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IBM Steers Partners Toward Integrated Hardware and Software

Big Blue's new CEO hails new era of computing based on intelligent systems that can crunch Big Data.

• By Jeffrey Schwartz
• March 26, 2012

IBM's new CEO Ginni Rometty is charting the company's future on the delivery of integrated systems that have cognitive capabilities.

In her first major public address to partners as president and CEO, Rometty described the coming of a new era in computing so significant that it was presaged only by the invention of computers in the early 1900s that were able to perform tabulation, followed by programmable systems ushered in the 1960s with the introduction of the System 360 mainframe.

"This third generation -- it learns, hypothesizes, suggests, and you saw the first fruits of it with Watson," Rometty said in her keynote address at the IBM PartnerWorld Leadership Conference in New Orleans in late February. Watson, of course, is the expert system that beat the reigning all-time champions on the game show "Jeopardy" last year. "Watson is being commercialized now. This will impact your business in your lifetime," Rometty said. Just a few days later, Citigroup Inc. and IBM announced that they've entered into an agreement to explore potential uses for Watson.

At the PartnerWorld Leadership Conference, IBM executives emphasized delivering business outcomes rather than selling technology. While this isn't a new concept, the company is evolving its technology toward helping people make faster decisions with information that's precise and contextual. At the same time, the company wants partners to think more holistically about providing this technology with integrated hardware, software and cloud-based solutions.

In an effort to motivate this behavior, IBM Senior Vice President and Group Executive for Software and Systems Steve Mills outlined what was internally known as the company's "Blue on Blue" initiative, and more formally called the IBM Solution Accelerator incentive. IBM is hoping the new incentives will encourage channel partners to bundle hardware with its software solutions or vice versa, along with cloud and traditional services.

As part of its latest bundling incentive plan, IBM is offering 5 percent rebates to partners who upsell certain hardware in a software deal and 15 percent rebates for software added to a systems deal sold to a single customer. On top of that, IBM is offering an additional 10 percent rebate that addresses specific types of solutions such as business analytics, risk management, security, compliance and social computing for business. Partners can also earn an additional 1 percent when clients finance their solutions through IBM Global Financing.

"The idea [is] putting hardware and software together and giving you the opportunity to participate in combined hardware-software sales opportunities to deliver more margin to your business," Mills told more than 1,000 partners attending the conference. "In simple terms, it's an incremental incentive. It's above and beyond all of the incentives out there today. Nothing is taken away, reduced or eliminated, so it's entirely additive in nature."

Customers are looking for bundled systems, added Mark Hennessy, who took over three months ago as general manager for IBM Business Partners. "Customers are looking for business partners to bring to them integrated solutions that deliver real business outcomes quickly," Hennessy said. "So combining IBM hardware and software with their solutions can deliver that business outcome faster, as opposed to someone having to integrate lots of different pieces."

Darren Bibby, program vice president for software channels and alliance research at IDC, said the program is conducive to partners linking up with other partners. "IBM's biggest challenge and opportunity is to get partners to buy into the cross stack or up and down the stack in terms of selling hardware and software together," Bibby said. "They might not be able to deliver it, but they can partner."

Fifty percent of hardware sales and 15 percent of software is sold through IBM's channel partners, said Wilfredo Sotolongo, vice president of Business Partner and Mid-Market Sales for IBM in North America. Even with the incentives, Sotolongo acknowledged it could be challenging to get many partners to take more holistic views of bundling hardware and software.

"To get a single customer-facing team to successfully sell an integrated solution- -while some customers are ready to buy that way, many are not," Sotolongo said. "It's a call to action. It's time to dust off the skills we used to have 25 years ago and sell totally integrated solutions, and we're making it financially attractive to do that."