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IBM Launches New $500 Million Small and Medium Business Market Initiative

Finally Heard!

After Seven Years, a Major IT Vendor Is Finally Focusing on Small and Medium Enterprises for Growth

PHOENIX, Jan 29 - It's like a seven-year itch that finally got scratched.  It took seven years of harping about it (see below), but finally a major IT vendor has heard us.  And it is the most unlikely computer provider - the biggest and the bluest of them all (IBM) - that made the first major move toward reaching out to small and medium size enterprises in the hopes of fueling its own growth. 

IBM announced today a new $500 million-initiative designed to stimulate the demand in the small and medium company market, estimated at about $300 billion per year.  And Big Blue is doing it just as we had recommended - using the Internet and its vast (90,000 companies) business partner network.

The initiative, which will formally be rolled out at PartnerWorld 2003 in New Orleans next month, consists of channel enabling activities, incentives, demand generation tools and teaming opportunities.

"IBM is committed to leveraging the extensive reach and skills our network of Business Partners to deliver e-business on demand solutions and services to the SMB marketplace," said Michael Borman, general manager of Global Business Partners, IBM. "We're backing this commitment up with a $500 million investment in demand generation programs and sales incentives designed to grow Business Partners profit potential in the SMB market."

IBM said in a release that it understands that SMBs have unique and differing technology needs, and has invested in the development of products and services designed, priced and marketed specifically for these customers as they become on demand businesses. 

"IBM is focused on delivering, via our Business Partners, the solutions and services SMB customers need to extend their marketplace leadership," said Marc Lautenbach, general manager of Global Small and Medium Business, IBM. "The new IBM Small and Medium Business Advantage initiative will make it easier for Business Partners to market to the largest growth segment in the IT marketplace."

Services - the number of IBM Business Partners selling services continues to grow significantly. To increase the profit potential of these opportunities for Business Partners, IBM is developing new services incentives. 

IBM will continue to promote the incentives announced in the US for Business Partners that sell IBM hardware coupled with an IBM services agreement. In Europe, Middle East and Africa (EMEA), beginning July 1, 2003, Business Partners will earn a higher base discount when they sell services with IBM hardware into the SMB market. Also in EMEA, IBM announced additional incentives focused on new business and competitive accounts. Finally, IBM will continue to expand its services incentives world wide to focus on growth in SMB. 

Software - Value Advantage is a new initiative designed to reward those Business Partners that deliver what SMB customers value in their middleware software decisions -- applications and services from skilled solution providers.

For customer-facing business partners, the Value Advantage initiative offers a new incentive called Value Advantage Plus (VAP) which rewards qualified participants when they sell their applications and services together with IBM software to SMB customers. The incentives included in the Value Advantage initiative will be available globally in May 2003.

Demand Generation

IBM has invested $200M in demand generations activities which will allow Business Partners to market to the SMB marketplace. One tool, called Campaign Designer, has over 130 ready-to-use industry specific marketing materials. IBM will also give partners access to prospect data in selected countries to assist Business Partners with execution of co-marketing campaigns. 

All of the above is, of course, something that our clients have been hearing for year.  Here's, for example, a chart published in our August 1996 Annex Bulletin, "Louis XIX of Armonk", in which we criticized IBM for focusing so much on large companies, while mostly ignoring the vastly greater growth opportunities in the small and medium enterprise market.

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Past Reports

Here are also some additional Annex Bulletins in which we had urged our clients to reach down to small and medium companies for growth:

Analysis of IBM Third Quarter Results (Oct 16, 2002)
... listening to our six-year “sermon” about the importance of diversifying away from the Fortune 500-type accounts to the small and medium-size enterprises ...

Boom Amid Gloom and Doom (Oct 10, 2002)
... in the US As we’ve pointed out on numerous occasions in the past, the growth of the American economy is from the bottom (small and medium companies), not the ...

HP Breaks ino IT Services Major League (Sep 17, 2002)
... Fortunately for HP, this also means that there is plenty of blue sky ahead, especially in its sweet spot - the small and medium companies market. ...

Annex Research IT Services Heptathlon 2002 (May 21, 2002)
... few of the top IT services vendors have heeded our advice to expand their range and reach deeper down in the marketplace, to small and medium size businesses. ...

Annex Bulletin - 2000-02 (EDS' e-Price Clubs) (2000)
... Because IBM is only paying a lip service to the small and medium companies market, while milking its cash cows - the Fortune/Forbes 500 companies - for all ...

Business Is Humming Nicely (Nov 3, 2000)
... Brown replied that indeed EDS had signed a lot of new contracts with small and medium size customers that are new accounts to EDS. ...

"Two Faces of Globalism; Yin and Yang; Princes and Paupers" (1998)
... Most of the cutting is being done by the multinationals, while most
of the hiring is taking place by small and medium size companies. ...

Annex Bulletin - "The Upsizing of America" (1998)
... media. The truth is - none of the above. It's coming from Main Street, the small and medium size American companies. The Bureau ...

Annex Bulletin - 96-42 - "Louis XIX of Armonk" (1996)
... IBM's chief strategist, whose talk followed Gerstner's, said that more than 50% of the 1996 IT revenue opportunity lies in the small and medium companies market ...

 Happy bargain hunting!

Bob Djurdjevic

For additional Annex Research reports, check out... 

2002: “Gerstner: The Untold Story”  (Dec 27), "Gerstner Spills the Beans" (Dec 13), "On a Wing and a Prayer" (Oct 21), "IBM-PwC Tie the Knot" (Oct 2), "Half or Double Trouble?" (Aug 12), Wall Street/Main Street Chasm (June 25), “Wall Street Casino,” (June 21), Big Blue Salami (June 19), "Looming IBM Layoffs" (May 14), "IBM 5-Yr Forecast: From Here to Eternity?" (Apr 2002),  “Tough Times, Soft Deals,” (Apr 25, 2002), “Gerstner’s Legacy: Good Manager, Poor Entrepreneur” (Jan 2002), IBM Pension Plan Vapors: Where Did $17 Billion Go? (Mar 2002), "Sir Lou OutLayed Lay!" (Apr 1, 2002).

A selection from prior years: Is IBM Cheating on Taxes, Annex Bulletin 99-17 (May 1999),  IBM 5-year Forecast 2001: An Unenviable Legacy (June 2001) "Break Up IBM!" (Mar. 1996), Fortune on IBM (June 15, 2000), “Smoke and Mirrors Galore,” July 2000), "Slam Dunk of Bunk" (Jan 2000), Annex Bulletin 98-14 ("Wag the Big Blue Dog"), Armonk's Fudge Factory (Apr. 9, 1999)Where Armonk Meets Wall Street, Greed Breeds Incest (November 1998)Stock Buybacks Questioned: Is IBM Mortgaging Its Future Again?, 97-18 (4/29/97),  "Some Insiders Cashed In On IBM Stock's Rise, Buybacks" 97-22, 7/27/97,  Djurdjevic’s Forbes column, "Is Big Blue Back?," 6/10/97;  “Executive Suite: How Sweet!,” (July 1997), "Gerstner: Best Years Are Behind", Aug. 10, 1999), "IBM's Best Years Are 3-4 Decades Behind Us" (July 1999), "Lou's Lair vs. Bill's Loft" (June 1999),  "Corporate Cabbage Patch Dolls," 98-39, 10/31/98; Djurdjevic’s Chronicles magazine October 1998 column, "Wall Street Boom; Main Street Doom", “Louis XIX of Armonk,” (Aug. 1996), "Mountain Shook, Mouse Was Born" (Mar. 25, 1994), “A Nice Guy Who Lost His Compass” (Jan 26, 1993), “Akers: The Last Emperor?” June 1991), Industry Stratification Trend (Mar. 30, 1990) etc.]

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Volume XIX, Annex Newsflash No. 2003-01
January 29, 2003

Editor: Bob Djurdjevic
Published by Annex Research, Inc.

P.O. Box 97100, Phoenix, Arizona 85060-7100
TEL/FAX: (602) 824-8111

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