IBM consolidates channel incentives 27 January, 2009 By Paul Weinberg

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"We had too many [incentive programs] and partners couldn't deal with them all, "stated Rich Michos, vice president of IBM's Global Channel Strategy.

Instead of incentives focused on products, they will be targeted on solution sales, Michos told eChannelLine.

In addition, the IBM spokesperson continued, "there are no revenue targets for smaller partners in order to earn incentives. They are completely eliminated and partners begin earning incentives with the first dollar that they sell [from this vendor's products and services]."

Furthermore, Michos explained, "IBM's incentives are automated, [and] our incentives do not require any claims or actions on our resellers' part, other than to report their sales."

However, the larger IBM Business Partners in the vendor's top premier certification level still have revenue targets.

Michos stated that IBM does not make available how much revenue a reseller would have to generate before they might have the premier designation.

IT channel watcher and president of Global Touch, Denise Sangster, applauded IBM's consolidation of incentive programs and predicted that other vendors will be introducing similar initiatives.

"In the first quarter we are going to see not only IBM but we are going to see HP and others really simplify, lower the threshold for gaining access to the incentives, as well as simplify how you get access to them, and manage the payment process."

In a period of economic difficulty, she observed that vendors are rushing to cut costs for their channel partners stemming from the paperwork involved in keeping on top of a myriad of incentive programs for host of products in order to receive rebates for sales later on.

Furthermore, Sangster continued, the larger resellers that had the staff would typically employ various people devoted to ensuring that their companies were on top of incentives for vendor products that could change twice a month or every quarter.

Incentive programs were originally designed to build channel loyalty but the jury is out on whether that did occur.

"I think theoretically they started out that way but quickly these incentives became the drug of choice for the partners. They needed the incentive money in order to be competitive with each other and some of the partners used the money really well and some of the partners just used it to drive the prices [down]," Sangster stated.

Upset that some resellers were using rebates to drive down product prices rather than invest it in their businesses, vendors delayed incentive money for up to six to nine months, she said.

"Unfortunately, partners followed the money opportunity in many cases and well intentioned vendor programs kind of had screwball affects."

Another element in the IBM channel strategy for 2009 is greater support and investment in professional services activity by channel partners.

Rich Michos stated that channel services represents "the fastest growing channel segment with a $600 billion market opportunity."

He indicated his confidence that many if not all channel partners can still generate revenue even when sales are generally flat at this time.

"Are there companies that have struggled and perhaps gone by the board over this period of time? I think it would naïve to say no to that."

The best strategy for IT vendors is to really focus on improving their relationships with customers and channel partners, stated Rob Enderle, principal analyst at the Enderle Group.

"Loyalty is one of the most valuable commodities at times like this and assuring the health of both groups will go a long way towards helping survive and maybe even prosper during the downturn."