Last week, I attended IBM’s General Business (GB) Influencer Summit for analysts covering the mid-market (companies with 100 to 1000 employees and larger enterprises that are not currently spending a lot with IBM, sometimes termed “white space” accounts). I’ve attended this event since IBM began holding them a few years back. IBM recently split GB into two groups, creating separate sales and marketing arms for the mid-market and white space large enterprise accounts to better tune its resources and initiatives to the very different needs of these two sectors. While Big Blue is a natural to grow market share in the large enterprise space (especially as the ranks of Sun defectors grow), the mid-market is an area that IBM is still figuring out. It’s also the area that I cover, so focused most of my attention on how IBM is evolving strategy and execution in this area. Here are a few key takeaways that bubbled to the top for me, and that underscore some of the ways IBM is shifting gears to better reach and serve the mid-market.
- Telling a more aspirational, transformative story. IBM is making its corporate Smarter Planet (which centers on the message that the world is rapidly becoming more intelligent, instrumented and interconnected—in other words, smarter) more relevant to mid-market customers by engaging them in deeper, more industry-specific conversations, such as “What does it mean to be a smarter retailer?” and providing solutions that will help them to achieve better business outcomes from their IT investments. In addition to the industry-specific approach, IBM has themes that run across industries, such as Dynamic Infrastructure, New Intelligence, and Green IT. While it may be difficult for IBM to condense the Smarter Planet story in sound bites, if IBM can clearly articulate the vision in a targeted way (by industry and/or horizontal requirements), it should resonate as the economic recovery gets underway and mid-market companies re-focus towards growth.
- Continuing to shift from commodities to solutions and bottom line business benefits. Mid-market customers prefer to buy solutions, not piece parts. To that end, IBM continues to push its revenue mix further towards software and services. The vendor is introducing more integrated, cross brand offerings that zero in on top mid-market issues such as improving efficiency, reducing costs, getting new customers, increasing productivity, improving customer service and managing risk. The goal is to make it easier for mid-market customers to deploy solutions for specific workloads, and speed time to value from them. For example, IBM has introduced solutions building blocks that offer customers pre-configured, pretested building blocks that combine IBM hardware, services and financing. IBM packages the components in a loose bundle that customers can order and assemble quickly. Comprehensive Data Protection and Cognos Express are some of the first out of the gate, with more scheduled for 2010. Then there’s IBM’s Linux based smart appliances, which include the SmartCube and Lotus Foundations (see What is a Business Applications Appliance and Why Should You Care? for background), as well as a growing portfolio of cloud-based services (see below). IBM’s new integrated solutions story is kind of a back to the future experience—ala the AS/400—that IBM has had great success with in the past. This time, however, IBM is offering customers many more solution paths, which is good for choice, but also makes the story more confusing. IBM will need to clearly position and delineate benefits and outcomes to avoid getting in its own way.
- Shaping its cloud strategy and portfolio. Like most legacy hardware and software vendors, IBM has been somewhat ambivalent about the cloud. However, it seems to be moving past this ambivalence with a more decisive strategy that includes both public and private cloud offerings. IBM will significantly expand its Smart Business Services offerings, which are standardized services that run on IBM’s cloud, such as LotusLive, which IBM currently offers, and a slew of planned solutions for analytics, development and testing, desktop and devices, infrastructure and storage, and business services. Smart Business Services also includes IBM’s private cloud services, in which IBM builds and runs a private cloud behind the customer’s firewall. In addition, IBM is developing Smart Business Systems, an integrated platform to deliver and manage cloud solutions. While the vendor still has a lot of work to do to clearly position and market these solutions, and is still searching for the right formula for creating value with SaaS developer partners, it seems to have a more substantive and cohesive strategy than its had in the past.
- Ramping up and revamping partner programs. In addition to significant investments in global partner recruitment and enablement, IBM is restructuring incentives to help partners weather the recession. The vendor has moved from a cumulative type ladder approach to a simplified incentive program that pays partners in a more linear approach from step one. IBM is also trying make it easier for partners to do business with it, with new PartnerWorld communities and concierge service designed to remove administrative costs and hassles. Being the behemoth that it is, IBM may never be able to make the partnering process friction-free. But, I’ll give it points for pushing the needle forward, and more points for helping cash-strapped partners stay the course in difficult times, and its efforts to remix its channel to better align with evolving mid-market customer requirements.
- Increasing investment in demand generation. Partners have told IBM to focus more on demand generation, and less on lead passing. So IBM is scaling up resources for high air cover marketing. All told, IBM conducted 835 marketing events, drawing more than 63.000 mid-market customers, in the past year. For instance, the vendor is conducting what it terms “Grand Formaggio”sessions around the world to personally engage mid-market CEOs with senior IBM executives, and also has a series of events aimed at CFOs. IBM also recently launched InfoBOOM, a social network for U.S. mid-market businesses, in partnership with CIO Magazine. IBM sponsors the site, but content is designed around mid-market themes and issues so that IBM can better understand and share with the community. IBM intends to launch this in other countries soon. Successful demand generation will be critical to raising IBM’s profile and heightening awareness about what IBM can offer mid-market customers—and keeping the channel happy.
- Reconfiguring operations for growth markets. IBM has invested in building two management systems, one for established markets, and one for emerging growth markets. This enables IBM to tune in to the different requirements, approaches and government investments that different regions afford, and accelerate expansion in emerging growth markets. For instance, IBM has added more than 50 new offices in growth markets, and investing in leadership and talent development by moving seasoned IBMers from developed markets to emerging ones, and bringing fresh new faces to more established territories to learn the ropes. Big Blue has built new innovation centers in countries such as Vietnam, South Africa, Poland, Brazil and Hungary, and a global innovation center in China.
- Better financing programs for the mid-market. IBM’s 30 year-old Global Financing arm (IGF) is strong, healthy and proactive—in fact, financing accounts for 9% of IBM’s pretax income. The vendor offers solution financing for hardware, software and services with at least 20% IBM content, and has simplified rate structures and contracts to help streamline the financing process. IGF has also introduced some “recession busters”, such as a Q4 deferral program and 0% financing for Software Group financing for 12 months. IGF also runs a huge asset recovery program (processing about 40,000 pieces of hardware a week) and $1.5 billion dollar used equipment business, which offers cash-strapped companies value based alternatives as well. IGF is also ramping up partner programs and education to help partners better engage mid-market CFOs in the IT purchase conversation. In the current economy, IGF is clearly one of IBM’s most powerful marketing weapons, helping companies to invest now to jump start growth as the economy turns around.
- Continuing investments in asset-oriented acquisitions that can scale to the broad market. IBM has been on a shopping spree, acquiring companies such as Internet Security Systems (ISS), Cognos, Outblaze and SPSS, among others. IBM can use its global distribution capabilities to expand the footprint for these solutions, and as necessary, make them more relevant for mid-market customers.
As it nears its 100th anniversary (in 2011), IBM is putting a more shape and substance into its mid-market strategy and execution capabilities than it has ever done. However, in a market where brands such as Microsoft, Dell and HP dominate, and Google and other “born on the Web” vendors are ascending, IBM’s job isn’t easy.
The IBM brand is already well-respected in the mid-market, but IBM will need to continue to step up its efforts to become more relevant. Unlike many of its competitors, IBM doesn’t have a consumer or even a small business presence to leverage in the mid-market. Big Blue will need to wow the mid-market to move customers out of their current comfort zones.
One of IBM’s strengths is that it has a very rich portfolio of offerings and solutions, but this is also a double-edged sword. IBM will need to articulate and position overlapping solutions to help guide both customers and partners through the clutter to best-fit solutions. IBM will also face challenges on the channels front. How will it make the economics of the channel and the economics of lower-cost, volume based solutions work? And how will it fold high-growth SaaS vendors into a value-added and profitable business model?
To succeed in its mid-market quest, IBM will have to fire on all cylinders over the long haul, continue to sharpen its mid-market focus, and ensure that its offerings stack up well not only against the Microsoft-centric status quo, but against the increasing array of newer solutions available.