IBM Uses Entrepreneurial Partners to Boost Its Sales
With an eye on streamlining and cost cutting, IBM is relying more and more on small businesses to sell its products.
And both Big Blue and the 5,000 smaller firms it contracts with to sell business computer systems are benefiting, according to Wirt Cook, assistant general manager for new business marketing at International Business Machines. Cook and hundreds of “IBMers” recently spent four days in Anaheim, sharing ideas and information with 2,000 “business partners” who paid their own way to attend the meeting.
IBM’s partners are systems experts, consultants and software developers who contract with the computer giant to represent IBM products and services in 1,200 territories across the nation.
Their growing importance to Big Blue is illustrated by the fact in the last three years, under Cook’s guidance, IBM has reduced its direct sales force 30%. It has also eliminated 9,500 management jobs the last five years as part of a restructuring aimed partly at establishing separate, more entrepreneurial business units.
The role of IBM’s own employees “is changing from a sales role to a marketing role,” Cook said. “Our people ought to be working behind the scenes,” in part to support the outside sales force.
The relationship between IBM and even its tiniest business partners benefits both sides, Cook said.
Small businesses selected to sell IBM products are given an opportunity to cash in on IBM’s stellar reputation and marketing clout.
“IBM representatives actually sell our software,” said Jennifer Beever, product manager for Woodland Hills-based JB Systems Inc., an IBM partner since 1988.
In the past few months, Beever said, sales of JB Systems’ Mainsaver program have surged because of IBM’s increased efforts. The program keeps track of maintenance schedules for systems and equipment.
But not every business partner is happy with their IBM relationship.
“I’ve got a love-hate relationship with the company,” admitted Ray Bingham, a business partner in Boise, Ida. “They always set things up to their economic advantage.”
Until a few years ago, IBM paid no sales commissions to Bingham. Policies changed, and today he averages a 15% commission on the IBM equipment he sells. Still, he chafes at the requirement that he sell only IBM equipment, because sometimes his clients prefer other brands.
Curious about exactly who their partners were, IBM commissioned the University of Pennsylvania’s Wharton School to conduct a survey. According to the survey, IBM’s average business partner employs 38, is service-oriented and highly leveraged.
The chief executive earns about $101,000 a year, has been in business an average of 8.6 years and has had a relationship with IBM for five years.
Inspired by the lean operations and creativity of their small-business partners, Cook said IBM is trying to take a more entrepreneurial approach to its own business.
“We’ve got a lot to learn from our business partners,” he said.
He surprised more than a few partners by announcing that although IBM intends to work cooperatively with them to serve customers, if necessary “we may look each other in the eye and compete.”
IBM, which lost $2.8 billion last year, is under pressure to slash personnel and overhead costs. In 1991, IBM business partners sold $1.8 billion worth of IBM mid-range computers.
Cook’s announcement that IBM is exploring the possibility of opening franchises across the country sent a nervous murmur through the crowd.
But he emphasized that the franchising concept is still in the very formative stages.
Meanwhile, IBM plans to continue its aggressive sales program in the small-business community. Last year, 77,000 small-business owners or employees attended 14,000 free IBM “solution” seminars in the United States.
Those free seminars generated $900 million in follow-up sales of IBM products.
