Readers Weigh In on iSeries Channel Challenges
February 23, 2004 Timothy Prickett Morgan
We have received a lot of feedback on the series of stories put together by Alex Woodie describing the channel issues facing the OS/400 server platform. If the amount and intensity of the feedback are any guide, we have certainly touched a nerve with this story. And this makes perfect sense, since as the iSeries channel goes or does not go, so goes or does not go the iSeries business at IBM and the ecosystem that we are all a part of.
Readers of The Four Hundred had some interesting thoughts and observations, and we felt it was appropriate for us to share them with you. We have removed the readers’ names to protect their identity.
My company was also forced out of the business channel by IBM after 20 years of dedicated service. We were one of the original midrange firms in [state name withheld] in 1983 and have rolled with all of the punches IBM has thrown at us during that time. We have a very loyal customer base, and that allowed us to meet all of IBM’s quotas. What finally got us was the requirement that you have two certifications, one sales and one technical, and that it must be two different people.
After losing the person who held the technical certification, due to the economy in 2001 and 2002, we are down to four people. One person is administrative, so that leaves three available. I hold the sales certification, which leaves two people available for the technical certification. We worked very hard trying to get one of those people trained well enough to pass the certification test. Unfortunately, most of the test related to LPARs [logical partitioning], card placement in the larger iSeries–all areas that we don’t even deal in, because our customer base uses Model 270s and Model 800s.
As you, Timothy, and others have pointed out time and again, IBM has basically abandoned these smaller customers. The reason so many of them remain on the iSeries? Business partners like us who retain a loyal following regardless of the stupidity at Big Blue in dealing with the iSeries.
Keep up the good work! With any luck, maybe someone at IBM will actually read your material and wake up to the possibilities.
I was a business partner for about 20 years. The AS/400 was very good to me and my business. However, every now and then, IBM would shuffle the rules of the channel. In the last survey taken by IBM, my clients gave me a 98 percent satisfaction rating.
Now, due to the shuffle of the channel, I find that I can no longer sell to some of my longtime clients. A case in point was a very large government account (large to me, tiny to IBM). IBM took it away from me. Since IBM has “owned” the account, almost no new or updated equipment has been moved into this account. Or, more accurately, no new or updated IBM equipment has been moved into this account. You see, they are too small for IBM to bother with, and IBM would have to drive about 200 miles to visit this account.
My company specialized in these small accounts. We did the long-distance drive to support them on a regular basis. As soon as IBM got the account, or transferred the account to a “down state” partner, the account became dissatisfied. Nobody ever visits them anymore. And the client was very confused about why I could no longer serve them. And, of course, some of that dissatisfaction with IBM rubbed off on me.
I have left the business. I got a “real job” working full time for one of my AS/400 clients. That move occurred over two years ago. As of today, I have not seen an IBM person visit this shop, and I have not seen one of those business partners visit this shop. I spent a day or two attempting to find out who is our assigned business partner; IBM had no clue. I did get assigned to an IBMer who resides someplace on this planet (I think). And he does call me about once or twice per year. However, every time I ask for some information, the standard response is, “Here is the Net address where you can look it up for yourself.” If I ask for reasons why I should purchase something new or updated, the answered is, “Here is the Net address where you can look it up for yourself.”
We are a small business. We have only 50 employees, spread out over four divisions, and IBM would have to drive about 150 miles just to visit us. Thus we are off their radar. Just like all of the clients that I serviced over the years.
IBM is one of the most difficult computer companies to be a reseller for. If it was easier to be a business partner, more resellers might be inclined to lead with the iSeries. This would result in more footprints and more revenue opportunities. Therefore, having more resellers would translate into more iSeries revenue to IBM, and eventually to the reseller as well.
The resellers that are experiencing these slim margins you refer to are the larger guys that are just “slinging lead.” They are the first ones to recommend that you front-end your iSeries with Windows if you want to do Web serving on GUI interfaces because they usually don’t know how to do anything other than sell upgrades.
Our firm is a [midrange software supplier] business partner, and 90 percent of our revenue comes from selling custom software for the iSeries. We started in 1999, and 2003 was the first year that the iSeries reseller part of our business was in the black. That’s not because of lack of effort or opportunity, but because we acquired a smaller business partner that already had the services and growth VAE, so that enabled us to close the deal on the sale of a $500,000 Model 825. This customer has done about $500,000 in iSeries services with us a year. But we had to acquire another firm to be allowed to sell to them. There are no other business partners or IBMers in the account. Unfortunately, IBM removed our growth and service VAE shortly after that transaction. We’ve had to bring in other business partners to sell upgrades to our own customers.
As a result, profits that we would reinvest in iSeries solutions are given to other business partners to reinvest the way they see fit. I know that most of these larger business partners have used their iSeries profits to invest in other technologies that lose money, and then they cry to IBM that they can’t make enough off of the iSeries. Unfortunately, IBM is listening to them and as a result is going to kill the iSeries.
If you allow these smaller resellers to compete on a level playing field, the free-enterprise system will weed out the weak and inefficient. Those of us who are die-hard iSeries bigots will prosper and grow our businesses, and those who are just trying to grab the low-hanging fruit will fail. Bottom line, the customer and IBM win.
The current business partner strategy that IBM is adopting is a “going out of business” strategy, not a “grow the business strategy.” Also, as much as we love the iSeries, we may eventually have to consider–God forbid–selling other platforms. What we won’t do, because we’ve tried it, is to partner with a larger solution provider. The ones in our area are poorly run, and IBM should allow them to fail, instead of trying to force companies like ours out.
By the way, the money we made off the iSeries last year was spent funding an iSeries development effort. We plan to offer iSeries-centric software solutions for the small and midsized business market. Our solution is both graphical and Web-based, and, best yet, requires no 5250 at all. It still uses the iSeries database engine for database retrievals, etc. But for the project to continue, we’ll have to fund it some other way, thanks to IBM’s business partner strategy.
I get up some days and ask myself, “Why don’t we just partner with somebody else?”
I read your article about the recent changes to the reseller channel that have hurt the iSeries. I would disagree that there are too many resellers. Quite the contrary: There are not enough.
We are one of the hundreds of resellers that had their coverage VAE taken away. Unfortunately, in our territory there is only one other IBM reseller. While that firm is larger, it tends to sell a great deal of non-IBM products to its IBM installed base. We, on the other hand, provide 100 percent IBM solutions, with a very heavy emphasis on iSeries solutions.
The customers are frustrated that IBM is dictating where they must purchase their IBM iSeries solutions. We are switching to selling a lot of used iSeries upgrades to accounts where we can no longer sell new iSeries upgrades. I don’t think IBM intended for things to turn out this way, but many of these small accounts want to buy from us, and not the other business partner. The partner is only catering to the large iSeries shops because that can get more dollars per sale.
These disenfranchised resellers aren’t leaving the IT business; they’re just selling other products and taking their iSeries accounts with them. What IBM doesn’t get is that customers like choices. The customer, not IBM, should chose the solution provider that will help them best. If these business partners aren’t allowed to sell new iSeries equipment, they’ll find something else to sell the customer. What they won’t do is join forces with the larger resellers. We’ve tried that before, and that’s part of our problem. There are iSeries systems out there that we sold, but some other business partner got credit for it. So we don’t have a “footprint” in the account, even though we really do.
As a former IBMer, I am totally disgusted with IBM’s recent channel moves. I think this is the beginning of the end for my beloved iSeries.
Please don’t use my name, I fear IBM will retaliate.
Great articles on the challenges facing the iSeries market.
Another solution is to get rid of the distributors and have IBM sell direct to the partners. Since we configure the iSeries on IBM’s configurator, and product is shipped direct from manufacturing to our customers, there is no longer a need for a “distributor.” The distributor’s value to the channel these days is the invoice. In most cases they can’t even answer the simplest question without calling IBM’s Partnerline.
Looking at a model without distributors, IBM would increase revenues and profits and at the same time get more profits into the partners’ pockets. The channel has too much overlap between the distributor’s support people (mid-level management, etc.) and IBM sales and support staff. It is criminal that in a lot of cases the distributor makes more on an iSeries sale than the partner that landed it, due to the current model and the fact that it is a commodity sale.
I could go on and on, but have to get back to supporting my distributor.
Great article on IBM’s challenges for the reseller channel. I think the unspoken challenge that no one addresses is that the ISVs are experiencing significant resistance to the iSeries in general beyond their customer base. Put simply, very few companies that want an iSeries these days aren’t already iSeries users. I talk to ISVs all the time because they’re interested in our RIO product as a means of turning their applications into Java, and therefore to allow them to deploy to other platforms. Some might construe this as being bad for the iSeries, but I think people have to accept that we’re moving toward a paradigm where servers are becoming commodities. You really have to be a true iSeries bigot to pay more for an iSeries than its pSeries equivalent. And even then your application choices are limited unless you want an RPG application, which many companies don’t.