IBM Channel Executive: Partners Must Embrace Change

The era of maintaining a hardware-only business is coming to a swift close, according to a veteran IBM channel executive who told IBM partners to embrace change and expand the breadth of services they offer their clients.

Partners that sell a mixture of hardware, software and services are primed to reap the most success, said Neal Callahan, vice president of global business partners at IBM. Speaking to attendees at UBM Channel's XChange 2013 in Washington, D.C., Callahan urged IBM partners to embrace the cloud, expand into managed services and invest in new practice areas such as security, big data analytics and mobility.

"IBM is focused on bringing higher-value solutions to the marketplace, and this is where the higher-margin opportunities are there for you," Callahan said. "You have to improve your skills so you can bring the value to the table because the customers are expecting more."

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Jim Torney, president of Essextec, a Rochelle Park, N.J.-based IBM partner, said Essextec is in the middle of a transformation. The business started in 1994 with expertise in IBM servers and later worked with IBM and distributor Arrow Electronics to expand into other areas including cloud hosting, business continuity and resiliency, and managed security services. At first, business was slow, but as more companies embraced the cloud, Essextec's growth rose significantly, Torney said.

"Almost every customer is asking us to show them a proposal for the managed services option," Torney said. "More than 50 percent of customers are electing some form of services."

Torney said he also is placing a strong bet on security services, recently acquiring ionRisk, a Wilmington, Del.-based firm that specializes in enterprise risk services. The new team of security specialists makes up the business and risk services arm of Essextec and helps it build revenue, Torney said. IBM's Callahan is responsible for managing and growing the channel business across the company's hardware, software and services lines of business. IBM recently unveiled discounted hardware and software bundles based on its PureSystems converged infrastructure platform. The bundles include blade servers, a chassis and network switches aimed at the converged infrastructure market.

IBM also is offering its channel partners one-year free use of the IBM Marketing Center, the company's cloud software that combines online marketing capabilities and customer analytics. The goal is to get partners intimately familiar with the Software-as-a-Service products and sell them more proactively, IBM said.

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Callahan said the company is committed to deal protection and is rewarding partners that boost their employees' skills with increased margins. IBM also revamped its portal site, offering a robust dashboard, management tools and leads in one place.

"Just this year alone we've increased the resources focused on our channels by over 50 percent," Callahan said.

IBM is being forced to offset its declining hardware business by focusing less on physical processing and storage equipment and more on delivering cloud software and service offerings. The company recently said it would furlough employees in its hardware Systems and Technology Group for a week later this month as a cost-cutting measure, while it works on retooling its business for cloud-based solutions. IBM recently won a $1 billion contract to provide cloud computing services to the U.S. Department of the Interior, which will rely on the company for cloud computing technologies, services and hosting, IBM said.

Ira Gersfeld, president of IBM partner Computer Resource Technology, Syosset, N.Y., said he has seen his IBM business rapidly change, with hardware moving to the background and services taking a greater role in driving revenue. Gersfeld said, however, that he isn't ready to fully embrace the cloud, instead investing in skilled experts who can perform managed services and consulting work.

"We've been seeing the nature of the business change rapidly in recent years," said Gersfeld. "Every partner is charting their own path."

Part of a successful strategy is for partners to work together, said Callahan, who added IBM is increasingly bringing together partners that excel in different areas. IBM's three lines of businesses -- hardware, software and services -- each has dedicated channel reps and programs and rolls up into an overall business partner organization, he said.

PUBLISHED AUG. 19, 2013