New IBM rules seek to avoid channel conflict

The rules say 100 named accounts go through IBM and the rest are for partners -- with exceptions, of course.

IBM has published new rules to avoid channel conflict, but still leave the door open for the vendor to take partner deals direct in some cases.

The principles of engagement, as they're called, aim to avoid channel conflict by spelling out when midmarket deals go through channel partners and when they go direct. Basically, 100 or so named accounts will go through IBM and the rest will be for partners, although there are several exceptions that aren't always clearly spelled out and which could lead to conflict.

For example, the rules for enterprise systems state: "Business Partners will participate in opportunities with IBM Enterprise Systems accounts, based on the needs of the customer." And the rules for business systems state: "While IBM will pass many LE and Competitive leads to Authorized IBM Business Partners, IBM may determine that some opportunities may be better served by IBM's Direct sales force."

IBM channel conflict rules
Download IBM's Principles of Engagement

The rules currently apply to partners and direct teams that sell IBM's x86-based System x servers, but IBM plans to roll out customized rules for its other hardware and software lines by the end of the year, said Karstin Bodell, vice president of North American channel marketing.

Rick Rittmeyer, IBM business development manager for Norcross, Ga.-based Optimus Solutions, said it will be good to know when he does or doesn't have to worry about IBM taking his business -- which the vendor has done on some larger Power System accounts.

"I'm not really sure when they can do it or when they can't," he said. "It's real important, so we don't waste our time. If it's a big account that takes a lot to get into, we don't want to waste that time if we know we're not going to get that business."

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One of the key rules that IBM has put into place to avoid channel conflict addresses incumbent partners -- those that have been active in an account for at least two years and account for at least half of that customer's System x annual spending. IBM won't sell System x into those accounts and will direct those customers to work with their incumbent partners, Bodell said.

IBM's new focus on midmarket customers, which the company launched earlier this year, drove the move, Bodell said. IBM defines midmarket customers as those with 1,000 seats or less.

"Business partners are a preferred route to market in hardware and systems in the midmarket," Bodell said.

Most of the rules were already standard practice, Bodell said, but when IBM reorganized for its midmarket push, a lot of employees began working with the channel for the first time.

"Some of this is just educating and re-educating on our approach," she added.

Some other major vendors also have written rules to avoid channel conflict, but most keep them private. A senior channel analyst with Milford, Mass.-based Enterprise Strategy Group, Paul Myerson said formal rules are becoming more common.

"Channel conflict goes on on a regular basis," he said. "If you don't have any channel conflict, you don't have enough coverage. So then it's just a matter of minimizing it and managing the risk."

The key for vendors is to enforce the rules against people who break them, and "the only way to do that is to zing them in the pocket," Myerson said. Both he and Rittmeyer said rule-breakers should not receive credit for the sales they make.

At IBM, an executive review board will set quotes when both a partner and the direct sales team request special bid pricing for a customer, according to the rules. The board will use several criteria to determine whether a disputed deal will go direct or through the channel, including: the customer's existing relationships with the partner and IBM's direct sales team, the amount of work the sales teams have done to make the sale, and customer preference.

In other cases of channel conflict, the rules first recommend that the partner and direct teams attempt to resolve the issue themselves. If they can't, they can escalate the issue to the regional channel vice president, who can in turn bring the dispute to a meeting of four executives -- representing IBM's channel, internal sales and appropriate product groups. Still-unresolved channel conflicts go to the vice president of the business partner organization and the vice president of the systems and technology group, who have the final decision.

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