IGS: IBM's Renegade

At last year&'s PartnerWorld, IGS, to much pomp and circumstance, said it was budgeting $300 million for marketing, training and business partner recruitment and that it planned to include a portfolio of partner-only, or partner-led, services offerings sold to midmarket customers on a modular, fixed-fee basis. The intent, IGS said, was to brand business partners as IBM&'s service providers in midsize accounts with between 100 and 1,000 employees.

The reality is that IGS still views business partners primarily as sales agents for IGS packaged services. IGS wants business partners to bring them into their accounts, pay the business partner a fee, and have IGS perform the service and book the revenue. That&'s fine for business partners that don&'t have the people or technical skills to deliver services their customers want. But many business partners do have sophisticated service departments with skills and the cost structure specifically geared to midmarket customers.

As a result, many IBM business partners with robust service practices view IGS as a direct competitor. And the feeling at IGS appears mutual. Too often, business partners say, IBM field people are reluctant to bring a service-savvy business partner into a hardware deal for fear that partner might wrestle away the subsequent services business.

Unless IGS wakes up, the problem could get worse in 2006. IGS revenue for 2005 increased only 2 percent over 2004, and fourth-quarter sales were down 5 percent over the year-earlier period. During IBM&'s fourth-quarter earnings call, CFO Mark Loughridge said IGS plans to go after more midmarket opportunities this year.

While most of the IBM brands have learned how to partner with solution providers to the mutual benefit of both, IGS remains off the reservation. As IGS moves down the food chain, it seems convinced that it has the cost structure and the marketing cachet to mount an incursion into business partners&' midmarket turf. Good luck. IGS needs to tread lightly if it truly has designs on the midmarket, as any move there without the advice, guidance and cooperation of business partners will be counterproductive.

How is your relationship with IBM Global Services? Let me know at (715) 282-6561 or via e-mail at czarley@cmp.com.