaid business problems are quite common across all business houses whether it is BFSI, retail, insurance, Govt., SMEs, etc. These are the specific challenge areas where IBM partners develop applications and offer those to the customers. He adds, “Towards enabling them we are developing their skill sets to become more autonomous. We are expanding to newer territories and integrating our acquisitions a lot faster.”
From the skill set stand point, IBM has come up with IBM Partner World Virtual University where partners can on demand go and skill themselves. This is a 24/7 site where they can take webinars, technical sessions, presentation, product pitches, etc. On top of that the company also offers face to face enablement activities. These activities cover sales and technology bit. And it is a continuous process - every month and every quarter. The objective of the company is to make them skilled enough so that they can have independent intelligent conversation with the customers to address their core problems.
So it is about elevating the discussions from software as a commodity to really about solving the business problem of the customers. Towards achieving its, goal, IBM Software Group has embarked on a journey called Software Value Plus (SVP) programme. Towards this, the company has tried to ensure that the partners are valuebased partners and not just the volume partners who sell software as commodity. So to be an SVP partner, they need to certify themselves in terms of technology and sales so that they could have intelligent sales conversation with the customers. IBM is ensuring that the partners have certain requisite skills’ level to start selling their portfolio.
That does two things for the customers –one: the customers can have a deeper discussion with the partners in terms of helping them solve their issues and secondly, the partners are able to offer a lot more value added services to the customers than just selling licences. They are able to implement solutions and provide services on top of that. Besides IBM Software Group has also launched Software Value Incentive (SVI) programme for its partners, where by the partners are rewarded for identifying and selling to the customers on their own. Here, the partners bring in the opportunity and take it to the closer level and in turn they end up in making a huge rebate – almost a tune of 20% additional rebate excluding their normal rebate on sales. If somebody else identifies the opportunity and the partners does all the works in terms of progressing the opportunity, the company also rewards those partners. So in effect, the company has come up with an ecosystem and an incentive programme to help the ecosystem to be able to generate more autonomous revenue thereby making it more profitable for the partner organizations.
In addition to that, IBM Software Group has also announced an incentive programme called Business PartnerLed Market (BPLM) incentive. This programme is about how the company expands its geographic reach. The company has identified 27 cities part as of its BPLM strategy. The cities include all 7 metro cities and 22 tier-2 cities. The partners get flat 8% margin in their first sales in these BPLM territories. Of course, they carry certain target and if they achieve that target, they get additional 7%. So they end up making 15%, which is on top of SVI incentives. It means if a partner becomes an SVI, he gets 20% margin and if qualifies for BPLM, he gets additional 8% to 15% and all total he makes a margin in the region of 28% to 35%, which is excluding his normal transaction margin. Kalyan adds, “On top of it, if he happens to be IBM STG partner, he ends up making an additional rebate of 15% on software and 5% on hardware but the pre-condition to that it has to be 30-70% or 70-30% mix, which means, if he sells 100 dollar worth of products, 30 dollar should be of software and 70 dollar should be of hardware of vice-versa. This is part of IBM Solution Accelerator Incentive programme.
”Effectively, IBM Software Group has a strategy where partners are the corner stone and the company cares for how they can grow in the market place. And the company is putting incentive programmes so that they can put money back in their business and skill themselves up and bring autonomous revenue for them. These partners are connected with IBM through three value added distributors – Redington, Ingram Micro and Avnet. These distributors are the first line of support for the channel partners. They have dedicated resources to help the tier-2 partners. From the market perspective, the common perception is that IBM software is not right for the SMBs but Kalyan refutes it, “It is a perception. Bulk of IBM software’s business comes from SMBs. I have been in IBM for the last 14 years and have sold software to many SMBs in India. The perception has been created because of media reporting of our dealings with companies like Bharati Airtel, IDA, etc., where we have executive large orders.”
When IBM Software Group is leveraging its STG channel strength to sell its software products, at the same time, IBM is also scouting for more independent software channel partners across pan India, creating an opportunity to make good margin in hard times.
Source: SME Channels