It's not going too far to say that 2009 has been a watershed year for IBM hardware partners. More than a few of them have seen a significant drop in their sales and profits and have actively sought out IBM competitors. Not surprising given the 21 percent sales decline in IBM's Systems &Technology Group sales in the first nine months of this year to $11 billion compared with $13.8 billion in the year ago period.
The decision to embrace a competing vendor used to be viewed as heresy in the IBM partner community. Not anymore. That has been a tough pill to swallow for those once-proud partners, who bled IBM Blue, that decided to make that move. But they felt they had no choice given the state of the IBM channel. Call it the Season of the Witch.
That is the stormy channel environment that Rod Adkins, a highly respected 28-year IBM veteran, is stepping into as he takes over as Senior Vice President of IBM's $19 billion Systems & Technology Group.
Adkins' appointment came after IBM informed employees on Friday October 30 in a missive on its corporate intranet that Robert Moffat Jr., who had headed up the IBM hardware business before he was arrested in the largest alleged hedge fund insider trading case in high tech history, is no longer an employee of the company. Adkins had been named on October 19 as a temporary replacement for Moffat.
Now, to the cheers of IBM partners, Adkins, viewed as a channel advocate, is officially in the hardware driver's seat. IBM solution provider partners say they are hopeful that Adkins will address channel shortcomings that marked Moffat's 14 month tenure.
The biggest issue is what some IBM partners call a change in IBM's complex direct sales channel compensation focused on profit that effectively incented IBM's direct sales force to take some deals direct.
But there is more than that. At the heart of that direct sales profit compensation change is what one top IBM partner calls a shift that views the hardware channel as a cost center that needs to be cut rather than a sales ally that is on equal footing with the IBM direct sales force. Moffat, a one-time close confidant of IBM Chairman Sam Palmisano, was viewed as Palmisano's go-to guy in tough cost-cutting situations. Remember it was Moffat, who sold off IBM's PC business and IBM's printer business and reengineered the IBM supply chain to save the company billions of dollars.
There was certainly a lot of fear, uncertainty and doubt in the hardware partner community with regard to what direction Moffat would take IBM's hardware partners. More than once, Moffat was forced to deny that IBM would exit the hardware business. Moffat did cut Synnex as a distributor of IBM hardware and software. "Frankly, channel participation rates declined under Moffat," said one IBM solution provider partner, who is considering bringing on a competing vendor. "A lot of people thought he was brought in to do cost-cutting in TSG."
Part of the issue for IBM's hardware partners is the service giant's refusal to talk hardware for fear that it will drive down IBM's stock price. "You might want to position yourself on Wall Street as a software and services company, but the reality is operating systems are still a big, big piece of the software number, and all that is hardware driven," said one IBM partner. "And a large portion of services is typically based on integrating hardware and managing hardware."
To his credit, partners say that Adkins has already reached out to them. "That's a good sign of commitment," said Rick Hamada, chief operating officer for Avnet Inc., an IBM hardware distributor based in Tempe, Arizona, who is looking forward to a mid-November sit-down with Adkins. "I am very happy about Avnet and IBM getting together to talk about how we can succeed for 2010."
That optimistic view is shared by a number of IBM partners who are hopeful that Adkins will make some much needed channel changes for 2010. The danger, of course, is that Adkins might not take on those tough IBM hardware channel issues and things could get worse.
"IBM is losing mind share as [IBM partners] bring on other manufacturers' products," said one IBM partner. "They need to fix this."