Humble IBM Successfully Engages MSPs, Pursues ISV Partners

A strikingly different IBM emerged at the company's Think and PartnerWorld 2018 conferences here in Las Vegas this week. More than a decade into the MSP industry revolution, IBM has finally awoken with a humble, eager, engaged partnering attitude. MSPs and cloud ISVs here at the coordinated conferences are noticing and applauding the new IBM, though there's more work to be done.

In terms of the big picture, CEO Ginni Rometty says the company's reinvention phase -- involving a multi-year journey -- is now "largely complete." The reinvention includes growing success in IBM's strategic imperatives -- areas like cognitive computing and Watson, IBM Cloud, security, social, and more. There's real progress on multiple fronts, reinforced by the fact that IBM's overall quarterly revenues are finally growing again. Looking ahead, Rometty believes IBM can drive the next revolution -- something akin to "Watson's Law" -- to help change the world, and drive positive customer outcomes. Rometty's reasoning goes like this:

• Moore's Law for microprocessing power and Metcalfe's Law for network connections delivered incredible, connected processing power to the masses, and that power essentially grew exponentially.
• Similarly, Watson's Law will combine data and artificial intelligence (A.I.) to change the world again. But humans, working with computers, will drive the revolution -- rather than removing humans from the cognitive computing equation, she says.

That's the big picture from Rometty. But what does the scene look like when you zoom in on the IBM channel partner ecosystem?

---

---

IBM Channel Leadership: Humble, Motivated, Driving Change

Simply put, IBM's channel team isn't patting itself on the back. Yes, there are some clear partner program victories. But the revamped channel leadership team has also eaten some humble pie here and there at the conference.

Carola Cazenave, VP, IBM

John Teltsch, GM, IBM

During multiple meetings with ChannelE2E as well as fireside chats with media and analysts, IBM executives described an aggressive "work in progress" to build a next-generation channel. John Teltsch, general manager for global business partners, is leading the partner program overhaul. His team includes a mix of fresh recruits from outside the company; established IBM channel veterans; and proven talent who previously made their mark elsewhere in the company. Among the names to know: Carola Cazenave, VP for the IBM Global Business Partner Ecosystem Strategy and Programs. A career IBMer who has worked closely with entrepreneurs and security partners, Cazenave shifted to the partner team in January 2018. Her mission: Repeat and scale many of the security partner best practices and milestones across IBM's broader partner ecosystem. It won't be easy. Speaking theoretically, IBM essentially is trying to design a single partner door that leads to a virtual mall -- allowing partners to select, procure and deploy specific IBM products and services for end-customers.

---

---

IBM Gains MSP Partner Momentum

There are clear signs of progress on multiple partner fronts, particularly in the MSP ecosystem. Many of those partners have blended models, introducing managed services while also building out their own intellectual property.

Paolo Mazzo, CEO, b.digital

Three key example MSP partners include: 1. Paolo Mazza, CEO of b.digital. The Italy-based MSP also is a Watson ISV that built a home-grown solution in the precision agriculture (PrecisionAG) market. Many traditional MSPs in the SMB sector, particularly HTG Peer Groups Founder Arlin Sorensen, point to PrecisionAG as a huge opportunity to revolutionize and automate the farming and agriculture industry through technologies including drones, GPS, artificial intelligence, big data, automation and more.

Mark Scott, CEO, CareWorx

2. Mark Scott, CEO of CareWorx, an MSP focused on the senior care market. CareWorx just raised $17 million in private equity funding, and also works closely with ServiceNow. So why is CareWorx attending IBM's conferences this week? That's confidential for now. But consider this: Scott previously was CEO and co-founder of N-able Technologies, one of the companies that pioneered the MSP software market.

Mark Wyllie, CEO, Flagship Solutions Group

3. Mark Wyllie, CEO of Flagship Solutions Group. More than an IBM hardware partner, Flagship has built out managed services and cognitive computing expertise. Also, Wyllie is a seasoned MSP industry executive, having previously worked at Compuquip -- which sold off its MSP practice nearly a decade ago to All Covered. Key Flagship Solutions customers include the Atlanta Falcons, the Miami Marlins and NASCAR. Key development efforts include WeatherTrack, a real-time, weather insights dashboard, developed on the IBM Cloud and leveraging Flagship Solutions’ trademarked Infralytics methodology. Designed for NASCAR, the app will provide critical information including rain start and stop times, wind speed, lightning proximity, tornado/flash flood warnings, and more to help organizers optimize each event, according to the MSP. The Magic of Intellectual Property: On the one hand, each of those MSPs is strikingly different from the other. But on the other hand, they each have three critical things in common:

1. They're working with IBM.
2. They're mastering recurring revenue services.
3. They're building intellectual property, the rarest and most important ingredient for an MSP that wants to increase its business valuation.

Note: ChannelE2E estimates that fewer than 1 percent of all MSPs truly have some form of their own intellectual property. We suspect fewer than 5 percent of all MSPs will ever develop and monetize IP in a profitable way. Continue to page two of two for IBM's earlier MSP missteps & course corrections. Plus, some partner program basics and next moves. Welcome to page two of two. Here's the conclusion to this report.

IBM's Earlier MSP Missteps & Course Corrections

The new MSP engagements are strikingly different than IBM's earlier missteps or incomplete efforts. Nearly a decade ago, IBM viewed thousands of MSPs mainly as customers for servers and related hardware, according to my reporting at the time. The company erroneously believed that most MSPs were set to build out massive data center infrastructures that they would own and operate for customers. Alas, IBM overlooked the fact that most MSPs would remotely manage customer workloads (either on-premises or in public clouds) rather than move those workloads into MSP-owned data centers. The major IBM-MSP inflection point stretched from 2013 to 2014, when IBM acquired SoftLayer for cloud services, and sold off its x86 server business to Lenovo. During a fireside chat today, Flagship Solutions Group CEO Mark Wyllie said those two events were strategically aligned with one another. If IBM hadn't sold off the x86 server business, it would have caused conflicts with the acquired SoftLayer business in terms of sales and partner strategies. In my mind, the dual IBM moves (acquire cloud services, exit x86 servers) are akin to Microsoft launching Office 365 in 2011 and killing Windows Small Business Server in 2012. Those Microsoft moves sent a clear message to partners that the shifts to cloud services and recurring revenues were set to accelerate.

---

---

IBM: Addressing Partner Program Basics

Amid IBM's clear progress with sophisticated MSPs, the company also is busy working on some partner program basics. Chief among them: Making the partner portal easier to navigate, simplifying partner registration programs, and improving areas like the portal's cross-platform browser support. Let's pause there for a second. It's 2018 -- more than 20 years since the browser wars started. And IBM concedes that it's still working on proper cross-platform browser support for partners. Like I said, IBM ate some humble pie here at the conference. Another slice of humble pie involves IBM's compensation models. The company is finally moving toward a compensation model that ensures IBM's direct sales force doesn't trigger channel conflict with partners. On the one hand, that's welcome progress. On the other hand, it's a decade or two overdue. Rival Cisco Systems, for instance, largely solved its channel conflict issues in the late 1990s, though problems have still popped up from time to time. Looking ahead, IBM is finally developing products and go-to-market programs with partners in mind -- from the start. As a new IBM product or service comes to market, partner sales models will increasingly arrive on Day 1. At some point in the near future, it sounds like IBM's direct sales team will no longer enjoy so-called "first mover advantage" over partners, because new products and services will have corresponding partner programs on launch day, company executives indicated here at the conferences.

---

---

IBM: Addressing ISV, SMB and Millennial Gaps

Amid all that progress, IBM realizes it faces a real generational challenge -- especially compared to growing cloud rivals like Amazon Web Services (AWS) and Google Cloud Platform. The good news: IBM is wisely moving existing partners toward cloud, MSP and cognitive business opportunities. The challenges:

• Many of those partner businesses are led or owned by GenX and Baby Boomer executives. Pure math and demographics suggest many of those leaders will rapidly age out of the market over the next five to 10 years.
• Meanwhile, conferences like Amazon AWS re:Invent and Google I/O have successfully captured the hearts and minds of next-generation partners -- particularly ISVs and developers. Those AWS, Google Cloud Platform and Android partners scale from the enterprise down to midmarket and SMB customers.
• For its part, Microsoft's partner ecosystem certainly extends across the enterprise, midmarket and SMB sectors. And CEO Satya Nadella -- an engineer by trade -- has made Microsoft hip again among the developer crowd, ensuring that Azure and Office 365 are finally gaining the Millennial developers that AWS and Google enjoy.

IBM needs to get hip to SMBs, ISVs and Millennials as well. But how? The answer  may already exist within IBM Cloud. The thesis goes like this: IBM doesn't have the time, budget or staff to engage every MSP. Nor does it have the resources to engage every SMB customer. But existing IBM Cloud ISVs could fill those gaps in a huge way. For instance, MSP platform provider Continuum runs its BDR (backup and disaster recovery) software platform in IBM's cloud. Continuum's partner ecosystem includes 5,000 MSPs that support SMB customers worldwide. Many of those MSPs and SMB customers are owned by -- you guessed it -- Millennials. By partnering more closely with Continuum -- and putting a brighter spotlight on such ISV relationships -- IBM could gain thousands of MSP partners and SMB customers without having to directly recruit and support those ecosystem members.

---

---

IBM: Leadership Progress, Next Moves

Amid all those observations here at IBM Think and PartnerWorld 2018, two things are clear.

1. IBM's channel leadership team is making progress, understands the challenges, and is rolling out new programs to simplify partner engagement across all key partner types (MSP, ISV, reseller, etc.).
2. That leadership team has a direct line to CEO Ginni Rometty. And Rometty is clearly tracking the partner program's progress, especially in terms of how it aligns with the broader IBM.

Still, there's room for even more progress on multiple fronts. And a newly humble, engaged IBM partner team knows it.