IBM's software partners are giving a largely warm reception to the company's fresh take on its financial rewards program.
The Software Value Incentive (SVI) program aims to compensate IBM partners financially at each stage of the sales cycle. SVI will apply to sales of all five of the vendor's software brands when it is rolled out worldwide in coming months.
"SVI is tantamount to taking IBM's partnerships to the next level," president and chief executive officer of US systems integrator, En Technologies, Sal Patalano, said.
An IBM partner for about 15 years, En primarily focuses on deploying large, complex systems for enterprises across IBM's five software brands: DB2, Lotus, Rational, Tivoli and WebSphere, according to Patalano. In offering financial incentives at all three stages of the sales cycle - lead identification, sale and product fulfilment - IBM is providing something unique, he said.
Previously, IBM provided financial incentives only at the fulfillment stage, meaning a partner involved in setting up a sale could find themselves not compensated for their work should another partner swoop in at the last minute with a lower bid.
"It's like you have been dating for two years, engaged for a year and you get to the altar and there's another bride standing there," Patalano said.
He estimated that a company like En could have invested between $US40,000 - $US75,000 in a sales cycle just to forfeit the software piece of the deal to another partner undercutting them on price.
With SVI, IBM is leaving the fulfillment recompense at 5 per cent of the cost of IBM software sold to a customer by an IBM partner. For large accounts, if that partner originally identified the sales lead that resulted in the customer purchase, the partner would receive another 5 percent in compensation. The same partner, should they fulfill the sale and deliver the software, would reap a further 5 percent.
Turning to a market IBM has identified as particularly key, small to midsize businesses (SMBs), the financial incentives are even higher at 10 per cent each for identifying a sales lead and making the sale, and 15 per cent for fulfillment. IBM partner, InCentric Solutions, does around 65 per cent of its business with SMBs, chief marketing officer, Troy Webb, said.
He expected SVI to make a positive contribution to InCentric's future bottom line.
"[SVI] will create a more healthy ecosystem for partners that bring value to the sales cycle," En's Patalano said. He hopes the new system puts predatory partners that had focused solely on fulfillment out to pasture.
SVI may also encourage some IBM partners to work together on a particular sale. InCentric is already doing this, according to Webb, and the company has talked to its 15 partners about how SVI may impact their relationships. Typically, the partners have identified a sales lead and then brought InCentric in to demonstrate IBM technology and make the sale.
The partners then delivered the software and InCentric provided value-added services, he said.
Both Webb and Patalano expect there will be kinks to work out in the SVI system after it launches.
"I give SVI one to three years to really get sorted out," Patalano said.
Once the system was fully running, IBM essentially had a customer relationship management (CRM) application on tap for use by both partners who can't afford to implement their own CRM software, and for IBM to provide key insight into the performance of its software channel sales, he said.
IBM worked closely with partners, including En and InCentric, to develop SVI, vice-president for worldwide channels sales with IBM Software Group, Neil Isford, said.
Isford joined IBM in November 2004 from Dell where he was vice-president of professional services.
After looking at IBM's incentive programs, it was clear they weren't as leading edge as they needed to be, Isford said.
"We resisted the urge for a quick fix to the program," he said. Instead, IBM brought in an outside consultant and polled 250 partners multiple times about what they'd like to see in a new program.
Besides asking for financial rewards throughout the sales cycle, partners also wanted a program that covered different kinds of partners, including systems integrators and value-added resellers, all of IBM's software brands, and all geographies. They also wanted a system that was easy to use.
"Before, it was too darn complicated," Isford said.
SVI will first be rolled out in the US, Canada, Australia, New Zealand and the UK in April, according to Isford. Then, in the third quarter, IBM will take SVI to 32 countries in Europe and 10 nations in Asia-Pacific.
As 2007 dawns, SVI should be offered in multiple languages and the global rollout should be complete, he said.
"It reinforces our commitment to the channel," he said. "If we can put more money into the hands of people we partner with, the thinking [at IBM] is that we'll get a great return on our investment and sell more software."
IBM won't break out how much money it's putting into the SVI program, Isford said.