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IBM channel chief Mark Hennessy maps out partner growth strategy

IBM channel chief Mark Hennessy lays out partner priorities for 2014, including how the company sees partners plugging into cloud, analytics and social technologies.

Appointed as IBM's channel chief in January 2012 by the company's then newly appointed and first woman president and CEO, Virginia M. Rometty, Mark Hennessy is entering his third year in the role.

SearchITChannel caught up with Hennessy, general manager for IBM global business partners and midmarket, to talk about the how IBM is meeting -- or not meeting -- its commitment to its 132,000 channel partners worldwide, which involves $2 billion spent annually on partner programs, development, systems and so on.

Hennessy said that IBM's commitment to partners goes back decades. It's a relationship that's straightforward because of what partners bring to the table, he said -- namely, business relationships with customers, insight, skills and solutions.

Hennessy also stressed the importance of IBM's channel strategy and how the company's dependence on and commitment to the channel is growing.

What's the status of the hunt for a new North American channel chief since the retirement of 32-year IBM veteran Bill Donohue, vice president of business partner and midmarket sales, in August?

[IBM is] spending $6 billion a year on R&D that creates technology, capability and solutions. We have to make sure that we're leveraging all of that technology and capability with our partners.
Mark Hennessychannel chief, IBM

Hennessy: We're very fortunate to have had Jim Gregory [vice president of competitive sales initiatives for North America] jump in immediately to the acting role of North American channel chief. He knows the channel very well. He has a positive history with the channel, lots of experience, and he knows many of the partners personally. He's been very involved with the programs, advisory councils, conferences, etc., so we really haven't missed a beat with Jim in the role.

That's great, but we want to make sure that we find the right person for the job because quite frankly, it's an important role for North America. This is an area that's growing within IBM, and we're looking to leverage partners more across all of our brands, so it's critical. … And I assure you that we'll have a very strong leader, and we'll announce that in the near term. I can't give you a specific date, but it will be soon, and we look forward to making that announcement.

Can you elaborate a bit on IBM's 2015 roadmap and what it means to partners?

Hennessy: As we laid out our 2015 roadmap as a business, all three of our major groups -- hardware (Systems and Technology Group, or STG), software and services -- said that they needed to expand their business partner participation in order to meet their revenue and productivity expectations. So that articulates how important partners are going to be to us.

And, by the way, for our key growth strategies around cloud, analytics and Smarter Planet solutions [IBM's concept of how technological intelligence is being built into the world's systems, processes and infrastructure], partners are going to be very critical as we roll those out. For example, we keep close track of our Smarter Planet references that we take to the market -- and there are thousands -- and business partners represent 50% of those references. So partners are going to continue to be important to us and, frankly, accelerating over time.

Can you be more specific about the 2015 roadmap and partner growth?

Hennessy: I think that the most important thing here is that our partners are participating in our key growth plays. For example, cloud is a huge opportunity for us and our partners and a huge competency for our partners and us. In the Q3 earnings announcement, we said that the company generated $1 billion in cloud sales -- that's up 70%, and we're well on track to what we perceive to be $7 billion in cloud sales by 2015.

If you look at the partner piece of that, they're very involved. We have about 1,700 partners working alongside IBM on cloud projects. They may be private or public, on-premises or off-premises, but the partners are an integral part of that growth. We can say the same thing about analytics, which grew double digits, and we have about 27,000 partners that are a part of our analytics ecosystem. That's another proof point that we're not going to generate the growth we need without getting our partners involved.

So what is IBM doing to attract partners in order to fulfill the growth that you're talking about?

Hennessy: Let me step back a second because I think it's important to have a view of what we see going on in the marketplace, and therefore what we see happening with the partner community.

A survey that we completed in 2012 showed that the No. 1 factor impacting businesses, as described by CEOs, is technology. This is the first time over the past 12 years of doing the survey that technology came up to the top. So clearly, the technology that's in the marketplace has incredible promise, but it's also very challenging. The majority of the C-level executives [in the survey] said that they were going to go outside their firms for assistance to build and implement a digital strategy. So this is a terrific opportunity for our business partners to capitalize on this and to leverage these technologies to drive real value for their clients.

It means a bit of a change for a lot of partners. As firms look to technology to leverage more value, partners will have to transform from a product-oriented, resell mentality to really driving solutions and higher levels of value and ROI faster for their clients and margin expansion for themselves.

Many are moving to a higher value in areas such as industry specialization, or solution orientation such as analytics, cloud or social. And they may be transforming to deliver IT as a Service to their clients by shifting more to a [managed service provider, or MSP] set of capabilities.

We do have growth plays -- around analytics, cloud, Smarter Planet and analytics -- and these are areas [in which] we can help partners achieve their aspirations.

There are a few ways we're helping partners do that. The first is around certification, specialization and expertise that we can help them build. There are close to 2,000 partners working on cloud projects, many of them working in the 11 cloud development labs that we have worldwide. They're also leveraging the 42 innovation centers that we have in 36 countries around the world -- and that continues to expand. One of the most recent announcements that we made was around the Watson ecosystem and cognitive computing. We announced that our partners who are focused on delivering content, our ISVs [independent software vendors] and some of our learning partners, are leveraging the Watson platform and the technical enablement that we can offer to develop Watson applications with us.

We're also accelerating the co-marketing that we're doing with partners in these high-growth areas. And that's proven to be successful in terms of the joint development of tactics, doing analytics to increase yields, etc.

The third thing that I would say is that it's not always easy for firms to transform, to move to a higher-value, integration-based, industry- or solution-based model. We've been rolling out a set of transformation workshops where we work with individual partner firms to help them do market analysis, target specific growth areas, help them develop a solutions strategy, do business model analysis. And if they're moving from a product-oriented, transaction-based model to an annuity-based model, we're helping with that transformation.

These things that we're doing to help partners with their transformation benefit their clients, benefit them and help IBM achieve its objectives.

What were your top three goals for 2013?

Hennessy: I'm trying to help IBM achieve our goals in terms of working with partners, expanding the participation of partners, and driving revenue and profit growth -- but also making sure that we're helping partners meet their aspirations of growth and profitability. So I would say those are the two goals that I'm focused on.

There are three specific sets of actions that I've been focused on since I came on board: One is to increase the amount of opportunity that we generate for our partner community; the second is enhancing the field engagement that we have; and the third is improving the partner experience.

First, around the opportunity, I mentioned a couple of these, and we're continuing to drive education, [with] our partners developing new certifications and new specializations. Our strategy is to have a high-value channel and for our partners to achieve their aspirations by helping them deliver higher value to their customers. I also talked about co-marketing. … As an example, STG increased their co-marketing investment by 28% this year because they're seeing real yield improvements when a partner is developing the tactics in conjunction with us around the growth plays.

Around field engagement, I think that this is one that we needed to step up. … How do we do a better job working with partners side by side to identify more opportunities but also to progress the opportunity, particularly when we're in competitive or white-space environments?

We did a couple of things there this year. The first is that we added a significant amount of technical resources because what we heard from partners is that they need more help from an architecture standpoint and technical standpoint to help make the case or help build the right solution for their client.

We also moved to something that we call co-sell -- particularly around STG -- and that's a huge shift for us and a significant enhancement for the business partner engagement that we had. It creates opportunity at existing accounts, but it also helps us expand the opportunity with new buyers at existing customers or with new buyers, as well.

The last one is around the partner experience, and there are a couple of elements to this. I think that the margins and incentives that we deliver to partners are a very important element. That's why you've seen us come out with guaranteed minimum margins, where we now have very competitive and predictable margins. Now our partners know up front and in advance just how well they're going to do on the deals that they get into with IBM.

Another thing is that we really accelerated the bidding process by reducing the cycle time, as well as the number of iterations it takes for us to come to an agreement with partners. And we've also accelerated the time for partners to get their rebates from 30 days to 15 days.

A third example in this category is the ease of financing. For the last couple of years, we've made $5 billion available to our partners and their clients. Today, about 8,500 different clients have used our financing, and it's a real benefit to them. We've also made it simple. We have a new mobile application that they can use to turn around credit approval and rate development in minutes.

Are there some 2013 goals that you didn't meet?

Hennessy: Are we done? No. But I think we are making good progress in all of these areas, and the feedback from partners is that we're making progress.

I think that there are a couple of examples of things we need to do. ... The backdrop is that we are developing offerings and solutions very quickly, spending $6 billion a year on R&D; that creates technology, capability and solutions. We have to make sure that we're leveraging all of that technology and capability with our partners.

Also, we've done hundreds of acquisitions in the high-growth areas, and we have to make sure that we leverage those elements as well. For example, we've seen more of our partners -- of all kinds -- looking to leverage cloud to deliver IT capability to their clients. We're helping some of them build out their own hosting capability with our PureSystems: cloud in a box. But there's also the opportunity with SoftLayer for partners to leverage our hosted solution for IaaS [Infrastructure as a Service] or SaaS [Software as a Service] or Application as a Service. SoftLayer is up and ready to engage our partners in taking that path, and that's something I hope to see happen more of in 2014.

What's ahead for 2014?

Hennessy: I have the same three focus areas for next year: opportunity, field engagement and partner experience. The areas that we can double down on are around the growth plays that I described, and also leveraging SoftLayer as some of our partners transform to a MSP model.

Is IBM looking to expand its partner base?

Hennessy: Absolutely. All three of our brand organizations -- hardware, software and services -- are looking to expand [partner] participation in terms of achieving our 2015 roadmap.

What are the top opportunities for partners in 2014?

Hennessy: They are the key growth plays IBM has articulated around -- cloud, analytics and geographic expansion -- and they leverage our hardware, software and services capabilities.

One thing we're seeing that's very interesting is … more partners that are leveraging both hardware and software into a solution for their clients. It helps them drive more value for the client, it helps the client see a quicker ROI, and it helps the partner firm expand their revenue growth and margins.

So, one action that we've taken to assist that is to put what we call Solution Accelerator Incentives in place that give partners incremental margin on top of what they would get on the individual products. It's incremental because it's a solution that incorporates both hardware and software.

We know that some additional investments are necessary to build skills and capabilities to bring those solutions to market, and we're rewarding partners when they do it.

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