IBM consulting looks downstream
Long a competitor to smaller systems integrators, Big Blue looks to partner with regional outfits to get into medium-size businesses.
The company said Tuesday that it will invest $300 million this year on partner programs to boost consulting services sales to medium-size businesses. A series of initiatives, detailed at its PartnerWorld conference in Las Vegas, call for IBM to form better working relationships with regional consulting houses that cater to smaller companies.
IBM Global Services often has a competitive relationship with other systems integrators because Big Blue's partners, which resell IBM gear or software, often also try to sell related installation and support services. With its midmarket services program, IBM will seek to partner with a set of regional systems integrators and share the profits, said Mike Riegel, director of on-demand marketing and strategy at IBM Global Services.
Big Blue has developed a line called Express Managed Services, a series of consulting services designed for smaller organizations, which partners can offer customers. The company expects to sign on between 20 and 40 regional systems integrators in the United States as part of the program, Riegel said.
Through the midmarket services push, code-named Project Infusion, IBM will team with regional systems integrators on joint sales and marketing efforts. Consulting partners can now also resell IBM services including outsourcing, application hosting and business management consulting services, he said.
Like its competitors, IBM considers medium-size businesses an important area for revenue growth. In the past two years, the company has created an Express line of products targeted at the middle market.
The company has boosted its efforts to work better with business partners, such as application providers and resellers, in part because smaller organizations generally purchase a complete application package, rather than assemble several different components themselves.
Until now, IBM Global Services has generally catered to larger organizations with custom application development work and consulting services. To better penetrate the smaller companies, the IBM unit intends to partner with regional consulting outfits because midsize customers tend to work with local suppliers, Riegel said.
Because of changing buying trends, many regional consulting houses need to move to a "solutions" approach, where they sell a package of products and services, rather than simply hardware or software, he said. "Hardware and software margins are just not going to cut it anymore," said Riegel.
IBM needs to have good working relationships with services partners, even if they may compete in certain areas, analysts said.
Partnering "is a recognition of the fact that as big as IBM is, it can't do everything, particularly when it comes to smaller customers," said Stephen O'Grady, an analyst at researcher RedMonk.