IBM Taps Ingram Micro, Tech Data To Peddle Power Systems, Storage

January 21, 2013 Timothy Prickett Morgan

It is not every week that the Power Systems platform gets big news that is not related to hardware or systems software that has the potential to shake up the competitive position of the Power business, but last week was one of them. We have been telling you about the Power7+ systems and how IBM is looking to better compete against X86 iron. In November, IBM put $4 billion on the table for partner financing to move more iron. And now, Big Blue is tapping Ingram Micro and Tech Data to broaden its channel sales for Power Systems and enterprise storage in the United States.

Like you, I have watched as the reseller and independent software channels for the AS/400, iSeries, System i, and now Power Systems machinery have consolidated over the decades. This is the first time that I can remember of IBM adding one big reseller for its CISC, PowerPC, or Power iron, much less two. What’s going on here?

It is simple. IBM thinks that the market for systems, storage, systems software, and related software consumed by small and medium businesses in North America is around $160 billion and is growing at 3 percent annually. (That statistic is for companies with fewer than 1,000 employees.) While IBM’s current master resellers, Arrow Electronics and Avnet, have great coverage, no reseller channel has complete coverage and whether we like to admit it or not, resellers have strong relationships with their master resellers and in most cases are loyal to them like we are to other organizations that we are long affiliated with.

Bill Donohue, VP of North America business partners and mid-market sales at IBM

Resellers working downstream from Tech Data and Ingram are not apt to change affiliations just so they can sell a different kind of server like the Power Systems line up, even if they do offer a different customer set and perhaps a high profit potential for the reseller. If IBM wanted to engage the Tech Data and Ingram Micro resellers to peddle enterprise-class iron, there was very little chance they were going to manage two separate channel relationships. So if IBM wanted to increase its coverage for Power Systems and enterprise storage, it had to make Ingram Micro and Tech Data master resellers for this iron. It is really that simple.

This is particularly true with the hosting companies and managed service providers that have strong relationships with the two new distributors and who have not been able to get Power-based iron and related storage from IBM through Tech Data and Ingram Micro. As we previously reported, IBM is hot to trot to get MSPs to buy its PureSystems modular and converged systems into MSPs, and while many of these hosting companies are affiliated with resellers that are downstream from either Avnet or Arrow, not all of them are.

IBM is not backing off from Avnet or Arrow in any way, shape, or form, but it recognizes that if it wants to take on the X86 platform with Power Systems, it has to have as broad and as deep of a channel. It really is that simple. The obvious question is what IBM is doing to make sure there is not infighting or intensive price competition between reseller partners downstream from any of the four master distributors. Having two resellers grinding against each other does not lead to profits for anyone, but having two partners grind against two X86 resellers and winning an account based on the merits of Power iron and systems software will, in theory, be a more profitable exercise.

“We are trying to drive lift, not shift,” Donohue explained to me in discussing the new reseller deals. “And we have taken steps to make sure shift doesn’t happen.”

What those steps are would be considered a trade secret of course, and this is clearly what all of the four distributors want to have happen as well. The main thing is to get more IBM systems and storage out there. The bigger the base, the greater the health of the Power ecosystem in which we are all a part, and widening the base takes knowledgeable resellers committed to the platform banging on doors, reaching customers and making the sales pitch and closing the deal. Right now, IBM may have thousands and thousands of system resellers worldwide downstream from Arrow and Avnet, but there are only several hundred Power Systems resellers in the United States and these two distribution deals represent a potentially big increase in reseller count a few years hence. And there is every reason to believe they will be extended globally at some point if it works out.

To try to get a little better idea of how the relationships with Tech Data and Ingram Micro work, I did a little question and answer session with Donohue. Some of the answers might surprise you.

Timothy Prickett Morgan: Are there any particular operating system restrictions on the deal? In other words, can Ingram Micro and Tech Data peddle AIX, IBM i, and Linux licenses and their add-on software for the machines they sell?

Bill Donohue: Ingram Micro and Tech Data will be authorized for the entire Power portfolio, from the Power 710 through the Power 795 and includes PowerLinux offerings, as well as Power Systems software such as PowerVM, PowerSC, and PowerHA.

We encourage Tech Data and Ingram Micro to provide value added integration capabilities needed to support their partner community, including resellers, MSPs, and ISVs. The IBM Power platform and IBM PureSystems support a vast ISV ecosystem. We expect that Tech Data and Ingram Micro will have a key role in engaging the appropriate resellers with key ISVs that run on the Power platforms to address specific workloads and applications.

TPM: Do Ingram Micro and Tech Data do a lot of their business through downstream resellers, or do they sell mostly direct to customers?

BD: Both Ingram and Tech Data support business partners including resellers, ISVs, and managed service providers [MSPs]. In some cases, MSPs are also end user customers who are establishing infrastructures on IBM technology to support their managed services.

TPM: What machines does IBM expect Ingram Micro and Tech Data to peddle, and how is this different from what reseller channels of Avnet and Arrow?

BD: As you know, the Power portfolio is quite robust, ranging from PureFlex nodes, to low-end, midrange and high-end servers. We expect Tech Data and Ingram Micro to get off the ground quickly with the PureSystems and our low-end and midrange solutions targeted at their resellers who currently do not sell Power and enterprise storage today. As their teams develop high-end opportunities, we will engage additional IBM technical resources for any assistance needed around configurations, solutions assurance and installation planning. There will be dedicated Power and storage resources for both distributors to engage in these opportunities.

TPM: Do you really think that either Tech Data or Ingram Micro can sell a Power 795–a multi-million dollar box–or a high-end virtual storage array? Are Ingram and Tech prepared to support high-end servers?

BD: Yes. Ingram Micro and Tech Data have a broad capability supporting high-end servers with resellers today.

For example, adding the IBM Power 795 to their lineup is a natural progression and is supported by existing quality control processes already in place with IBM Power. As with all of our channel agreements, Tech, Ingram, and their associated business partners will be required to have the appropriate IBM certifications across the portfolio. Our team is already working with Tech and Ingram on education and completing their certification plans. Technical Delivery Assessments are required on all Power 795s, which assure full validation of the prescribed configuration and environment. We have complete confidence that Ingram Micro and Tech Data will utilize their extensive capabilities in these areas as well as comply with existing IBM quality processes to assure a successful implementation of all Power solutions. IBM’s Power and storage teams are working hand-in-hand with both distributor teams today.

TPM: How will IBM deal with potential conflicts across the four distributors? Are there accounts assigned to resellers that Ingram and TD can’t sell into? Or is this wide open competition?

BD: The addition of Ingram Micro and Tech Data to the portfolio of IBM’s full-line distributors is primarily for the purpose of distribution route expansion to reach new reseller and client segments. We have provisions in place to ensure the focus is on revenue “lift” and recruitment of new partners.

TPM: What is the expected effect of adding these two channel partners. For instance, I realize it doubles the number of channel partners for IBM, but what does it mean in terms of increasing the customer pool for Power Systems and IBM storage? Will it double the coverage in terms of potential customers, or is it a more modest increase in coverage?

BD: IBM needs broader market access to resellers and their clients, especially in the mid-size customer segment, which is the fastest growing segment in North America. Ingram Micro and Tech Data have a broad set of resellers that sell integrated IBM solutions into this mid-size customer segment.

Incremental growth from new resellers will help IBM to:

maintain and extend our leadership position with Power Systems, which continues to be the share leader in the high-end and mid-range Unix server segments;
accelerate our growth in the storage segment, where storage capacity shipped is projected to grow double digits through 2015, due to explosive data growth.

We expect the number of new resellers with this expansion will be modest growth of approximately 15 percent over the next two years. Given the timing of our fourth quarter and year-end 2012 performance [which comes out on January 22], I cannot comment on specific revenue impacts at this time.

TPM: What Power products are Tech Data and Ingram Micro now authorized to sell?

BD: Tech Data and Ingram Micro are now authorized to sell the entire IBM Power portfolio. We have been training and educating Ingram and Tech Data on the storage and Power portfolios. They have been on-boarding sales and technical support resources to support these new product lines. IBM has been very involved in the interviews and on-boarding process together with Tech Data and Ingram. Our Power and storage product teams have been at sales training events this week at both distributors. We have a very aggressive education plan that Tech Data and Ingram can now leverage.

TPM: What storage products are Tech Data and Ingram now authorized to sell?

BD: They are now authorized to sell enterprise-class storage including: XIV, SONAS, DS6000, DS8000, TotalStorage 7000, and SVC.

TPM: Why is this limited to just the United States? What about Canada, Europe, and Asia?

BD: The authorization for Power Systems and enterprise storage is a U.S.-only announcement based on a study of the distribution requirements in the U.S. In 2013, IBM plans to analyze the distribution requirements in Canada to determine if any further authorizations should be made.

I’ll be reaching out to Ingram Micro and Tech Data to see what aspirations they have for their new relationship with IBM regarding Power Systems and storage. Stay tuned.