From Hardware Deals to Recurring Revenue: The IBM Partner Shift

For decades, the IBM Business Partner (BP) model was simple and lucrative: sell hardware, attach maintenance, repeat. That model is now breaking...fast.
The market for new IBM Power hardware is shrinking. There are too many BPs chasing too few deals, and deal registration has distorted competition further. The first partner to register often secures the best pricing, locking others out, not because they lack capability, but because timing beats value.
Even when a partner does win, the victory is short-lived.

Feast today. Famine tomorrow.

IBM Power upgrade cycles average seven years. After the initial three-year warranty, margins on maintenance are thin, often sub-10%, unless the partner exposes the customer to third-party maintenance (TPM) alternatives. That creates risk, not annuity.
So partners face an uncomfortable truth: hardware sales are episodic, defensive, and margin-compressed. Services are not.

Why cloud & managed services look irresistible

Cloud and managed services offer what hardware never truly did:

• Predictable recurring revenue
• Deeper customer lock-in
• Control over the lifecycle conversation
• Strategic relevance beyond refresh cycles

At the same time, customers are changing. Many experienced IBM i and AIX professionals are approaching retirement. Skills are thinning. Boards are nervous. Outsourcing parts of the stack is no longer ideological, it’s practical.

The opportunity is real.

But here’s the problem.

The skills don’t transfer automatically

Selling machines is transactional.
Selling services is consultative.
Selling annuity is behavioural.

Many long-standing IBM sellers were trained to:

• Push upgrades
• Defend discount levels
• Close capital deals

They were not trained to:

• Sell outcomes instead of assets
• Navigate operational risk discussions
• Build multi-year value cases
• Compete with MSPs and cloud-native providers

Some adapt. Some struggle. Some never will.

That’s why so many partners who didn’t pivot ten years ago are now scrambling and discovering that changing the business model is easier than changing the sales mindset.

Those who transitioned early now have an edge

This transition isn’t theoretical.

Our leadership made the shift from hardware-led selling to services over 20years ago. For more than a decade, in senior sales leadership roles, they’ve helped other sellers do the same, not with generic training, but with:

• One-to-one sales coaching
• Individual transition plans
• Practical use of existing IBM relationships
• Reframing deep IBM knowledge into services-led conversations

This isn’t about teaching sellers to “sell cloud”.
It’s about re-wiring how they create value.

Fractional help for a structural problem

Today, IBM Business Partners face a clear choice:

• Continue fighting for shrinking hardware deals
• Or deliberately transition their sales teams toward services and annuity

For partners whose sellers are UK- or US-based (or English-speaking globally), our IBM Leadership Sales Consultancy can be engaged fractionally, embedding experience without the cost or risk of permanent hires.

The reality is simple:

The market won’t wait.
The model won’t revert.
And not every seller will make the jump on their own.

Those who help their teams transition now will still be relevant in five years.

Those who don’t will still be waiting for the next refresh cycle and wondering why it never comes.

Please contact Chris Smith or Lee Bailey if you would like discuss further and understand how we could be helping your business achieve a better outcome.

info@babyblueit.com