WebSphere! Even though IBM began its media blitz for its WebSphere middleware branding strategy more than two years ago, it still is difficult for most midrange customers to embrace and nearly impossible for the upper management of midrange shops to understand.
Perhaps that's why IBM has begun a new program for Business Partners. The program, called SMB Advantage, is dedicating $500 million in incentives over the next year to win the small and medium business (SMB) customer. These Business Partner incentives are substantial: between 20 and 60% over current rebates for its ISVs and solution providers. In addition, IBM promises that it will add new marketing tools to help Business Partners grow their midmarket efforts. The goal is to transform SMB customers into a lucrative opportunity for IBM solution providers and ISVs.
The SMB Advantage Initiative
- Channel enablement: A set of tools to teach Business Partners learn how to sell more profitably in the SMB market. These tools include access to the SMB Advantage Web Portal to provide return on investment (ROI) calculations. IBM is also offering educational and training programs through its PartnerWorld University and SMB College.
- Incentives for growth: A set of financial incentives designed for IBM Business Partners who sell eServers and storage lines that are specifically targeted at accounts that are either dormant or use competitive products.
- Value advantage: Incentives for ISVs and solution providers who build IBM's middleware into their offerings.
- Demand generation: Marketing materials and a list of 6,000 prospective customers who have done little or no business with IBM recently.
- Market coordination: Programs that will make it easier for Business Partners to team with each other to coordinate complementary technical, regional, and/or vertical industry skills.
The marketing message that IBM expects these Business Partners to deliver is twofold: WebSphere and e-Business on Demand.
The SMB Marketplace and the Business Partner Connection
But wait a minute! Isn't IBM's whole WebSphere strategy already a resounding success with SMB customers? Isn't everyone going WebSphere? If so, why do Business Partners need such enormous concessions to sell? Isn't WebSphere doing what it was supposed to do for IBM and its Business Partners? Why do Business Partners need such robust incentives?
The answer is complex, and it shows some of the holes in IBM's past marketing efforts. Consider, for example, that the SMB market place (sometimes defined as "companies with more than 100 employees" and other times defined as "companies with revenues between $250 million and $1 billion") is the fastest growing market for IT goods and services. It's a market niche that includes the traditional midrange market segment, but it is not bounded by any particular hardware or software architecture. This is the market segment that Microsoft has helped expand with NT and Windows/2000 servers: It includes small Unix and Linux servers; it is prime territory for Sun Microsystems servers; and it includes the iSeries and pSeries customers who have been traditional IBM Business Partner customers.
IBM relies on its Business Partners to deliver 70% of the revenue generated by the SMB market, and its reliance on Business Partners for this segment of the market was modeled on the Business Partner structure that once exclusively fueled IBM's midrange (AS/400) business strategy.
But these days, competition in the SMB is severe, and though the IBM eServer lineup has gained market share over the past several years, its overall solution success--placing new servers with complete software solutions--has been limited. IBM wants more business from this sector, and its WebSphere brand marketing strategy over the last few years was supposed to assist. But it never seemed to fully penetrate the SMB niche.
The WebSphere Marketing Message: Market Niche Slippage
Why have Business Partners been struggling with the WebSphere brand in the SMB market? How does the WebSphere brand tie into IBM's latest e-business on demand scheme? The answer seems to be that IBM's focus on WebSphere has changed from a product-specific message to a comprehensive "branding" strategy.
Let's go back to the beginning to view IBM's past messages from the SMB--and particularly the midrange--perspective.
Remember when IBM introduced WebSphere? It was, according to IBM, a piece of efficient server software that served Web pages--in essence, a Web application server (WAS). Midrange customers understood that concept, even though for many on the iSeries platform, serving Web application pages was not exactly high priority stuff.
But then later IBM changed its tune. WebSphere, it said, was not just a Web application server. It was also a suite of development products designed to make e-business easier to implement. Well, to midrange customers working with RPG applications, the prospect of getting some help for e-biz seemed like a laudable--if not immediately practical--goal.
But time passed, and the tune changed a little more. IBM said WebSphere was not just a WAS or a suite of e-business tools: It really was an open, standards-based development methodology that revolved around open J2EE. "Okay!" the midrange folks said. "Sounds like that makes good sense, too! Sort of... So can I still use my RPG applications with WebSphere (please)?"
Then, later, it seemed that IBM liked the WebSphere tune so much that it was the only song that it sang. The WebSphere brand began swallowing up established IBM brands left and right, until it seemed that every piece of code IBM ever wrote and every piece of hardware it made was somehow WebSpherical. "Is that right, Mr. IBM Business Partner? Is everything WebSphere now? How about my RPG?"
But alas! When the IT recession hit, all those grand schemes that predicted a complete SMB re-tooling to an e-business infrastructure began to falter. IBM, like every supplier of technology, struggled to make its bottom-line projections meet stock market analysts' predictions. The little WebSphere ditty that IBM was whistling--and which IBM marketing had orchestrated into a symphony of market utility--began to sound a little strained as IT budgets fell and real demand for new products dried up.
IBM needed a new tune because--although large customers had embraced the WebSphere message--SMB customers never really learned how to whistle the old one.
The E-Business on Demand Market Message
The new marketing message--e-business on demand--is a direct response to the problems presented by IT recession. IBM saw the sparse, anemic budgets that IT was projecting and needed to develop a message that reflected reality.
The premise of e-business on demand is simple: Invest a little bit in IBM e-business on demand products and services now, and pay for only what you use. Later, when the demands of business require a stronger infrastructure, turn the magic key and e-business on demand will enable you to expand your system effortlessly by purchasing added capacity and features that are preinstalled. It's a message that makes some sense in these hard times.
But what about the old WebSphere message? Well, IBM is whistling the same tune, but now in a slightly different key. In this new rendition, WebSphere is not only a bunch of products, services, and methodologies. It's now also the magic key itself: the key that makes e-business on demand work! By embracing the WebSphere brand, IBM says that IT will be positioned to complete the integration and delivery of e-business on demand.
So how does this new symphony sound to the SMB customers?
SMB Challenges: Where IBM Is Falling Short
If IBM's complex market message sounds too good to be true, then for midrange and SMB customers as a whole, it probably is. WebSphere and e-business on demand--up to now--has aimed at the "big fellas" in business: customers with mega development bucks, many heads-down programmers, and real capacity problems. Yes, to be honest, when it comes to coding integration for implementing e-biz, WebSphere definitely brings everything together, while e-business on demand solves significant capacity planning problems. The IBM strategy solves the problems that IT architects worry about most: tools, services, user experience, back-end systems integration, and capacity planning.
Unfortunately (or fortunately, as the case may be), all these problems are not what most SMB customers have. And most of them don't want these problems, either.
SMB customer information systems tend to be much smaller than those of the big fellas, and their back-end integration needs are minute by comparison. In fact, a large proportion of SMB customers (and specifically midrange customers) are client-members of industry supply and distribution chains. Though they deal with much larger suppliers or customers who are the targets of IBM's marketing strategy, their problems are line-of-business problems: making efficient use of the resources at their disposal. Sure, those larger fellas need WebSphere and e-business on demand, but in the past, the SMB systems have been designed to meet specific needs of their business, not all the needs of IT architects.
In fact, that's what has made SMB customers so productive: They weren't out to solve every IT problem; they were out to solve specific business problems that affected their company's bottom line.
Business Partner Challenges
It's in this environment that IBM Business Partners face such serious challenges delivering the IBM marketing message. The WebSphere message--which stresses open, standards-based, comprehensive business integration--is a technical message aimed at high-level CIOs who are a part of an upper management structure. So too is the e-business on demand message.
But in most SMB sites, IT is less sophisticated, and IT itself is a part of an SMB's middle management culture. IT purchasing decisions are often made by CFOs, not CIOs, and IT integration and capacity planning issues don't often register on their radar.
Furthermore, Business Partners seldom have the chance to directly impact the purchasing decisions of these organizations. Instead, new technology is delivered with specific software solutions that are designed to meet specific business needs--solutions that often are dictated by the largest players in the supply chain. SMB customers don't buy hardware or software based upon IT strategies: They buy hardware and software solutions that are based upon the bottom line of productivity.
Finally, a large proportion of solutions that pre-exist in these organizations are based upon proprietary technologies: Microsoft, Sun, Unix, and even midrange iSeries (AS/400) technologies. The climate is technically heterogeneous, with the competition's products already entrenched. iSeries installations are a primary example: SMB customers don't care that OS/400 is a proprietary system. Likewise, they don't care that Microsoft solutions have proprietary interfaces. What they want is a productive, easy-to-implement, easy-to-maintain solution that solves real business problems.
IBM Business Partners Will Pen the Lyrics
It's only in this environment that IBM's commitment of $500 million to the SMB Business Partner in incentives and marketing collateral starts to make sense. IBM wants and needs these solution providers and ISVs to take the symphony of messages--WebSphere and e-business on demand--and use it as the sound track for a Business Partner success story in the SMB marketplace.
It will be up to the individual SMB ISV and solution provider to tailor the larger IBM messages to the specific needs of the SMB customer. And in this climate of tight IT budgets, IBM Business Partners will need all the help they can get. IBM may have struck the right tune with WebSphere and e-Business on Demand, but it will be the IBM Business Partner who must pen the lyrics for the SMB customer. And getting that customer to sing the IBM theme song will be worth every incentive IBM can cough up.