July 25th, 2012 | Author: Larry Walsh, Channelnomics
Original article reprinted with permission by the author can be seen here.
Ask anyone which market segments IBM services, and the answer will invariably be enterprise and big government. Midmarket is the place where the elephant can’t dance, at least until recently.
After a decade of false starts and unfulfilled promises, IBM has finally found its rhythm. Under the leadership of Andrew Monshaw, general manager of global midmarket sales and distribution, the company has steadily grown its midmarket business as much as five times the market. Most of that growth comes from a managed services strategy that’s gaining momentum and is arguably the backbone of Big Blue’s midmarket business.
How IBM defines managed services, though, is probably the real reason behind this growth. To Big Blue, managed services is more than the conventional remote monitoring and management of on-premise infrastructure. Rather, IBM sees managed services as any IT service that provides hardware, software, professional and support services to end users. This definition (Channelnomics’ interpretation) essentially covers everything from the conventional managed services provider (MSP) model to fully automated cloud services.
IBM’s strategy is the creation of a perpetual growth engine in which its enablement of partners’ managed services will lead to the greater consumption of end-user services. As partners activate more accounts and expand existing accounts, they will need greater service capacity. That capacity will come from IBM, which will provide additional hardware, software and support.
“We don’t look at MSPs as customers. We look at them as collaboration partners,” Monshaw said in an interview with Channelnomics. “If we can make an MSP better in business, we all get better.”
When IBM launched its managed services initiative, it identified 500 MSPs as prospects. Over the last 18 months, IBM has profiled more than 25,000 potential MSPs, activated nearly 1,200 into the program and added more than 100 new MSPs per month worldwide. Monshaw says 74 percent of the MSPs entering the midmarket program are new to IBM.
The average IBM MSP, though, doesn’t often look like a traditional MSP. In fact, many look more like vendors and may have their own channel programs for reseller or white labeling services to downstream customers. They provide everything from email and security services to hosted private infrastructure, cloud-based managed ERP and supply-chain management applications. Many have the look and feel of the next-generation independent software vendor.
An example of such a company is Velocity Technology Solutions Inc., a cloud application company that, in 2003, spun off from an accounting firm specializing in ERP, financial analytics and supply chain management applications. Over the last decade, Velocity has grown through a series of acquisitions that have expanded its application offerings, infrastructure capacity and customer base. While it works with a number of software vendors including Lawson and Oracle, Velocity relies on IBM for its platform and services management.
“Providers like Velocity are the VARs [value-added resellers] of the future,” says founder and CEO Tom Bruno. “In the past, technology was provided to the customer. Now it’s delivered to us and we slice it up for delivery ‘as-a-service.’”
A prime value proposition of Velocity’s services is application management. Through its services, it manages the mass upgrades and maintenance of applications that would ordinarily take software vendors and enterprise customers copious resources and time to execute. Bruno says IBM not only provides the underlying technology that enables what he calls an “upgrade factory,” but works with Velocity’s team to develop the mechanics that make the services possible.
Even at this level, though, Monshaw says services companies are challenged with limited resources for developing services, expanding capacity and marketing products. In addition to technology enablement, IBM is providing marketing and business development support. And this is the value derived by Oxford Networks, a Maine-based fiber optics distributor evolving into managed services.
Over the last two years, Oxford has been executing on a plan to develop the capacity to meet its customers’ managed services needs. It acquired an IBM MSP and bought a former NATO data center for its services assets – however, those assets weren’t market ready. Working with IBM, Oxford transformed the data center and realigned its service offerings with its future vision.
“By working with IBM and building on our fiber network, we have products and delivery services to expand our existing business and our geographic reach,” said Oxford CEO Craig Gunderson.
Monshaw sees Velocity and Oxford as indicative of collaboration leading to the mutual managed services success of IBM and partners. By providing technical and marketing resources, building complementary technologies and providing enablement tools, IBM’s managed service program, Monshaw believes, will lead the market.
“This is beginning to and will be a very large business for IBM,” he said. “I will do whatever it takes to keep our team up on the tools and models that makes this possible.”
