IBM to Spend $100 Million in 2006 to Drive Express Offerings at SMB Shops

Published: August 24, 2006

by Timothy Prickett Morgan

IBM said last week that it was going to spend $100 million to reach out to thousands of IT resellers around the globe who peddle hardware, software, and services into the small and medium business end of the IT market. The effort, dubbed Express Track, aims to significantly increase the number of partners and resellers that IBM has in the SMB space.

The SMB part of the IT market is growing roughly twice as fast as the enterprise segment, so IBM has been revamping and repricing its servers and software to get more traction in the SMB space, where price is a bigger issue than the name on the label. While IBM is the dominant vendor at a lot of the largest companies in the world, there are many small businesses to chase and IBM has not historically done a good job chasing them. IBM's reseller partners are usually enlisted in that ground war with IBM's competitors in the SMB space, in fact, which is why IBM wants to expand its SMB channel.

The Express line of hardware and software products, which were created a few years ago, are the main marketing vehicle that Big Blue has to take on the SMB space. With the Express Track program, IBM is committed to spending $100 million in 2006 to build up the global base of IBM business partners. Earlier this year, Donn Atkins, general manager of IBM global business partners, said IBM wanted to add 5,000 new SMB partners--many of them sell competitive platforms--to its roster. And he said last week that IBM is meeting that goal by having signed up more than 2,500 new partners in the first half of 2006 specifically aimed at driving SMB sales.

SMB has become an increasingly important part of IBM's overall business. In the first two quarters of 2006, IBM had $40.2 billion in sales to corporate end user customers (not including sales of technology on an OEM basis), and the SMB segment accounted for $7.9 billion of that. If you take out currency effects, IBM's SMB business grew at 5 percent in 2006 so far, which is more growth than any of the large-enterprise sectors IBM sells into (financial services, industrial, distribution, communications, and government are the areas IBM tracks for investors).

SMB may only account for 20 percent of sales, but it is also the one place where IBM can consistently grow. And adding partners will help foster that growth, since partners account for about half of IBM's SMB sales. In the System i5 and p5 businesses, partners do most of the selling in general (whether they are large or SMB accounts). IBM keeps most of the mainframe business to itself, and System x and BladeCenter machines are increasingly sold by partners. There are Express offerings for i5/OS, Windows, AIX, and Linux platforms and various database, middleware, and groupware, too.

In addition to 2,500 new SMB partners and putting the money in place to get another 2,500 before year's end, Atkins says that Big Blue has added 300 partner support people who help resellers chase and close deals. Some of the $100 million investment has been dedicated to providing partners with online tools to help them sell products. And, IBM is letting partners peddle more software and services so they can add value, get more revenue from their customers, and make more profits for both themselves and IBM.

On a global basis, IBM has over 100,000 partners of different stripes and sizes.