With an improved Partner Plus program and a mandate that all products be channel-friendly, IBM CEO Arvind Krishna aims to bring partners into the enterprise AI market that sits below the surface of todays trendy use cases.
To hear IBM Chairman and CEO Arvind Krishna tell it, the artificial intelligence market is like an iceberg. For now, most vendors and users are attracted by the use cases above the surfaceusing text generators to write emails and image generators to make art, for example.
But its the enterprise AI market below the surface that IBM wants to serve with its partners, Krishna told CRN in a recent interview. And Krishnas mandate that the Armonk, N.Y.-based vendor reach 50 percent of its revenue from the channel over the next two to three years is key to reaching that hidden treasure.
This is a massive market, said Krishna. When I look at all the estimates the numbers are so big that it is hard for most people to comprehend them. That tells you that there is a lot of opportunity for a large number of us.
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In 2023, IBM moved channel-generated sales from the low 20 percent to about 30 percent of total revenue. And IBM channel chief Kate Woolley, general manager of the IBM ecosystemperhaps best viewed as the captain of the channel initiativetold CRN that she is up to the challenge.
Arvinds set a pretty big goal for us, Woolley said. Arvinds been clear on the percent of revenue of IBM technology with partners. And my goal is to make a very big dent in that this year.
GenAI as a whole has the potential to generate value equivalent of up to $4.4 trillion in global corporate profits annually, according to McKinsey research Krishna follows. That number includes up to an additional $340 billion a year in value for the banking sector and up to an additional $660 billion in operating profits annually in the retail and consumer packaged goods sector.
Tackling that demandworking with partners to make AI a reality at scale in 2024 and 2025is part of why Krishna mandated more investment in IBMs partner program, revamped in January 2023 as Partner Plus.
What we have to offer [partners] is growth, Krishna said. And what we also have to offer them is an attractive market where the clients like these technologies. Its important [for vendors] to bring the innovation and to bring the demand from the market to the table. And [partners] should put that onus on us.
Multiple IBM partners told CRN they are seeing the benefits of changes IBM has made to Partner Plus, from better aligning the goals of IBM sellers with the channel to better aligning certifications and badges with product offerings, to increasing access to IBM experts and innovation labs.
And even though the generative AI market is still in its infancy, IBM partners are bullish about the opportunities ahead.
Krishnas mandate for IBM to work more closely with partners has implications for IBMs product plans.
Any new product has to be channel-friendly, Krishna said. I cant think of one product I would want to build or bring to market unless we could also give it to the channel. I wouldnt say that was always historically true. But today, I can state that with absolute conviction.
Krishna estimated that about 30 percent of the IBM product business is sold with a partner in the mix today. Half of that Im not sure we would even get without the partner, he said.
And GenAI is not just a fad to the IBM CEO. It is a new way of doing business.
It is going to generate business value for our clients, Krishna said. Our Watsonx platform to really help developers, whether its code, whether its modernization, all those things. these are areas where, for our partners theyll be looking at this and say, This is how we can bring a lot of innovation to our clients and help their business along the way.
Some of the most practical and urgent business use cases for IBM include improved customer contact center experiences, code generation to help customers rewrite COBOL and legacy languages for modern ones, and the ability for customers to choose better wealth management products based on population segments.
Watsonx Code Assistant for Z became generally available toward the end of 2023 and allows modernization of COBOL to Java. Meanwhile, Red Hat Ansible Lightspeed with IBM Watsonx Code Assistant, which provides GenAI-powered content recommendations from plain-English inputs, also became generally available late last year.
Multiple IBM partners told CRN that IBM AI and Red Hat Ansible automation technologies are key to meeting customer code and content generation demand.
One of those interested partners is Tallahassee, Fla.-based Mainline Information Systems, an honoree on CRNs 2024 MSP 500. Mainline President and CEO Jeff Dobbelaere said code generation cuts across a variety of verticals, making it easy to scale that offering and meet the demands of mainframe customers modernizing their systems.
We have a number of customers that have legacy code that theyre running and have been for 20, 30, 40 years and need to find a path to more modern systems, Dobbelaere said. And we see IBMs focus on generative AI for code as a path to get there Were still in [GenAIs] infancy, and the skys the limit. Well see where it can go and where it can take us. But were starting to see some positive results already out of the Watsonx portfolio.
As part of IBMs investment in its partner program, the vendor will offer more technical help to partners, Krishna said. This includes client engineering, customer success managers and more resources to make their end client even more happy.
An example of IBMs client success team working with a partner comes from one of the vendors more recent additions to the ecosystemPhoenix-based NucleusTeq, founded in 2018 and focused on enterprise data modernization, big data engineering and AI and machine learning services.
Will Sellenraad, the solution providers executive vice president and CRO, told CRN that a law firm customer was seeking a way to automate labor needed for health disability claims for veterans.
What we were able to do is take the information from this law firm to our client success team within IBM, do a proof of concept and show that we can go from 100 percent manual to 60 percent automation, which we think we can get even [better], Sellenraad said.
Woolley said that part of realizing Krishnas demand for channel-friendly new products is getting her organization to work more closely with product teams to make sure partners have access to training, trials, demos, digital marketing kits and pricing and packaging that makes sense for partners, no matter whether theyre selling to very large enterprises or to smaller enterprises.
Woolley said her goals for 2024 include adding new services-led and other partners to the ecosystem and getting more resources to them.
In January, IBM launched a service-specific track for Partner Plus members. Meanwhile, reaching 50 percent revenue with the channel means attaching more partners to the AI portfolio, Woolley said.
There is unprecedented demand from partners to be able to leverage IBMs strength in our AI portfolio and bring this to their clients or use it to enhance their products. That is a huge opportunity.
Her goal for Partner Plus is to create a flexible program that meets the needs of partners of various sizes with a range of technological expertise. For resell partners, today we have a range from the largest global resell partners and distributors right down to niche, three-person resell partners that are deeply technical on a part of the IBM portfolio, she said. We love that. We want that expertise in the market.
NucleusTeqs Sellenraad offered CRN the perspective of a past IBM partner that came back to the ecosystem. He joined NucleusTeq about two years agobefore the solution provider was an IBM partnerfrom an ISV that partnered with IBM.
Sellenraad steered the six-year-old startup into growing beyond being a Google, Microsoft and Amazon Web Services partner. He thought IBMs product range, including its AI portfolio, was a good fit, and the changes in IBMs partner program encouraged him to not only look more closely, but to make IBM a primary partner.
Theyre committed to the channel, he said. We have a great opportunity to really increase our sales this year.
NucleusTeq became a new IBM partner in January 2023 and reached Gold partner status by the end of the year. It delivered more than $5 million in sales, and more than seven employees received certifications for the IBM portfolio.
Krishna said that the new Partner Plus portal and program also aim to make rebates, commissions and other incentives easier to attain for partners.
The creation of Partner Plusa fundamental and hard shift in how IBM does business, Krishna saidresulted in IBMs promise to sell to millions of clients only through partners, leaving about 500 accounts worldwide that want and demand a direct relationship with IBM.
So 99.9 percent of the market, we only want to go with a channel partner, Krishna said. We do not want to go alone.
When asked by CRN whether he views more resources for the channel as a cost of doing business, he said that channel-friendliness is his philosophy and good business.
Not only is it my psychology or my whimsy, its economically rational to work well with the channel, he continued. Thats why you always hear me talk about it. There are very large parts of the market which we cannot address except with the channel. So by definition, the channel is not a tradeoff. It is a fundamental part of the business equation of how we go get there.
Multiple IBM partners who spoke with CRN said AI can serve an important function in much of the work that they handle, including modernizing customer use of IBM mainframes.
Paola Doebel, senior vice president of North America at Downers Grove, Ill.-based IBM partner Ensonoan honoree on CRNs 2024 MSP 500told CRN that the MSP will focus this year on its modern cloud-connected mainframe service for customers, and AI-backed capabilities will allow it to achieve that work at scale.
While many of Ensonos conversations with customers have been focused on AI level-settingwhats hype, whats realisticthe conversations have been helpful for the MSP.
There is a lot of hype, there is a lot of conversation, but some of that excitement is grounded in actual real solutions that enable us to accelerate outcomes, Doebel said. Some of that hype is just hype, like it always is with everything. But its not all smoke. There is actual real fire here.
For example, early use cases for Ensono customers using the MSPs cloud-connected mainframe solution, which can leverage AI, include real-time fraud detection, real-time data availability for traders, and connecting mainframe data to cloud applications, she said.
Mainlines Dobbelaere said that as a solution provider, his company has to be cautious about where it makes investments in new technologies. There are a lot of technologies that come and go, and there may or may not be opportunity for the channel, he said.
But the interest in GenAI from vendor partners and customers proved to him that the opportunity in the emerging technology is strong.
Delivering GenAI solutions wasnt a huge lift for Mainline, which already had employees trained on data and business analytics, x86 technologies and accelerators from Nvidia and AMD. The channel is uniquely positioned to bring together solutions that cross vendors, he said.
The capital costs of implementing GenAI, however, are still a concern in an environment where the U.S. faces high inflation rates and global geopolitics threaten the macroeconomy. Multiple IBM partners told CRN they are seeing customers more deeply scrutinize technology spending, lengthening the sales cycle.
Ensonos Doebel said that customers are asking more questions about value and ROI.
The business case to execute something at scale has to be verified, justified and quantified, Doebel said. So its a couple of extra steps in the process to adopt anything new. Or theyre planning for something in the future that theyre trying to get budget for in a year or two.
She said she sees the behavior continuing in 2024, but solution providers such as Ensono are ready to help customers employees make the AI case with board-ready content, analytical business cases, quantitative outputs, ROI theses and other materials, she said.
For partners navigating capital cost as an obstacle to selling customers on AI, Woolley encouraged them to work with IBM sellers in their territories.
Dayn Kelley, director of strategic alliances for Irvine, Calif.-based IBM partner TechnologentNo. 61 on CRNs 2023 Solution Provider 500said customers have expressed so much interest in and concern around AI that the solution provider has built a dedicated team focused on the technology as part of its investments toward taking a leadership position in the space.
We have customers we need to support, Kelley said. We need to be at the forefront.
He said that he has worked with customers on navigating financials and challenging project schedules to meet budget concernsand IBM has been a particularly helpful partner in this area.
While some Technologent customers are weathering economic challenges, the outlook for 2024 is still strong, he said. Customer AI and emerging technology projects are still forecast for this year.
Mainlines Dobbelaere said that despite reports around economic concerns and conservative spending that usually occurs in an election year, hes still optimistic about tech spending overall in 2024.
2023 was a very good year for us. It looks like we outpaced 2022, he said. And theres no reason for us to believe that 2024 would be any different. So we are optimistic.
Juan Orlandini, CTO of the North America branch of Chandler, Ariz.-based IBM partner Insight EnterprisesNo. 16 on CRNs 2023 Solution Provider 500said educating customers on AI hype versus AI reality is still a big part of the job.
In 2023, Orlandini made 60 trips in North America to conduct seminars and meet with customers and partners to set expectations around the technology and answer questions from organizations large and small.
He recalled walking one customer through the prompts he used to create a particular piece of artwork with GenAI. In another example, one of the largest media companies in the world consulted with him on how to leverage AI without leaking intellectual property or consuming someone elses. It doesnt matter what size the organization, you very much have to go through this process of making sure that you have the right outcome with the right technology decision, Orlandini said.
Theres a lot of hype and marketing. Everybody and their brother is doing AI now and that is confusing [customers].
An important role of AI-minded solution providers, Orlandini said, is assessing whether it is even the right technology for the job.
People sometimes give GenAI the magical superpowers of predicting the future. It cannot. You have to worry about making sure that some of the hype gets taken care of, Orlandini said.
Most users wont create foundational AI models, and most larger organizations will adopt AI and modify it, publishing AI apps for internal or external use. And everyone will consume AI within apps, he said.
The AI hype is not solely vendor-driven. Orlandini has also interacted with executives at customers who have added mandates and opened budgets for at least testing AI as a way to grow revenue or save costs.
There has been a huge amount of pressure to go and adopt anything that does that so they can get a report back and say, We tried it, and its awesome. Or, We tried it and it didnt meet our needs, he said. So we have seen very much that there is an opening of pocketbooks. But weve also seen that some people start and then theyre like, Oh, wait, this is a lot more involved than we thought. And then theyre taking a step back and a more measured approach.
Jason Eichenholz, senior vice president and global head of ecosystems and partnerships at Wipro -- an India-based IBM partner of more than 20 years and No. 15 on CRNs 2023 Solution Provider 500told CRN that at the end of last year, customers were developing GenAI use cases and establishing 2024 budgets to start deploying either proofs of concept into production or to start working on new production initiatives.
For Wipros IBM practice, one of the biggest opportunities is IBMs position as a more neutral technology stackakin to its reputation in the cloud marketthat works with other foundation models, which should resonate with the Wipro customer base that wants purpose-built AI models, he said.
Just as customers look to Wipro and other solution providers as neutral orchestrators of technology, IBM is becoming more of an orchestrator of platforms, he said.
For his part, Krishna believes that customers will consume new AI offerings as a service on the cloud. IBM can run AI on its cloud, on the customers premises and in competing clouds from Microsoft and Amazon Web Services.
He also believes that no single vendor will dominate AI. He likened it to the automobile market. Its like saying, Should there be only one car company? There are many because [the market] is fit for purpose. Somebody is great at sports cars. Somebody is great at family sedans, somebodys great at SUVs, somebodys great at pickups, he said.
There are going to be spaces [within AI where] we would definitely like to be considered leaderswhether that is No. 1, 2 or 3 in the enterprise AI space, he continued. Whether we want to work with people on modernizing their developer environment, on helping them with their contact centers, absolutely. In those spaces, wed like to get to a good market position.
He said that he views other AI vendors not as competitors, but partners. When you play together and you service the client, I actually believe we all tend to win, he said. If you think of it as a zero-sum game, that means it is either us or them. If I tend to think of it as a win-win-win, then you can actually expand the pie. So even a small slice of a big pie is more pie than all of a small pie.
All of the IBM partners who spoke with CRN praised the changes to the partner program.
Wipros Eichenholz said that we feel like were being heard in terms of our feedback and our recommendations. He called Krishna super supportive of the partner ecosystem.
Looking ahead, Eichenholz said he would like to see consistent pricing from IBM and its distributors so that he spends less time shopping for customers. He also encouraged IBM to keep investing in integration and orchestration.
For us, in terms of what we look for from a partner, in terms of technical enablement, financial incentives and co-creation and resource availability, they are best of breed right now, he said. IBM is really putting their money and their resources where their mouth is. We expect 2024 to be the year of the builder for generative AI, but also the year of the partner for IBM partners.
Mainlines Dobbelaere said that IBM is on the right track in sharing more education, sandboxing resources and use cases with partners. He looks forward to use cases with more repeatability.
Ultimately, use cases are the most important, he said. And they will continue to evolve. Its difficult for the channel to create bespoke solutions for each and every customer to solve their unique challenges. And the more use cases we have that provide some repeatability, the more that will allow the channel to thrive.
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