IBM Outlines The Top 4 Channel Opportunities For 2014

IBM said change is on the way in 2014 and identified key areas for growth for partners in health care, big data and managed services.

IBM's 2014 channel forecast, outlined by Dave Carlquist, vice president of worldwide channels for the Systems and Technology Group (STG), comes at the end of a rough year for that business unit as sales in key markets such as China have evaporated. IBM's STG has been hit hard compared with other IBM divisions, reporting a 17 percent drop in revenue in the company's third fiscal quarter.

Carlquist is hoping changes to IBM's channel program and new training opportunities for partners in emerging technologies will help reverse STG's decline.

In 2012, IBM said, the channel accounted for 53 percent of revenue for STG. The channel traditionally has accounted for nearly 60 percent of STG sales.

"IBM wants to help its business partner community transform and evolve their business models and leverage higher-value opportunities via industry specialization or solution specialties. We continue to differentiate IBM as a partner by driving simplicity, growth and profitability with our business partners," said Carlquist in an email interview with CRN.

IBM in 2014 will deliver more predictable minimum margins, specialized education and certification, and roll out new "business transformation initiatives" -- IBM workshops that help partners transform business models for cloud, he said. The goal is to enable partners to leverage more IBM big data analytics, cloud, social and mobile solutions and help bring them to market.

IBM, Armonk, N.Y., also will refine order management, deal registration and will improve programs around pricing and financing in the year ahead, he said.

Laura Didio, an analyst with Information Technology Intelligence, is bullish on IBM's prospects.

After consecutive quarterly declines, DiDio said, IBM is ready for 2014. "CEO Ginni Rometty knows the value of the channel and is looking to partners to drive sales in hardware and software," she said.

At IBM's PartnerWorld Leadership Conference in Las Vegas in February, the company boosted cohesiveness between the channel and the STG organization by moving the groups under one leader, with channel chief Mark Hennessy now reporting to Tom Rosamilia, Senior Vice President, IBM Systems & Technology Group.

The move, executives told partners, enabled more shared resources and gave IBM a sharper focus on STG.

Part of that sharper focus, DiDio said, is leaning on partners to sell IBM cloud services and go deeper into the midmarket and even large-company accounts. Leveraging partners is a key strategy if IBM wants to recoup lost revenue from its hardware business with new cloud, software, storage and big data services, she said.

IBM's cloud revenue is up more than 70 percent year-to-date compared with last year to about $1 billion. IBM's software revenue rose 1 percent over last year, according to its most recent earnings report.

NEXT: IBM Partners Chime In On Forecast

For IBM partners in 2014, Carlquist said, managed services opportunities represent a huge growth potential. He said IBM's commitment to invest more than $100 million in R&D on new big data technologies is paying off as well. Big data technologies can be leveraged on IBM servers including Pure, Power, System X and mainframes, he added.

So far, IBM partners are on the same page.

Ernie Yenke, president of Lighthouse Computer Services, a Lincoln, R.I. –based solution provider that works with IBM server and storage hardware and a broad range of IBM software and security products, said he's upbeat on the changes he's seen at IBM.

Lighthouse Computer Services is seeing an increase in sales of IBM's PureSystems converged systems servers. "We think that's a big opportunity," he said, noting that company already has sold "a lot" of the systems, without disclosing specific numbers. Lighthouse Computer Services has a number of sales and technical support personnel certified to work with PureSystems, he added.

As IBM turns over more of its midmarket and even large-company accounts to channel partners, it is creating opportunities for larger, regional solution providers such as Lighthouse Computer Services, Yenke said. "There are some real big customers on that list," he said. "We're spending a lot of time with IBM lobbying for those accounts."

Yenke is generally upbeat on changes IBM has made to its channel program in the last year or two. IBM now guarantees a minimum 12-point margin on data storage product sales, he said, and now pays fees to solution providers that perform IT assessments for prospects, even if the solution provider ultimately doesn't get the deal. "I think IBM has done a great deal with the channel in the last couple of years," he said.

IBM's cloud ambitions, meanwhile, are lofty and its investments have been extensive, with 12 recent acquisitions such as WebDialogs, Diligent Technologies and most recently SoftLayer. The company said it's working with 1,700 partners on cloud computing projects and 3,000 more MSPs focused on cloud-based projects.

But despite the impressive growth in its cloud business, cloud remains a challenge. IBM recently lost a high-profile $600 million cloud-based system contract with the Central Intelligence Agency to cloud rival Amazon.

IBM's biggest challenge in 2014, DiDio said, will be to shake its image as an entrenched 102-year-old industry goliath and work hard to be seen as agile and ready to compete with nimble newcomers and the Amazons and Googles of the world.

RICK WHITING contributed to this story

PUBLISHED NOV. 27, 2013