IBM Boosts Rebates To Encourage Higher-Value Channel Solutions

IBM is offering financial incentives to encourage channel partners to sell systems that combine IBM hardware and software products, and for developing and selling solutions targeting such areas as cloud computing, security and business analytics.

Along with elevating the value of solutions sold by IBM channel partners, the new IBM Solution Accelerator incentives, announced Tuesday at IBM's PartnerWorld Leadership Conference in New Orleans, are also designed to get more partners to work with each other and with value-added distributors.

"This is important because we're all engaged in this transformation," said Steve Mills, senior vice president and group executive of IBM software and systems, in a keynote speech. "We're all dealing with our customers continuing to move the bar up, as it were, towards realizing greater value from information technology.

IBM executives at the conference are making it clear that the company's own goals are tightly linked with those of its partners. "We cannot achieve our 2015 roadmap, our growth aspirations, without the help of our partners," said Mark Hennessy, general manager, global business partners and midmarket, in a meeting with reporters.

Hennessy was named IBM's new channel chief in early January, after Virginia "Ginni" Rometty took over as the company's CEO on Jan. 1.

Under the "Software and Systems Reward" component of the new program resellers can earn rebates of 5 percent on eligible hardware systems and 15 percent on eligible software when they sell those products together to a single customer. Those rebates are incremental to any other margins and rebates the partner may be eligible for.

Partners can earn an additional 10 percent rebate under the "Business Solutions Rewards" element of the program for selling software packages targeted toward IBM's key initiatives, including business analytics, security, cloud computing, risk management, business social networks and what IBM calls "smarter cities" -- the instrumentation of everything from traffic management systems to power grids.

IBM already has qualified some 60 software packages for the Business Solutions Reward effort, Mills said, with more to come.

Next: Boosting Partner, VAD Cooperation

Solution providers at the conference say they recognize the value of the new incentives.

"This will help us make additional margins and it will help us bring price points down so that more customers…can afford these solutions," said Dan Bivona, sales director at Vormittag Associates, an IBM partner.

Saying the word "solutions" is often overused, Mark Wyllie, CEO of IBM partner Flagship Solutions Group, said, "this kind of a program puts a lot of meaning in the word 'solutions' because it does provide an incentive for the business partner -- and probably the end user because [of lower prices] -- to integrate multiple technologies."

The channel accounts for about 50 percent of IBM's server and data storage hardware sales. But only about 15 percent of its software sales are made through the channel, according to Wilfredo Sotolongo, IBM vice president of business partner & mid-market sales, in an interview.

The new IBM Solution Accelerator initiative is the latest of a number of efforts IBM has launched in recent years to encourage channel partners to upgrade their skills through IBM "specialization" certifications and sell more complete, higher-value systems with more services.

More than 5,000 IBM partners have undergone certification to win "specialty" status under the vendor's Software Value Plus program.

Addressing the 1,000-plus partners at the conference Tuesday, Mills said the rebates should help partners who are "struggling to make the [needed] investments to move to higher-value spaces. Clearly the added margin is designed to give that leverage in your financials on making those investments and building more skills.

"We think it's a great incentive," he said. "The time is right to do this. And I believe it's going to bring a lot of value to all of us in 2012."

IBM also hopes the new rebates will encourage channel partners to work together: Those that primarily resell hardware can pool their expertise and resources with partners with software expertise to create higher-value systems, Mills said. And VADs can likewise leverage the rebates to pull together teams of solution providers to build more complete systems.

To encourage partners to make sales referrals for IBM cloud services, partners that provide referrals for IBM's Intelligent Operations Cloud Center and Smarter Commerce cloud applications will be rewarded with 15 percent of the value of annual subscriptions.