Two years ago, key IBM channel executives abruptly initiated a sea change in the company's go-to-market blueprint to sell predictive analytics and cloud computing (and other newer technologies) to midmarket businesses.
Long considered an enterprise-centric company, IBM crafted a design, led by Rich Hume — its global channel chief at the time — to shift all midmarket sales to channel partners for the largely untapped $250 billion global segment comprised of businesses up to 1,000 employees.
IBM insisted that the idea wasn't merely a public relations move — the company pledged to redirect more than $100 million in marketing and sales support to underwrite the plan and pulled some 70 direct sales reps off of midmarket accounts to support channel partners.
While disappointing sales to mid-sized businesses formed the strategy's foundation, the nagging question surrounded preparing a large subset of IBM channel partners not only to sell business analytics and cloud technologies but also to convince a new, knowledgeable audience of midmarket CIOs and IT professionals that they were up to the task.
"We were dissatisfied with our results in the mid-market pre-2010," said Hume of the shift in sales strategy. "We realized that complexity was the enemy of how we had gone to market," he said. "We redesigned the model to make business partners the primary route to the midmarket."
IBM knew that reversing its field on midmarket sales wouldn't work if confined to a small group of highly qualified and dedicated channel partners; to succeed it needed strength and expertise in numbers. Of the 10,000 IBM channel partner selling to the midmarket, only about 700 delivered the lion's share of the vendor's business analytics solutions to those accounts while another 300 worked enterprise-class accounts.
And none came armed with a business analytics authorization that certified sales and technical skills to help open doors to the C-suite.
Myths of Analytics Costs and Risks
Mid-sized organizations typically refrain from investing in analytics owing to misperceptions over risk and cost and, conspicuously, an absence of qualified internal staff. But IBM said that its research showed midmarket CIOs were receptive to working with channel partners skilled in the deployment and configuration of analytics technologies to help them hurdle impediments to adoption.
That finding alone confirmed to IBM's channel execs that they were on the right track — a mix of technology, strategy and market momentum sided with them.
Market Momentum Drives Strategy
As IBM poured billions into expanding its analytics technology portfolio — currently the overall figure stands north of $14 billion for 25 acquisitions in the last six years, including $1.7 billion last year for Netezza, a maker of data warehousing appliances — top Big Blue execs openly expressed a desire to grab a bigger piece of the midmarket analytics pie.
With some $1.6 billion in annual sales in 2011, IBM pegs at 10 percent its share of the business analytics market and estimates its portion of the overall midmarket at about 10 percent for hardware, 5 percent of software and less than 1 percent of the available services revenue.
According to researcher IDC, the current global market opportunity for business analytics hardware, software and services is substantial, well in excess of $90 billion, and growing at a 7.5 percent compounded annualized clip through 2015 to some $123 billion.
"We knew from our CIO research that more than half of mid-sized businesses worldwide were planning to increase IT budgets for technologies such as cloud computing and business analytics," said Ed Abrams, IBM midmarket business vice president.
Abrams said that IBM saw that 70 percent of mid-sized companies worldwide planned to implement business analytics in the near term to improve efficiency, based on the fact that the technology had come down in price and had become far easier to deploy.
"Business analytics and predictive technologies used to be reserved once for big companies but today these capabilities are easy to use, appropriately priced and a significant priority," he said.
The heartbeat of the vendor's midmarket channel strategy banked on the notion that the benefits inherent in business analytics technology — huge volumes of collected, unstructured data could be mined and sifted to build foundations for targeted marketing and sales efforts — would echo with mid-sized and even small businesses as it had with large enterprises and serve as a lever to uncover new opportunities.
"The business analytics message — how to gain value from large amounts of collected data — resonates with CIOs of any size company," said Charles King, principal analyst at researcher Pund-IT Inc. and an IBM watcher.
"If you look across the history of IT you see a steady trend of enterprise technologies becoming less complex and expensive to the point where they can be readily adopted by mid-sized and small businesses," he said.
"Combine that trend with a healthy IBM partner ecosystem and you have a formula to provide real cost effective value to CIOs," he said.
IBM's channel execs laid out a plan to upgrade the business model of up to 10 percent of its entire channel base, preparing them specifically to address midmarket CIOs and IT professionals using analytics to help fashion a relationship.
The company pumped up support for channel partners selling its business analytics software and appliances with attractive financing, free skills-building boot camps, access to its Innovation Centers, a new, benefits-driven authorization and incentives for sales to mid-market clients.
IBM positioned Netezza as the center piece of its business analytics strategy, emphasizing to channel partners the speed of deployment and low cost per terabyte of the Netezza appliances to cement its point that the technology makes analysis of big data more affordable and accessible, and therefore, more applicable to mid-sized businesses. The vendor hopes that half of Netezza sales will come from channel partners within four years.
"It's a consultative sale to the CIO now," said Abrams. "We want to get businesses up and running on analytics functions quickly, easily and cost-effectively," he said.
Authorization, Training Prod Channel Growth
Authorization for business analytics, in particular, has catalyzed the number of channel partners interested in selling the technology to mid-sized businesses, said Abrams. In the past year, IBM has doubled its roster of authorized channel partners selling business analytics to 10,000, he said, a figure the vendor now believes provides sufficient critical mass to up its share of the segment.
IBM's move to extend analytics technology from the enterprise to midmarket accounts has bolstered the business model of channel partners such as BrightStar Partners Inc., a Chicago-area specialist in the technology.
"The challenge is in a relatively new area — to marry the traditional focus on sales data, marketing and analysis with the explosion in social media," said Neil Morgan, BrightStar president. "Our differentiator is building a solution that meets our customers' needs with which they can see a quick ROI," he said.
"The barrier to entry for business analytics is dropping quite rapidly," he said. "Multi-billion dollar organizations have always been able to afford business analytics technology but SMBs with many of the same needs lack either depth in IT support or deep pocketbook to afford a robust implementation," he said.
"For us, IBM is driving the change to move the market toward SMBs," he said. "They've assisted us with partner enablement and training and helped us to understand their analytics roadmap which has helped us make our own," said Morgan.
"Traditionally we've always been with larger organizations but we will try to pursue SMBs," he said.
John Lucas, formerly director of operations at the Cincinnati Zoo and Botanical Gardens and now BrightStar's director of solutions delivery, managed the solution provider's analytics software installation in his prior role. The Zoo employs 250 people with an overall annual budget of some $28 million.
"Analytics tools reserved for large companies have analogous capabilities for businesses of all sizes," he said. "We spent as much time selecting BrightStar as a partner as we did in evaluating the software," he said. "As a small business, we needed a partner that could understand our business, work within our timelines and budget needs and get us up and running faster than we thought possible."
Lucas said that analytics technology enabled the Zoo to realize an additional $370,000 in revenue in 2011. "Not everything we found out from the software about our sales was intuitive," he said.
"What greatly fostered user adoption through the executive levels of the organization was technology tools that could be used by someone who controls the checkbook," said Lucas.
Not Only IBM Hot on Analytics Trail
Other vendors are also plying a path to the C suite for business analytics through channel partners. For example, Cisco Systems, which has been pointing at the midmarket for about three years, opened what it calls a Business Architect program in 2010 specifically to help partners gain skills in business process consulting and analytics.
The training, delivered by Cisco's Learning Partners, aims to help channel partners shore up their professional services practice by adding business analytics and business process skills, according to Andres Sintes, Cisco global director and general manager, Worldwide Learning Partners & Authorized Training.
Cisco said that more than a dozen of its Learning Partners are focusing on business skills development programs for channel partners, including business analytics.
IBM's Business Analytics: What's Next?
IBM executive say the company can not only leverage channel partners to move its business analytics technology further into smaller business but untapped opportunities exist in emerging and growth geographies, according to Abrams.
"It's not just moving analytics to smaller businesses. It's also opening up new market in growth regions of the world," he said.
Abrams said that IBM plans to use the reach of its Innovation Centers to encourage channel partners in emerging growth markets to add business analytics technology to their practices.
D.H. Kass is freelance journalist who covers the channel and reseller market for CIO.com.