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By | Paul Kunert 8th January 2015 11:22

Channel: IBM stamps us into the dirt in race for cloudy glory

Direct salesmen tap up customers, claim partners

IBM is trampling over some smaller software boutiques in the rush to pump up its cloud sales volumes, we are told.

Selling tech as-a-service is one of the five strategic pillars on which Big Blue has staked its future – alongside mobile, social, big data and analytics.

But, at least according to some IBM Business Partners, it seems the grand old lady of tech has created channel conflict in mid-sized and small business customer markets.

One, who spoke on the condition of anonymity, complained IBM had tapped up all of his firm’s Collaboration Software customers in a bid to get them to partake of the Bridge to Cloud.

If customers agree to this, they purchase a new cloud service – SKU – and no longer need to renew the previous software licence as they are entitled to continue using the software under the cloud product number.

“They have been convincing customers to ditch their licensing renewals/maintenance contract and buy ‘new’ cloud services, which the customer doesn’t have to use,” our source told us.

“IBM can book the ‘new’ services revenue as cloud revenue,” the source claimed. “It is a quick and dirty scheme to inflate their cloud sales numbers. They are not new, they are simply gutting their software numbers”.

One other Business Partner told us there was an “air of desperation” about IBM, which launched a cloud marketing blitz in December to announce customer wins. This followed a disappointing – for CEO Ginny Rometty, that is – set of calendar Q3 financials.

The US Securities and Exchange Commission investigated how IBM reports cloud revenue in 2013. The vendor told us it cooperated with the probe and its cloud revenue was the result of a “rigorous and disciplined process”.

In the same year, IBM cosied up to channel partners with a more partner friendly model: In the UK it retained 23 corporate clients to whom it sold hardware directly and passed 200 accounts to relevant channel partners. IBM was mulling over making the same commitment to work with partners in the same way in the software space.

An industry observer who did not want to publicly criticise IBM claimed the firm “plays a lot of tricks to force fit results into desired categories” but added “they are not always open about the specifics”.

“When they report ‘Smarter Planet’ revenue, it is definitely overlay accounting,” our source alleged. “In other cases, they simply reclassify revenue behind the scenes,” he claimed.

We put these claims to IBM, but it had not responded to us at the time of publication. We will update if we hear more.

According to 2013 numbers, IBM reported cloud revenue of $4.4bn, up 69per cent year on year. As of Q3 last year, IBM said in Q3 it had a $3.1bn run rate on as-a-service revenue, up 50 per cent.

The SaaS infrastructure market in Western Europe hit $2.1bn in 2014, according to IDC, with the top five players including Symantec, ServiceNow, HP, Mimecast and EMC.

The PaaS market, to which IBM has hitched its wagon, grew to $1.3bn and was dominated by AWS, OpenText, Microsoft, Salesforce.com and Google. The IaaS market for 2014 reached $1.5bn and was led by AWS, following by IBM, T-Systems, Rackspace and Google. ®

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