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A new avatar for IBM STG

IBM is restructuring its focus from a product-centric one to a client-centric business model. This transformation is expected to help IBM STG grow faster by giving its customers a single face of IBM to deal with. By Akhtar Pasha

A structural change of this magnitude generally impacts operations and sales, but IBM STG has nicely pulled it off without any disruption whatsoever. STG has already completed a smooth month long trial run since it began its restructuring into four divisions—Enterprise Systems, Business Systems, Industry Systems and Volume Systems. This is one of Big Blue’s biggest internal reorganizations. The new management structure will have far-reaching implications. This latest reorganization can perhaps be best thought of as taking the next big step forward shifting away from a structure based on technology and product line distinctions, and towards one that follows the lines of distinct customer segments.

Shashi B Mal, Director, STG, IBM India/SA said, “The new year ushers in a new Systems Organization, one that is aligned to Clients from the erstwhile alignment to Products. This is in line with the changing decision making paradigm that we have all experienced in recent times wherein the success of any organization relies on embracing change to suit the changing needs of the marketplace.” He added, “Our objective is to accelerate STG’s profitable growth through greater client value. To achieve this objective, we need to position ourselves as integral to our clients’ success by aligning closely with our clients with an emphasis on providing complete solutions that address their ever-evolving business requirements.” To this end the company has put in place the following strategic actions to build a responsive sales model that’s closer to the client by:

• Initiating a client-centric sales coverage model
• Putting in place integrated sales teams with one leader to drive significant productivity, sales growth and client value through an aligned, team-based client-centric sales approach
• Reducing end-to-end costs and driving process efficiencies and improving linkages with S&D, BPO to extend the STG sales community
• Having a focused sales coverage in Large Enterprises, Small & Medium Businesses and Industry-specific priority clients
• Growing through technology innovation and focus on high-growth industries and investing in differentiating technologies such as virtualization

Mal outlined the benefits—“Our clients are facing a profound mix of opportunities and challenges—globalization, the Internet, Web 2.0, energy efficiencies, rising costs, business resiliency and security, and privacy issues. Many of them are shifting back to the business value of IT, i.e. the integration of technology into business design is fast becoming a competitive necessity for our clients.”

Jyothi Satyanathan, Vice President, Platform Business, STG IBM India/SA added, “The traditional market has evolved and the customers are the kings. Additionally customer desires have changed from products to ‘value’ that too from an RoI perspective. Any organization in order to sustain profitability and post strong growth needs to change according to customer demands and hence it is important to follow customers. We want to integrate all products [IBM] in front of customers—giving one face of IBM STG to customers.”

Mal said, “With our ‘client-centric one-team’ approach, clients can look forward to faster time to market with IBM. Clients can benefit from a responsive IBM team that understands their business requirements and brings a unified solutions portfolio consisting of systems, software and services that help them to quickly seize business opportunities and minimize business challenges.”

A leading analyst who said that he cannot comment on vendor-specific strategies however admitted that the realignment should help IBM move quicker and more in tune with the needs of smaller customers. Since IBM STG is already into the second month of this restructuring exercise, it has not affected its operations yet.

On the other hand HP and Sun Microsystems do not see anything new in STG’s restructuring. According to the respective company officials, they have been following client operational model for a long time now.

Having understood the rationale behind the restructuring of STG, let us get into what is so unique about this exercise.

A field force makeover

The restructuring is slightly different in India than what’s taking place globally. Historically an IBM sales territory has been staffed by sales and support employees who specialize in an STG product. While these specialists will remain in the field, they now be dedicated to specific customer accounts and will report to the Enterprise, Business, Industry or Volume Systems. They will also represent STG’s entire product portfolio to their accounts, not just their area of specialization.

• Enterprise Systems or Focused accounts: This division will be catering to mature enterprises where the emphasis is on increasing the efficiency of their data centers, adopting more ‘green’ or energy conscious products inside their data centers, consolidation and virtualization, data mining and more. Here one account manager will handle one enterprise customer and will do a lot of consultative selling.

Emphasis on Business Partners to own customer accounts

• Business Systems: It will be catering to the mid-market where businesses are putting their IT infrastructure in place as well as automating operations and transactions. These segments are investing in ERP, messaging, CRM, SCM and are evolving into next generation enterprises. Here STG has a different game plan. It plans to nurture its Business Partner Organizations who would be owning customer accounts themselves and not the STG team. Earlier STG was just involved in routing the products.

Shailesh Agarwal, Vice President, Business Systems, STG IBM India/SA said, “We want our Business Partner Organizations (BPOs) to take ownership of the deals that they have closed and support their scalability in increasing the number of transactions (number of customer accounts closed). This model will allow us to touch a greater number of customer accounts and help us to get more dollars per customer, which again is something that STG has not followed so closely in the past.” The rationale behind nurturing BPOs is that STG reps cannot forecast the number of market opportunities that exists but BPOs can and that it would like to revive this relationship to drive growth. This model also helps expand and leverage geographical expansion by getting into smaller towns. Now STG can estimate how much revenue can be built up from 14 smaller towns. In the product model, this advantage was not there.

• Industry Systems: STG will have dedicated specialized reps that will be focusing on key verticals such as BFSI, manufacturing, healthcare, Retail (Point of Sale) where IT often plays roles outside a traditional data center environment. IBM STG has also made it clear that its focus is now more on replicable products than one-off projects. The reps that have vertical experience can ask the right question because they would know how each industry vertical functions, the business challenges that they face and the technology requirement. Also processes adopted by customers can be translated into developing products.
• Volume Systems: To push this client-centric concept further, IBM is reorganizing its SMB Business Group, the division that manages the SMB sales force. The action splits the group into two teams. One team will focus on large mid size accounts that have the potential to become large ones and will be called high activation accounts, while the other team will focus on smaller ‘genuine’ mid-market companies and will be termed as low activation accounts. By dedicating resources to this second set of companies, IBM is aiming to avoid the common situation where a big sales opportunity in a large company soaks up most of the sales resources in a territory. This had led to many companies being ignored by IBM.

Agarwal explained that SMB customers need integrated solutions that fulfill their requirement. Since the cluster accounts spread is high it was required to look at STG’s strategy differently. Hence the focus of the Volume Systems will be two-fold—it will do the sizing [requirement] and bring more packaged solutions to market. Additionally it will create a Center of Excellence (CoE) in Bangalore, which will be a back office for BPOs that will help Business Systems cater to smaller or cluster accounts. The CoE will have 16 field people with technology expertise and each rep will accompany the BPO for a sales call. As Volume Systems leverages the CoE’s domain experience, Enterprise Systems will use STG Labs’ experience in all aspects of technology implementation in IBM System i environments. It provides services in installation, migration, porting, application architecture and development, performance tuning, technical consulting, and hands-on skills transfer. Business Systems would leverage on Systems Solution Center (SSC) wherein STG can do Proof of Concept and demos to SMBs.

By dedicating specific staff to specific customer accounts, IBM is working to present a ‘Single Face’ to its customers—large or small. That could make it easier for smaller companies to do businesses with IBM STG because there were too many product evangelists earlier—p Series, i Series, z series and storage.

Presenting a single face

Under the old organization, customers and channel partners often ran into inconsistent business practices from one business unit to the next, such as different contract terms and conditions, loan programs and bidding processes. Additionally in the past IBM STG has faced situations wherein reps had sold large Unix systems to fulfill targets without planning the storage requirement as a result of which the customer could have compromised on networked storage. IBM’s justification for these latest changes [restructuring] is that customers want to see one face of the company. They don’t want to see System x and System p sales reps each offering whatever parochial solutions are better for their particular plan. IBM doesn’t want to end up with the short end of the stick if customers play its divisions and sales reps against each other to get the best price.

Mainframe’s back

Small to medium businesses (SMBs) have often shied away from IBM Mainframe solutions because of cost. IBM has now made a considered move into this market by addressing this concern. Satyanathan admits, “There was no revenue coming out of the mainframe business. But that’s going to change with the restructuring. We have timed it right by introducing the z9 Business Class mainframe now.”

A client-centric model allows IBM STG to spot opportunities for its mainframe business. Since a specialized account manager handle large UNIX enterprise under its Enterprise Systems division, it will allow them to keep a track of customers who are maturing with UNIX systems to pitch for mainframe systems. The mainframe can be used with Linux applications making it a strong pitch for large customers doing consolidation of applications on to the mainframe. A Linux mainframe (just hardware) is priced at Rs 2,50,000. By creating a lower entry point for mainframe computing and by significantly lowering prices IBM’s System z can now extend its market reach from lower midrange through the very highest end systems. Add in high utilization rates, low cost of management, broad scalability, high availability, rich security and an expanding application ecosystem and IBM’s new System z9 Business Class offering should help the company extend its reach into new markets running new workloads. Additionally with energy costs rising, and power density of new electronics increasing, power-efficient devices are increasing in importance, especially in large data centers. This is where the mainframe brings its value—it’s a power-efficient device. With the z9 BC, there is now very little to deter smaller businesses from taking advantage of the mainframe’s legendary resilience and manageability.

Satyanathan sees huge potential for its z9 Business Class mainframe systems. There are a number of government projects where the company thinks that it makes a good fit. Passport verification and control where the database to check and retrieve information is one such project. Similarly IBM STG is finding opportunities in the Income Tax Dept. and the Department of Posts.

IBM’s effort to reorganize itself around the needs of its customers will make it easier for the company to gain the attention of SMB organizations and improve its communication with them and its four divisions. Though it too early to say if STG’s metamorphosis is a success, it does give customers more choices today than they had before.

akhtar.pasha@expressindia.com