As Ibm Slims Down Small Firms Bulk Up

January 06, 1992|By Leslie Cauley

Tough times for "Big Blue" have translated into boom times for small contractors that do business with the world's largest computer-maker.

Hard-hit by the recession and competition, International Business Machines Corp. is trying hard to shed fat and reach a fighting weight that the company hasn't seen in years.

Meanwhile, such cost-cutting plans are boosting revenue for many small firms that have established relationships with IBM through the company's "Business Partners" program. And in these recessionary times, small contractors are only too happy to handle the spillover.

"IBM is a $69 billion company, so when they start throwing off little pieces, the pieces are very small to them, but they're very big to the small guys standing there catching them," said William E. Regan Jr., president of Data Networks Inc., a Baltimore-based company that specializes in providing complete computer systems to schools.

Some local computer firms with ties to IBM report that revenues have increased as much as 60 percent over the past year, much of it due to spillover from IBM's belt-tightening.

And that's just fine by IBM, which sees its future directly linked to the financial health of the many smaller companies with which it does business, said Camberley Rollings, manager of the IBM's "Business Partners" program in Baltimore.

"There is no longer this issue of 'It has to be made here,' " Ms. Rollings said. "There is a recognition that IBM needs other people in order to do business."

As 1992 gets under way, Ms. Rollings says, IBM is looking to shrink -- not expand -- the number of business partners in its program. IBM wants to concentrate on the companies that have the most potential to bring new customers and profits -- part of the company's long-term strategy for shoring up its bottom line.

IBM announced last month a series of streamlining measures -- drastic by IBM standards -- aimed at stemming defections by customers and breathing new life into the company's anemic profits.

Those measures include breaking the monolithic IBM into smaller, autonomous companies -- for advanced computer printers, data storage products and mid-sized computers. Under the new, decentralized structure, IBM's headquarters in Armonk, will act as a holding company, buying companies in fast-growing areas and shedding units that are not performing well.

To cut costs, IBM plans to cut another 20,000 jobs -- on top of the 20,000 jobs cut in 1991 -- by attrition and buyouts this year. John Akers, IBM's chairman, has hinted publicly that IBM's long-standing "no layoff" policy might be revised if the company doesn't get lean and mean fast.

IBM's plan also calls for alliances with small, independent contractors. Some contractors are being given expanded sales and marketing duties, giving Big Blue a way to replace the in-house expertise it is losing as a result of its downsizing.

Participants in IBM's Business Partnership program have been among the first to benefit from the restructuring.

Established in 1983, the national program is aimed at fostering working relationships between IBM and smaller computer contractors. IBM currently has about 60 business partners in Maryland -- about 3,000 nationwide -- that sell IBM as well as their own, customized products and services. Partners act as authorized agents for IBM products and services.

As part of the program, IBM pays its partners up to 6 percent based on sales of IBM products and services, or offers discounts on equipment. IBM also markets the products and services of its partners, giving small companies a window of opportunity and a marketing platform for sales that they couldn't get on their own.

Ulrich Weil, founder of Weil & Associates in Washington, a computer consultancy, says the partnership program hasn't been all that successful in the past, mostly because IBM couldn't seem to make up its mind how successful it really wanted its contractors to be. But tough times at IBM have changed all that, he said.

"IBM in the past has been torn as to how much business they should be throwing people, and did they really want them [partners] to succeed. There was definitely a mixed view," Mr. Weil said. "Now that view is much crisper and clearer -- IBM wants these people to succeed. This [restructuring] should help those companies tremendously."

Local companies participating in the business partnership program agree that the fallout from the ongoing restructuring has been positive.

Data Networks, for example, says revenues last year increased 60 percent, most of it because of new IBM business. Two other IBM partners, Gateway Technical Services Inc. of Towson and ProVAR Inc. of Baltimore, report revenue increases of 30 percent and 40 percent, respectively -- not bad for these recessionary times.

"The leaner IBM has to become . . . the better it is for all indirect companies," says Robert Fleischmann, senior vice president of ProVAR, a Baltimore-based reseller of IBM hardware and software.

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