February 22, 2012, 12:49 PM — 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% its share of the business analytics market and estimates its portion of the overall midmarket at about 10% for hardware, 5% of software and less than 1% 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% 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% 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.
