IBM Corp., a $79 billion a year IT behemoth with a storied name and relatively small footprint as a vendor partner among channel pros, has announced plans to launch a major reseller-led push into the SMB market.
The effort is part of a larger, dramatic overhaul of the Armonk, N.Y.-based company’s partner ecosystem, and will be accompanied by an entirely new partner incentive scheme, as well as a revamped internal sales commission model aimed at all but eliminating channel friction in the SMB space.
The new initiative’s overriding goal is to drive increased sales of IBM’s software-as-a service solution portfolio. IBM is three years into a strategic campaign to transform itself from a hardware and professional services organization to a leader in cloud platform and application offerings. Last week, the company reported a 24 percent year-over-year jump in cloud revenue to $17 billion in the fourth quarter of its 2017 fiscal year.
“Throughout that journey, the channel and the ecosystem of the IBM company has been transforming, but not at the rate and pace that I believe we need to be transforming,” says John Teltsch, IBM’s general manager of global business partners and the architect behind the company’s new-look ecosystem.
Teltsch’s plan includes a component targeted at hardware resellers, underway now, that’s designed to simplify sales incentives. A more sweeping set of software-related program changes will go into effect in April.
“We’ve got over 100,000 partners in PartnerWorld today,” Teltsch says of IBM’s partner program. “A very large number of them are focused on selling a traditional infrastructure solution.” Teltsch, who stepped into his current role last July, is tasked with motivating those legacy partners, as well as a wide array of PartnerWorld newcomers, to join IBM on its move into the cloud.
To that end, the new ecosystem includes policies engineered to make selling IBM SaaS products and building solutions on top of them simpler. Partners interested in testing those products, for example, will no longer need to sign contracts in advance.
“We’re going to lower the barrier to entry for those new partners, new ecosystem partners, to come into IBM, try our stuff, download our stuff, play in our sandboxes, and play with our tools,” Teltsch says. The contracts partners sign if they like what they see will be much shorter too, he continues. The agreement for embedding IBM technology in third-party solutions, for example, has shrunk from 28 pages to three.
A new account management structure adopted along with the remodeled ecosystem reserves a list of 1,000 mostly large businesses exclusively for IBM’s salesforce. For the first time, though, partners will be able to see exactly which companies are on that list.
“We’ve never in the past ever given a window into that for our partners,” Teltsch says. “I want to be very clear with our partners [on] where we want them to play [and] where we’re going to have IBM play.”
IBM will share sales responsibilities with its partners for a group of roughly 14,000 “co-led” accounts. Another 170,000 mostly small and midsized businesses in what IBM calls its commercial space will be the exclusive purview of partners.
“We never will eliminate all channel conflict, but in this segment, the SMB segment, it is 100 percent partner first,” Teltsch says, noting that the company’s account managers will receive compensation for sales to SMBs only when a partner is the primary driver.
“If they want to retire quota and if they want to earn commissions, the channel must be the leader of the deal,” Teltsch says.
To further attract channel pros to IBM’s new partner ecosystem, the company will roll out revised financial incentives in April that reward resellers for contributing to strategic goals.
When the new bonus schedule goes into effect in April, partners will receive “stackable” commissions for adding net new companies to IBM’s client roster and for closing opportunities that partners found themselves rather than through IBM’s lead generation and co-marketing programs. Landing business with commercial segment accounts will earn partners an additional payout.
“We’re going to incentivize them specifically to go into the SMB space,” Teltsch says.
IBM will also pay partners to complete software subscription renewal negotiations with customers before license support expires.
“We’re going to pay an increased incentive for them to have on-time renewals, to ensure the relationship continues and we don’t have any stoppage in support for that client,” Teltsch says.
Other elements of the new ecosystem include efforts to drive increased sales of IBM products through major distributors like Tech Data and Arrow Electronics by guaranteeing to pay them a minimum amount each quarter, called a “base channel margin,” regardless of how many sales they record.
Teltsch and his team have been field-testing and fine-tuning IBM’s new channel ecosystem for some five months in consultation with business partner advisory council members and other resellers in 172 countries.
“I wanted to change everything about this organization—how we go to market, how we incentivize, how we communicate—but I wanted to do it with their insight, and their guidance, and their direction,” Teltsch says.
