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IBM Sharpens Mid-Market Focus at PartnerWorld

Analysis of News Events
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Last week, IBM used PartnerWorld--its annual conference for its Business Partners--to lay out an ambitious agenda for sales growth among medium-sized businesses. During the four-day event, every IBM division announced increased efforts to win a greater share of the mid-market through cooperative efforts with Partners. Many of those efforts will involve increased IBM investments in Partners and products that support the iSeries community.

Of the many announcements IBM made that will affect iSeries partners, several will directly or indirectly benefit iSeries customers. Among them, the following ones deserve special consideration.

Expanded support for industry software vendors--One year ago, IBM launched PartnerWorld Industry Networks (PWIN), an initiative to recruit independent software vendors (ISVs) and enable them to sell industry solutions with IBM products. The program has proved highly successful, as over 2,500 ISVs have signed up for it. At PartnerWorld this year, IBM added four industry programs to PWIN. Two of those programs--Fabrication/Assembly and Wholesale Distribution--are of special interest to iSeries customers because they focus on recruiting mid-market ISVs in industries where the iSeries has significant market shares.

To improve its chances of recruiting ISVs in these and other industries, IBM is also beefing up the development offerings that it extends to the vendors. One of those offerings, Solutions Builder Express, provides industry ISVs with technical support for developing and deploying applications on IBM's Express middleware. At PartnerWorld, IBM announced that is expanding Solutions Builder Express to include support for a broader range of application types. Taken together, the enhancements to PWIN and Solutions Builder Express should boost the number of new and modernized applications available on the iSeries in several industries. The iSeries customers who are most likely to benefit are in the automotive, banking, consumer products, fabrication/assembly, and wholesale distribution markets.

Lower prices on popular IBM products--Last week, IBM announced that it is transforming its SystemSeller program from a European pilot project into a formal, worldwide offering. Under SystemSeller, IBM will let its Partners order single units of selected hardware products that are designed for small and mid-market customers at significantly lower prices than in the past. This will enable Partners to resell those products at prices that are more competitive with those of Dell, Hewlett-Packard, Sun, and other vendors.

For the moment, SystemSeller covers selected items within the xSeries, BladeCenter, pSeries, OpenPower, and TotalStorage product lines. Later this year, IBM also intends to sell software products, services, and finance offerings under the program. While the iSeries is not yet available under SystemSeller on a worldwide basis, it is being piloted in Europe for the eServer i5 Model 520. While IBM is making no guarantees, I am hopeful that the Model 520 will become a formal part of SystemSeller in the future. In the meantime, the program could enable iSeries customers to get lower quotes on other servers and storage arrays.

Expanded mid-market sales coverage--Last week, IBM also announced that it is dedicating 1,000 of its sales specialists to helping Business Partners generate and close mid-market sales. While these specialists have been assisting Partners in the field for some time, they have done so while also supporting IBM's own account teams. From now on, IBM will assign sales specialists to specific regional ISVs and systems integrators and tie their compensation to the success of those companies. This should have a big influence on how much time the specialists dedicate to the Partners and, indirectly, to mid-market customers who need sales support. As a result, mid-market and iSeries customers will likely find their Partners making more calls with an IBM representative during the coming year. This could provide customers with more opportunities to direct IBM's attention toward their specific requirements.

Renewing the iSeries Investment

As the previous paragraphs indicate, IBM used PartnerWorld more to expand and refine initiatives that it has already launched than to announce new programs. While some may see this as a lack of imagination on IBM's part, it is more an indication that the existing programs are succeeding and simply need more funding and fine-tuning. As a testament to that success, consider the fact that Business Partners sold $32 billion of IBM products and services in 2004, a 10% increase from 2003. For 2005, Big Blue intends to increase that figure once again at a double-digit percentage rate. As part of the effort, the Systems and Technology Group has set a goal to increase hardware sales to small and medium-sized businesses by 14%. On a similarly aggressive note, the Software Group wants to gain 50,000 new mid-market customers for its middleware offerings during the year. Even IBM Global Services is getting into the act by investing $300 million to expand its services for medium-sized businesses.

As it is setting new sales goals, IBM is also recognizing that the iSeries is central to its mid-market plans. In several of the briefings that I attended last week, executives from multiple IBM divisions stated that the iSeries still represents the company's biggest presence in medium-sized businesses. This makes the server a critical beachhead from which IBM can reach the rest of the mid-market. As such, reenergizing the iSeries market is critical for IBM if it is to realize its sales goals. This conclusion is behind the new investments that IBM is making in the server, including the iSeries Initiative for Innovation that I discussed in my article last week.

In short, IBM is not forgetting the iSeries in its drive to capture more of the mid-market. Instead, the company is asking itself how it can best revive the server and investing resources in the programs that seem most likely to deliver that revival. While iSeries loyalists may disagree with IBM over some of the investment choices it makes, the good news is that the overall level of investment is on the rise. For that, iSeries customers can thank their fellow medium-sized businesses. By increasing their IT spending at above-average rates, they have renewed IBM's interest in the iSeries and the companies that use it.

Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology. You can reach him at This email address is being protected from spambots. You need JavaScript enabled to view it..

Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology.


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