Once an IBMer …


I left IBM a year ago – but have always held the company in high esteem . A lot of what I know today about the industry is stuff I learned in my time there . And I definitely had more good days than bad days there . I still own a tiny little bit of stock in IBM , and some of my best friends and mentors work there . Where I work now , IBM is both a partner and a competitor . And for all those reasons – I keep a close eye on IBM . As always – I am posting this as my personal opinions , not that of my employer .

It was pretty disturbing for me to read that IBM is planning another round of layoffs in 2014 and they have kept aside a billion dollars for that, like they did in 2013 . Having several friends who work there – it is pretty sad for me when I see IBM in such trouble .

When I joined IBM, I think the share price was a little less than $70 . And every year it kept increasing and at some point went well over $200 and now it is about $182 or so . So over the long term, they did pretty well and many employees and investors did well as a result . While there were always some unhappy employees – for the most part , IBM did ok .

IBM is unapologetically capitalist in nature . By the time I joined – there was no pension plan or life time employment type things . And the company was expanding rapidly outside USA. If you look at IBM as an American company , it is kind of hard to see it in a good light . But if you think of them as a global company – it made sense to make use of cheaper labor, better access to other markets and so on .

IBM , in Sam Palmisano’s time made the promise to investors that it will hit $20/share as EPS by 2020. And EPS has been on an upward trend through every quarter I think , irrespective of top line growth.

And then Sam handed over the reins of IBM to Ginnie Rommety . She had already managed services and sales for him, and was supremely qualified for the job . She also grew up the ranks at IBM and knew the company inside out . I thought it was a great decision to make her the CEO and Chairman . It was a pretty smooth transition too .

Sam not only grew the share price and EPS , he also did some savvy stuff like selling off the low margin PC division , investing significantly in IBM Watson etc . So all things considered – it seems Sam set up Ginnie for a decade of success . And Ginnie told the world that she is executing on current strategy .

IBM is laser focused on that EPS goal , and uses all possible levers . There are mainly just four things –
1increase revenue
2.decrease cost
3.buy back shares
4. show investment commitment to future revenues .

The latter three levers were the ones IBM seems to have played best in recent past . In Sam’s time – this was amply rewarded by the capital markets . But in Ginnie’s time – Market is punishing IBM for playing exactly those same levers . Not growing revenue is what is hurting IBM big time .

Selling the low margin part of hardware business to Lenovo seems like a good idea – but probably something the market has already factored in . I have mixed feelings of this sale – I have friends among the people in that business , and I can only wish them the best . But stemming that bleeding profit is good financially for the company .

All that being said – one question remains in my mind . Did Ginnie do the right thing by telling investors that she will follow Sam’s strategy and not chart her own course ?

Street likes predictability more than anything . So if a CEO resets expectations, market will usually give the company more time as long as the plan and time line is communicated well . In much worse situation, HP CEO asked for more time and the Market didn’t punish HP stock for that . If anything I felt HP CEO should have asked for even more time to steady her ship .

So if Ginnie had said “I am playing a long game – so I am going to extend the time frame of EPS roadmap” , would IBM stock have been punished more than the value it lost so far ?

Market is used to not seeing profits – companies like Salesforce and Amazon have gotten the market to believe that revenue/bookings growth should be rewarded even in absence of real profits . Yet, IBM will get punished for showing real profits and growing EPS but not revenue growth . I guess that is why capital markets have that mystic aura 🙂

Or maybe market is not that irrational – and IBM can’t cut costs forever and reach their promised glory . Like every large matrix organization, I am sure IBM has opportunities to cut costs and get leaner – but every time they do that, it does a lot of harm to its employee morale and that is not easy to repair . It is a hard choice to make .

Competitive landscape doesn’t make it easy either . IBM is an amazing technology company and has a habit of making long term bets – like Watson. But a mothership cannot always easily turn on a dime .

Amazon is the Walmart of infrastructure providers with its everyday low price model . That is not IBM’s game . IBM needs to play up its “value added services make us better than Amazon” card really well to see if it works . While I don’t under estimate Mr Bezos, I actually think IBM can out do Amazon since it has staying power in abundance . Soft layer acquisition is a good indication of IBM doubling down . Also , while intel based HW is out – IBM still has Z and P business which can provide manufacturing expertise for their cloud . IBM microelectronics has cutting edge expertise on semiconductors too. But data centers are a capital intensive business and IBM will need to get to the efficiency of the consumer company data centers at some point . Not at all easy , but eminently doable in my opinion .

I am pretty positive that IBM will do well again . I have three main reasons for that

1. Before my time at IBM, they had a near death experience . They know how bad it can get if things don’t go their way . But they survived that and thrived . That is invaluable experience that they can use again

2. IBM has invested a lot in leadership development . People like Ginnie and Steve Mills are some of the best in the industry and they have plenty of leadership bench . I always bet of good leaders and I would be shocked if these people can’t pull it off . It’s not just the top leaders – they have some very bright engineers and an amazingly well trained sales force with great customer relations . This is a people business first and foremost .

3. IBM has continued to invest in research through all kinds of economies . They have more patents most years than other companies . That kind of IP is invaluable in the long term – and not easy for someone else to overtake them

Good luck IBM – I wish you nothing but the best . But in the few times that I have to compete with them – I will try everything possible to kick their butt . That is how IBM trained me 🙂

A short personal response to Josh Greenbaum’s SAP FKOM blog


Well known analyst Josh Greenbaum posted 2 blogs with his views on how SAP sales reps should be selling to customers .

The New Year in SAP-land: Selling Customer Success (Part I)

The New Year in SAP-land: Selling Customer Success (Part II)

I absolutely enjoyed reading it – and want to make a few minor comments , strictly in a personal capacity . I don’t work in sales at SAP – I am on the engineering side of the house , but I work closely with sales all the time . But please don’t consider it as some kind of official SAP response . I am just typing as fast as I can on my phone in response to tweets from Josh and Jon Reed .

1. Relationships – do they matter ?

Josh starts off slightly dinging the idea of relationship based sales . I disagree with that position All business is done between people and for sales to move away from transactional realms to transformative realms – a strong relationship is a must .

The IBM quote of no one getting fired for hiring them – IBM didn’t earn that with clever marketing . IBM earned it with the blood , sweat and tears of its employees trying their best to do what is right for their customers . When I worked there , I have had CXOs tell me that “one reason we hire you is that we know that you will do right by us if things go bad in a project”.

This is true with SAP too – no one just listens to a transformative message and then writes a check . You have to work really hard to build a relation with key people at the customer to earn your seat at the table to tell them that story.

2. Quota vs Customer’s long term interests

I don’t think these are mutually exclusive things. And when they are – I won’t hold the sales people accountable – I hold the managers accountable .

Sales people have little to no choice in determining quota – that is done by sales leaders . So telling them to not worry about quota is essentially telling them that they can’t worry about putting food on the table for their families . That will not go anywhere in terms of getting another behavior . The possible course of action is that the quotas are set realistically and rewards being set on not just quota but on other things like customer satisfaction scores etcetera . Again – I agree with Josh , just want to point out that sales people cannot act on that message directly . This can happen only top down for the most part – and not bottom up .

3. Sell own services VS Partner services

I think this is a sure shot recipe for disaster . The SI ecosystem gets a bad name because of a few high profile projects that turned into disasters . What does not get mentioned in news is that vast majority of SI projects are successful . And when things fail – it is seldom that it is the SI that caused the failure by themselves . Most of the time the customer and SAP would also have done something to contribute .

SAP can never scale enough to cater to all service requirements . So it is in SAP’s best interests to make sure that SI partners get a good share of that business . SAP has an excellent services arm , but most projects need non SAP skills too to make them work . And the SI partners usually have plenty of expertise there .

SAP is primarily a software company – and what I would rather see is an acceleration on engineering efforts to make sure that customers don’t need as much services to use our products . But where services are required – I think it is best to either partner with other SIs or let the customer pick the best SI , including SAP services .

SI partners have fantastic relations at several customers . By partnering instead of competing all the time , SAP gets to leverage those relationships . Channel is good business for SAP – and SIs are important part of the channel business . Many SIs are also resellers .

4. Selling training and education

Quite agree with Josh here . Training should be part of every deal in my opinion too . However , my wish is that ultimately the software should not need any training to use it in vast majority of cases . That onus should be on engineering to make sure we build products that need less and less of training .

5. Don’t sell mobile , cloud etc

Again, completely agree – what an organization needs is a business strategy and not a mobile or cloud strategy . However , most customers start small and will have to satisfy themselves that the software works well before they think of transformative use cases . Selling cloud and mobility licenses are an integral part of helping those customers without bleeding the profitability in short term .

Ideally , the sales should be of solutions – not individual technology products . But that is again something that lies with product and solution management . Sales can only work with things they have in the bag . And when the SKU list is vast – no one in sales can realistically figure out what solutions are possible by combining all the cool toys . That means some portfolio rationalization needs to take place – which is not controlled by sales people .

Apart from these small points , I am more or less in great agreement with Josh . SAP and other technology vendors should change how they sell . It won’t happen over night and it won’t happen without customers changing their buying habits too . As I have always maintained – the sole judge of innovation is customer , and not vendors or analysts. All I can hope as an SAP employee is that customers continue to trust SAP in 2014 just like they did for last four decades .

It is hard being a sales leader


Off late, I have run into a lot of highly stressed out sales leaders – at work, at airport lounges and at assorted other places including at customer sites. It is real hard being a successful sales leader.

In most jobs, if you do well in current role – you are generally setting up yourself well for your next higher role. But I doubt that is true in sales . Many of the best sales people I know made mediocre sales leaders when they got promoted. And some of the top notch sales leaders I know today were just about average sales people in their prior life. While such things do happen in other job functions too – I have a strong feeling that sales kind of bucks the general trend.

To begin with – many organizations do not start grooming sales people into sales leaders early. They like sales people to be laser focused on quota and will not recognize the other skills they will need as they move up the chain. And compared to a developer or a finance person or something at the same level, the remuneration for a young sales person doing well in their job is pretty high. So the behavior patterns needed for narrow objectives of the organizations are rather strongly reinforced early in their life. I think this is also the reason why several successful sales people like to continue as individual contributors and not get promoted to leaders.

A developer who grows into an architect or development manager or a VP of development is not expected to code at that point. But  sales leaders have to occasionally take matters into their own hands and sell directly. That is not really the hard part – the real hard part is to resist the temptation of taking matters to their own hands too often in sales situation.

If you have an A team for sales, the chances are that they won’t sit patiently through a cadence call and take instructions and report status in a structured way. And many sales leaders are not very good at sales operations. It never ceases to amaze me on how long it takes for some of them to understand the need for good operations and hire a good COO . Good ops leaders are worth their weight in gold -once you find them, keep them close. However, you always need to watch out for where you draw the line on ops efficiency. End of the day – you need the sales to happen and reporting is an after effect. Don’t let controls screw up front line sales . It is a very hard balance to strike – especially for those sales leaders who totally hated controls when they were doing front line sales.

In  a big sale I did at IBM as an account partner – my deal strategy required a senior partner to come in as a “closer” to get the deal signed. I did not really need that given I had a great relation with the customer CIO and his staff, and we had done a good job in understanding each other. However, I was so tuned to having a closer in such big deals. Thankfully, when I pinged my boss to show up – he said ” this one is on you buddy, call me when you have it signed”. Words cannot express the sense of elation that balanced out my sense of panic. He was a senior guy and totally saw that the defined process is only a guideline – and I needed help in seeing that. Now, this is my guiding principle in any situation – sales or otherwise. Do not use “process” as a rigid mandate – use it only as a rough guiding principle. As long as you have the trust of the manager that you are ethical and responsible – you will have the support you need.

What is the most important asset for sales people? That would be the relations they have nurtured with customer contacts. This is also why a lot of Sales Force Automation systems get implemented by companies who want to keep that data. This is also the reason why most sales people do not care to put the information in these systems. It is hard to get the sales people to share those relationships. However, as a sales leader – your very success is dependent on your ability to share your relationships with your team so that they can go make the sale. This is the most counter intuitive thing for most sales leaders in their first leadership appointments.

As the size of the organization increases, there will be a number of over lay sales roles created to make sure there is sufficient attention on all important stuff. Too often – this results in lack of clarity and vast majority of leaders just become “checkers of the double checkers”. Eventually, everyone and no one is responsible for the actual sales or the lack there of. Over lay functions cannot be avoided when a company has a large number of products and vast geographic coverage for markets they serve. I have seen upwards of ten people “managing the spreadsheet” and “checking on status” for same sale in some situations in past life. It is a rough life to be at the receiving end of that mess. And this is only flavors of sales people. On top of that – there will be general managers of products, HR and assorted others who will need to be kept informed too. They cannot be blamed for asking “who is the customer here ? you folks or the company that actually is paying us?”.

Finally, there is the love-hate relationships with channels. Nothing demonstrates misaligned goals more than the goals set for direct sales and channel. Everyone loves channel up the chain – except the people held directly responsible for the quota for the same business. If you put direct sales and channel in conflict via goals and processes – you have no one else to blame for the resulting chaos. It is a hard lesson – with very few right answers. These are strategic goals to be set at the CEO level and lower level goals should be aligned perfectly to that strategy.

Despite all these things stressing them out day in and day out, all my buddies in sales leadership roles still keep their heads up and motivate (ok ok, occasionally even manipulate) their teams to achieve the big targets. I hope they have a less stressful 2014.