Orlando – While its Global Technology Services division hasn’t always been seen as complementary to channel partners, IBM Corp. (NYSE: IBM) is looking to carve out a bigger slice of the global services pie so it’s changing its approach to services to make channel partnerships a priority.
Part of the motivation comes from IBM president and CEO Sam Palmisano’s mandate to double IBM’s earnings per share by 2015. To help meet that goal Bob Hoey, director of IBM Global Technology Services, global business, needs to grow the percentage IBM’s services revenue that flows through partners by 5.5 per cent annually through 2015. Currently, about 20 per cent of GTS revenue is through partners. And the services opportunity is not insubstantial. IBM pegs it as a $450 billion market, of which IBM, although the market leader, can only lay claim to 10 per cent of today.
“The opportunity is enormous,” said Bob Hoey, general manager, IBM global general business, global technology services. “The reality is we don’t have enough sellers in IBM to capture more market share and we’re absolutely dependent on resellers to extend out reach into the market opportunity.”
Hoey told partners at IBM’s PartnerWorld Leadership conference they need to make services a key part of their business, and their revenue mix. IBM operates services as its own p&l, and it drove 56 per cent of IBM’s overall revenue in 2010. While not all partners may want to go that heavily into services, it is an increasingly important, high-margin revenue source for the channel.
“As you’re working with customers to put more data into the cloud, for example, consider what services IBM can bring to the table to complement your portfolio of services and fill gaps in your offerings,” said Hoey. “Look for places where one plus one can equal three.”
While some in the channel once saw services as a Trojan horse to drive more hardware and software sales, Hoey said services are increasingly being seen as a standalone profit generator.
IBM services arm hasn’t always been seen as channel-friendly, and it hasn’t been seen as overly easy to work with either. That’s something IBM is trying to address, said Hoey. The scope and breadth of the catalogue was just too much, so IBM is moving to standardized offerings that are more easily understandable and repeatable. They also want to sit down with partners to identify the right services offerings for each local market opportunity, based on geography, industry and market conditions.
“We’re increasing investment in asset-based offerings, and we want to give partners the option to wrap their own service offerings around ours and lead where they’re strongest,” said Hoey. “The bottom line is you can make more money growing your services, and we want to work with you to help you do this. This isn’t theory; it’s reality.”
It would be a mistake to think IBM has found channel religion in the services space said Darren Bibby, vice-president, software channels and alliance research with IDC Corp. Partners should be realistic that IBM does compete in potentially hundreds of different service areas and they are going to be competition to partners that do some of the same things. That said, there’s going to be virtually no partner out there that does everything, and IBM could be a great gap-filler, particularly in asset-based resources and services.
“I can’t see myself as a business partner going to IBM too often for professional services, I think it would be expensive and I’ve got my own resources for that,” said Bibby. “Maybe in some areas where IBM has an extreme capability or focus. But some of the cloud offerings, the hosting, things like that, I think there is a good opportunity for partners.”
The key for IBM though, said Bibby, is to be honest and up-front with partners about how they see the channel fitting in a services business that, despite the increased channel openness, will predominately remain a direct-first play.
“The big thing for IBM is they can’t go out and say this is a sea change and we’re ‘partner friendly’ now in services. They’re ‘partner accommodating.’ It’s not a partner business, it’s a direct business for the most part, but there are very good areas where partners can leverge this,” said Bibby. “But if IBM comes out and doesn’t say they don’t think there will be conflict, I would run away. So I think they’re going to be realistic.”
Follow Jeff Jedras on Twitter: @JeffJedrasCDN.