Avnet and Big Blue See Vertical Gold at Silver Anniversary

November 1, 2010 Alex Woodie

Avnet Technology Solutions (ATS) may peddle hardware and software from every major supplier in the world, but its 25-year relationship with IBM is special for a number of reasons–about three billion of them this year, in fact. Last week ATS executives predicted it will do $5 billion in business with Big Blue by 2015, an aggressive growth rate it hopes to power in part with new vertically oriented business practices it launched for the energy, financial services, and retail industries.

The relationship between Avnet and IBM was on full display last week in San Antonio, Texas, where IBM held its Avnet Technology Solutions-IBM Partner Summit conference to energize the sales channel and re-connect with 350-some value added resellers (VARs) in attendance.

During the conference, Avnet said it has grown its IBM business 20 percent globally during 2010, and is now selling $3 billion worth of IBM hardware, software, and services around the world every year, making its business with IBM a big percentage of the entire Avnet company’s total revenues, which hit $19.2 billion for the fiscal year ended July 3 (global ATS sales accounted for $8.2 billion of that amount). Within the next five years, ATS expects to sell $5 billion in IBM wares globally.

Avnet is hoping that a sizable chunk of that new business comes through three new vertical market business practices that it launched at last week’s conference. The new programs, called EnergyPath, FinancialPath, and RetailPath, seek to duplicate the vertical-industry success that Avnet and its partners have enjoyed over the last several years with its two existing vertical programs for the healthcare and government solutions markets. According to ATS, VARs that participated in HealthPath have experienced more than 40 percent year-over-year growth, while GovPath partners have seen their annual revenues grow more than 30 percent.

Shifting VARs from a horizontal sales approach that emphasizes technology areas like servers, storage, security, or networking to a vertically oriented approach that addresses the specific problems faced by companies in certain industries has the capability to boost revenues for both Avnet and its partners, says Mike Houghton, vice president of vertical market solutions for ATS.

“If you’re just in there to sell hardware, to sell more volume of a product, chances are that’s not the conversation that that CIO of a bank is going to be looking to have,” Houghton tells IT Jungle. “We’re dealing with a situation where pricing has become so competitive, and products have become commoditized in so many ways. If you can walk into a customer site and truly have a conversation about how to solve issues and how to help them grow their business . . .[that offers an opportunity] to have a clear distinction about who’s going to have an opportunity to earn that business, and in turn have an opportunity for that to be a long partnership.”

Avnet has identified four specific domains for each of the three new industry verticals it’s attacking. For example, for EnergyPath, Avnet and its partners will specialize in providing power companies and utilities with: data management; infrastructure optimization; asset, device, and service monitoring; and risk management and compliance. This approach puts a greater emphasis on specific software applications, and ATS will be looking to bring new ISVs into its sales channels to address the new focus areas.

Avnet will work with VARs to identify the areas they want to specialize in, and provide training through three Avnet University programs for the three verticals. Houghton, who was hired in May and oversees the HealthPath program in addition to the three new ones, expects the Avnet University programs to become available by February or March.

In some cases, VARs will already possess the industry expertise and the new Avnet vertical programs will serve to highlight and promote that fact. In others, the new vertical programs will encourage VARs to train existing personnel in new specialties or hire people who are already subject-matter experts in a given area. In any case, the new programs will help customers in these industries identify which VARs have the right skill sets to tackle IT projects.

“There is an opportunity for partners to become much more of an expert in the market,” Houghton says. “It comes with a lot of work and education. The benefit is you now have a much more strategic relationship with those accounts, and you’re going to be selling into the different categories. It offers an extension of more avenues of revenue and profit.”

However, the new approach will also ramp up the complexity for Avnet partners. Instead of just selling Power Systems servers running IBM i, for example, VARs in the Avnet channel that want to differentiate themselves may be asked to sell software or services as well.

“From the partner’s perceptive, you’re going to really be moving upstream in the complexity of products you’re selling,” Houghton says. To help deal with the different levels of expertise, Avnet has developed a rating system that ranks the maturity level of partners’ and their industry-specific expertise on a scale of one through 10.

The new vertical industry programs jibe quite well with IBM’s Smarter Planet initiative, which reaches across the five verticals that Avnet now targets. “We are very well engaged with IBM,” Houghton says. “We absolutely will work with IBM to bring those solutions to market, just as we will with other suppliers.”

It’s all about being “smart.” Avnet’s new vertical market approach “aligns well with IBM’s framework that supports smarter industries,” says Sandy Carter, who holds the title of vice president of Software Group business partners and midmarket for IBM. Tony Madden, who holds the title of global supplier business executive for ATS, says IBM and Avnet are “creating a smarter channel.” With all the shakeups that IBM has foisted upon its Power Systems business partners over the last decade, the channel is leaner and hungrier–and hopefully smarter–than ever.

The vertical approach could also jumpstart Avnet’s cloud-computing initiative, which it launched earlier this year. “That’s another area where there’s a lots of confusion and a lot of complexity,” says Houghton, who previously worked at business process outsourcer Direct Alliance, which targets the retail, healthcare, and financial services industries.

Reducing customer complexity is the name of the game in IT these days, and for Avnet, IBM, and others, vertical solution selling and cloud computing are two of the most compelling ways to go about it.

This Issue Sponsored By

Table of Contents

Content archive

Recent Posts

Subscribe

Pages

Search