Despite all of the hand wringing surrounding Amazon.com’s service outages last week, it is clear to me that cloud computing is dramatically changing the delivery models of computing forever. We simply will not return to a model where organizations assume that they will consume primarily their own data center resources. The traditional data center certainly isn’t going away but its role and its underlying technology will change forever. One of the ramifications of this transition is the role of cloud infrastructure leaders in determining the direction of the partnership models.
Traditionally, System vendors have relied on partners to expand the coverage of their platforms. With the cloud, the requirement to have a strong partner ecosystem will not change. If anything, partners will be even more important in the cloud than they have been in traditional computing delivery models. This is because with cloud computing, the barriers to leveraging different cloud-based software offerings – platform as a service and Software as a Service are very low. Any employee with a credit card can try out just about anything. I think that the Amazon.com issues will be seen in the future as a tipping point for cloud computing. It, in fact, will not be the end to cloud but it will change the way companies view the way they select cloud partners. Service management, scalability, and reliability will become the selection standard – not just for the end customer but for partners as well.
So, I was thinking about the cloud partnership model and how it is evolving. I expect that the major systems vendors will be in a perfect position to begin to reassert their power in the era of the cloud. So, I decided to take a look at how IBM is approaching its partnership model in light of cloud computing. Over the past several months, IBM has been revealing a new partnership model for the cloud computing market. It has been difficult for most platform vendors to get noticed above the noise of cloud pioneers like Amazon and Google. But this is starting to change. It is not hard to figure out why. IBM believes that cloud is a $181 billion business opportunity and it would like to grab a chunk of that opportunity.
Having followed IBM’s partnering initiatives for several decades I was not surprised to see a revamped cloud partnering program emerge this year. The new program is interesting for several different reasons. First, it is focused on bringing together all of IBM’s cloud offerings across software, developer relations, hardware, and services into a single program. This is important because it can be intimidating for an ISV, a Value Added Reseller, or a systems integrator to navigate the complexity of IBM’s offerings without some assistance. In addition, IBM has to contend with a new breed of partners that are focused on public, private, and hybrid cloud offerings.
The new program is called the Cloud Specialty program and targeted to cover the entire cloud ecosystem including cloud builders (hardware and software resellers and systems integrators), Service Solution Providers (software and service resellers), Infrastructure Providers (telecom providers, hosting companies, Managed Service Providers, and distributors), Application Providers (ISVs and systems integrators), and Technology Providers (tools providers, and appliance vendors).
The focus of the cloud specialty program is not different than other partnering programs at IBM. It is focused on issues such as expanding the skills of partners, building revenue for both IBM and partners, and providing go to market programs to support its partners. IBM is the first to admit that the complexity of the company and its offerings can be intimidating for partners. Therefore, one of the objectives of the cloud specialty program is to clarify the requirements and benefits for partners. IBM is creating a tiered program based on the different types of cloud partners. The level of partner investment and benefits differ based on the value of the type of partner and the expectation of those partners. But there are some common offerings for all partners. All get early access to IBM’s cloud roadmap, use of the Partnerworld Cloud Specialty Mark, confidential updates on IBM’s cloud strategy and roadmap, internal use of LotusLive, networking opportunities. In addition, all these partners are entitled to up to $25,000 in business development funds. There are some differences. They include:
- Cloud builders gain access to business leads, and access to IBM’s lab resources. In exchange these partners are expected to have IBM Cloud Reference architecture skills as well as cloud solutions provider and technical certification. They must also demonstrate ability to generate revenue. Revenue amounts vary based on the mix of hardware, software, and services that they resell. They must also have two verified cloud references for the previous calendar year.
- Service Solution Providers are provided with a named relationship manager and access to networking opportunities. In exchange, partners are expected to use IBM cloud products or services, demonstrate knowledge and skills in use of IBM cloud offerings, and the ability to generate $300,000 in revenue from the partnership.
- Infrastructure Providers are given access to named IBM alliance manager, and access to business development workshops. In exchange, these partners are expected to use IBM’s cloud infrastructure products or services, demonstrate skills in IBM technology. Like service solution providers they must use and skills in IBM cloud offerings, have at least $300,000 a year in client references based on two cloud client references
- Application Providers are given access to a named IBM alliance manager, and access to business development workshops. They are expected to use IBM cloud products or services, have skills in these technologies or services, and a minimum of $100,000 a year in revenue plus two cloud client references.
- Technology Providers get access to networking opportunites, and IBM’s cloud and services assessment tools. In exchange, these partners are required to demonstrate knowledge of IBM Cloud Reference architecture, have skills related to IBM’s cloud services. Like application providers, these partners must have at least $100,000 in IBM revenue and two client references.
What does IBM want? IBM’s goals with the cloud specialty program is to make it as attractive as possible for prospective partners to chose its platform. It is hoping that by offering financial and technical incentives that it can make inroads with cloud focused companies. For example, it is openings its labs and providing assistance to help partners define their offerings. IBM is also taking the unusual step of allowing partners to white label its products. On the business development side, IBM is teaming with business partners on calls with prospective customers. IBM anticipates that the impact on these partners could be significant – potentially generating as much as 30% gross margin growth.
Will the effort work? It is indeed an ambitious program. IBM will have to do a good job in explaining its huge portfolio of offerings to the prospective partners. For example, it has a range of services including CastIron for cloud integration, analytics services, collaboration services (based on LotusLive), middleware services, and Tivoli service management offerings. In addition, IBM is encouraging partners to leverage its extensive security services offerings. It is also trying to encourage partners to leverage its hardware systems. One example of how IBM is trying to be more attractive to cloud-based companies like Software as a Service vendors to to price offerings attractively. Therefore, it is offering a subscription-based model for partners so that they can pay based on usage – the common model for most cloud platform vendors.
IBM is on the right track with this cloud focused partner initiative. It is a sweeping program that is focused on provides a broad set of benefits for partners. It is pricing its services so that ISVs can rent a service (including IBM’s test and development cloud) by the month — an important issue in this emerging market. It is also expecting partners to make a major investment in learning IBM’s software, hardware, and services offerings. It is also expecting partners to expand their knowledge of the markets they focus on.
Just as I was about to start figuring out my next six predictions for 2010 I had to stop the presses and focus on IBM’s latest acquisition. IBM just announced this morning that it has purchased Lombardi which focuses on Business Process Management software. Lombardi is one of the independent leaders in the market as well as a strong IBM business partner. The obvious question is why would IBM need yet another business process management platform? After all, IBM has a large portfolio of business process management software — some homegrown and some from various acquisitions such as Filenet, ILOG, and Webify. I think that the answer is actually quite straight forward. Lombardi’s offerings are used extensively in business units, by business management to codify complex processes that are at the heart of streamlining how businesses are able to differentiate themselves. Clearly, IBM has recognized the importance of Lombardi to its customers since it has had a long standing partnership with the company. I think there are two reasons that this acquisition are significant beyond the need to provide direct support for business management. The ability to use Lombardi’s technology to sell more WebSphere offerings and the connection of business process to IBM’s Smarter Planet initiative are the two issues that stand out in my mind.
Selling more WebSphere products. There is no question that the WebSphere brand within IBM’s Software business unit includes a lot of products such as its registry/repository, applications integration, security, and various middleware offerings. IBM likes to sell its products by focusing on entry points — the immediate problem that the customer is trying to solve. The opportunity to gain direct access to business buyers who start with business process management and then may be see the value of adding new capabilities to that platform.
Supporting the Smarter Planet strategy. Business transformaton often starts by reconstructing process. IBM’s smarter planet strategy is based on the premise that customers want to be able to transform their businesses utilizing sophisticated technology. Therefore, it is important to look at how business innovation can be supported by IBM’s huge hardware, software, and services portfolio. The fact that Lombardi’s technology is the starting point for business units looking at transformational process changes is an important marker in IBM’s evolution as a company.
So, who could argue that we need a smarter planet. I certainly couldn’t. I am at an IBM software analyst meeting. I have been attending this meeting for many years. The focus, as you might imagine is on the software strategy. But there was something this time that I think is worth talking about. Rather than providing us analysts with a laundry list of products and go to market strategies (yes, they did some of that too), the focus this year is around vertical solutions and markets. But more than that, there is an overarching theme that is about to become the major theme that will envelope IBM over the coming years – Smarter Planet. This initiative is driven by Sam Palmisano not just with his operational good sense, but his ability to provide vision for the company.
In his address to the Council of Foreign Relations in New York City on November 6, 2008, Palmisano proclaimed that the next challenge as our world gets more interconnected, hotter, and challenged for growth we need to leverage a new approach to innovation that is smarter.
This approach according to Palmisano, “This isn’t just a metaphor. I mean infusing intelligence into the way the world literally works – the systems and processes that enable physical goods to be developed, manufactured, bought and sold…services to be delivered…everything from people and money to oil, water, and electronics to move…and billions of people to work and live.”
Good thinking but what does this mean from a technology lens? It is clear that we have an overabundance of technology. What we lack right now is the right way to leverage technology to truly focus on customer benefit from both an agility perspective (being able to change quickly and without too much pain) and the ability to support an increasingly connected world. It is interesting to think about looking at the world this way.
If you think about it, the world is, in fact, a system. To make the concept even further, the world can be viewed as a biological system. The human body itself is an interconnected set of sensors, actions that trigger other actions. The body interacts with other humans, with the physical world as well as the virtual world. We take actions based on the information we are given or intuit from our experiences.
IBM is trying to tap into one of the most important transitions in our world today. And they are not shy about focusing these transformations to their products and services (it is a commercial world, after all).
Here’s a quick view of this idea of the Smarter Planet. If we look at the idea of a Smarter Planet, it starts with the idea that everything is an asset that takes inputs processes them and produces outcomes. Therefore, we can look at this from Smarter Planet from five different perspectives:
• Innovation can transform companies, countries, and governments to lower costs and increase revenue
• Intelligence that provides an ability to learn from the vast amounts of information in the world (I call this anticipation management). In essence, this means managing information, predicting outcomes, leveraging information across partners, suppliers, and customers
• Optimizing, managing, and changing based on the customer experience. Organizations no matter how big or small are looking for ways to transform themselves so they are ready for whatever happens. Companies that focused on this type of change are better able to weather very tough and complicated times.
• Greening of business. You can’t talk about the planet without thinking about the impact of green on everything we do. This includes everything from saving cash by better usage of energy to protecting the climate.
• Leveraging smart people. I think that people makes or breaks this noble goal. Leveraging all these innovative approaches to doing things smarter and more responsibly typically fail if people don’t work together as effective teams. Politics can kill innovation more quickly than anything else.
Now begin to take this concept out of the general view and apply it to specific industries, their problems, and opportunities. That is precisely what makes the idea of the Smarter Planet intriguing. For example, manufacturing itself is being transformed as we speak. Manufacturing has been transformed by technology with sensors and actuators so that the information produced is helping smart companies better control the manufacturing process both in terms of innovation, efficiency, and energy conservation. In retail, companies are leveraging new processes and technology to leapfrog the competition. If a retailer can optimize the way they change inventory based on an early understanding of changing buying habits of customers they can become a leader.
I think it is important that IBM is talking about this idea now. This idea of a Smarter Planet is really tailor made for a time when the natural inclination is to hide until things get better. There is no question that we are in very challenging time. It isn’t the first time that we have found ourselves in this position and it certainly won’t be the last. But in my experience, the companies that take action when everyone else is hiding under the bed to innovate, change, and learn will win. When the world comes back, these companies will be way ahead and everyone else will be playing catchup.