IBM/Synnex: Deauthorization Complete

IBM (NYSE:IBM) has notified Synnex (NYSE:SNX) they will no longer be authorized to distribute IBM software as of October 1, 2009.  This decision was not surprising to some, considering IBM's deauthorization of Synnex on x Series servers in January this year. Last fall, Ayman Antoun, vice president of Business Partners, Americas, at IBM, hinted at IBM’s direction when he noted that IBM wished to become "more relevant more quickly” to partners. Some VARs have indicated Synnex didn’t have overall traction. And IBM channel chief, Sandy Carter has commented that the recent change “was really in the best interests of our partners and our customers.” So, it looks like IBM was over-distributed.

Is this a good move for IBM? Clearly, yes, because it cuts out the low-priced leader in distribution, and may well result in overall higher distribution margin for IBM.

 How about Synnex? It may, in fact, be good for them too.  It looks like Synnex was spread too thin. But, according to the agreement, Synnex can still distribute IBM software in Canada and Asia Pacific.  The company may be better off focusing on these geographies, which would leverage their global business unit. Analysts have indicated that this unit is doing well and strongly influenced Synnex’s exceptional Q2 results.  In addition, Synnex has been aggressively expanding their consumer electronics division. Since their IBM practice was small (at least by IBM standards), it’s unlikely they lose much distributor value-add investment. Overall, there are probably other lines of business, (like consumer electronics) Synnex should be focusing on, and IBM has helped them narrow down the options. 

There were less than 100 (65 according to some sources) IBM solution providers who did business with Synnex. And now, these VARs have a wide choice of other distributors to work with: Arrow Electronics, Avnet, Ingram Micro and Tech Data. Wasting no time, those other distributors have already started the recruiting calls. The danger is, these IBM partners may be even more open to wooing from competitors like HP and Dell.

The bigger question is: Is this a picture of what’s to come in the IT channel? Can we expect other industry titans to cut back distribution in the wake of this economic downturn? It’s another trend to watch.


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