 Okay, welcome back everyone. We are here live in Las Vegas for Silicon Angles, the CUBE's exclusive coverage of IBM, Paul's IBM's premier cloud conference. This is the CUBE, our flagship program. We go out to the events, extract the signal from the noise. I'm John Furrier, the founder of Silicon Angles. I'm joined by Co's Dave Vellante, co-founder of Wikibon.org. Our next guest is Heidi Detthoff, Vice President of Global Mid-Market Marketing for IBM, which is a huge market segment that will benefit from this awesome cloud, low-cost, high-performing, dynamic environment. Welcome to the CUBE. Thank you, thank you gentlemen. We, the CUBE loves to talk about where the innovation is. Obviously cloud has been one of those things where it's been going through all kinds of cycles, now it's real, but your mid-market group benefits huge, huge. Oh, absolutely. So talk a little bit about how big that is in your mind, how huge the impact is to the mid-market and to the partners in the channel and just overall gross margin, growth, dollars, and you can throw out figures if you want. Well first of all, the mid-market is the fastest growing segment within IBM. And so for us to reach that small, medium business buyer out there is just huge. And then with the purchase of software and the announcements that we heard here this week just allows us to expand that growth right even further. So we are super, super excited of what we heard this week at Pulse with that expanded ecosystem, reaching to the development community, opening up our software capabilities and basically essentially turning IBM as a service. So that's great for us. And so from a mid-market perspective, we see that actually just only accelerating our growth. We've been giving you guys a lot of high marks on the messaging and how you guys are positioning the cloud up and down, positioning from high-end enterprise to the small, medium-sized businesses because it just hangs together and you can get IBM as a service and you can do on-premise. But for the mid-market, the small, medium-sized businesses, really people point to Microsoft's windows and you guys sold your desktop PC business years ago and now low-end server business. That whole market of just overhead involved and having an email exchange server and IT for a small business is a huge challenge. And it's been kind of like a bunch of rocks on people's back in terms of innovation. So now cloud eliminates that, you go to a SaaS model, everyone who goes SaaS gets some leverage. So talk about that dynamic, but talk about it in context too with a dollar shift. For instance, VARs, ISVs, channel partners, because those guys now can really add value. So talk about that dynamic of how you change the game and the economics and then how that lifts the channel. Okay, so first of all, I really think the shift that's occurring right now it's definitely what you touched upon. It's moving the back office to the front office. I think we as consumers are experiencing that today. So technology and innovation is becoming so ubiquitous. It's like reaching for the phone and expecting to hear dial tone. That's the kind of thing that I think the cloud is delivering, especially to these small, medium business buyers. They don't want to have this infrastructure to worry about. They want to worry about growth and profitability and scalability. They want to grow a business. And so these small, medium business buyers actually are starting to look very different to us. They're basically managed service providers. Some would argue that, well, that's really a channel. But from a mid-market perspective, that's the new client. So MSPs and cloud service providers are actually the new mid-market buyer for us. And that's where a lot of the growth opportunity is for us too. And they are a channel, right? They're a combination. They're a channel for IBM because they're buying from us. But at the same time, and we want to make sure we give them that end-to-end care and feeding and support, make sure they're enabled on our platforms. But then also, you know, they're basically running many, many small businesses out there. They're the new distributor, if you want to use a metaphor, they're not distributing benefits, value. So they're brokering the value. So they actually use the product, they buy and use the product, then they tack on additional gross margin services, 100% probably, to their customers. Absolutely. They're coming up in many flavors. I mean, look at monetize as an example. Monetize is basically all about mobile money. I mean, so they're serving up their application to 350 or so financial institutions. So that's an interesting, they're a client, but they're also a channel partner. Dave and I always talk about the whole channel thing comes up all the time on our services angle conversations around, you know, even look at CSC bought, you know, service mash. I mean, they're basically fully integrating in, providing those capabilities in high end virtualization situations. So you're seeing the channel partners saying, hey, I make more money, 100% gross profit with services that I provide that gets enabled by my vendor. The vendor, I'm not buying gear anymore and tacking on some margin and then some other maintenance and some services. It's, I get a platform and I'm now the provider. Right, I'm the provider. So, interesting, interesting. Oh, it's extremely, absolutely. But we're also seeing this major transformation take place in the channel itself. I'm sure others have talked about this, but our traditional resellers, if you will, are now trying to embrace the cloud. And as a result of that, they're recognizing within their respective businesses, they may have to run two sales forces as an example. You know, it's the traditional product type of resell. But now you're talking about cloud, adding new services on top of the cloud. That's a big shift for so many of our business partners. So on the mid-market side, we're making sure that we're offering them some of the workshops they need. An example I'd give you is, in mid-market, we actually have launched social media boot camps because we're realizing that it takes social selling skills today to reach these new buyers. And so we basically have over 3,000 of our business partners who have now graduated from the boot camps. We want to follow up. We want to follow up. So first of all, I get all excited when this comes up, when I hear stuff like this, because it's not only innovative, it really is disruptive. And so when you have this new disruptive landscape, new opportunities present themselves. So you mentioned the boot camp. So I got to ask you the question. As a marketer, the marketing mix is changing. So talk about your marketing mix, how you go into market, because now the old day was, hey, here's a product, here's some co-op dollars, and then have a golf tournament, everyone's happy, and then here's some extra dough, whatever. So we have two flavors of marketing on mid-market. So one is definitely marketing with and to our business partners. So we have a very lucrative co-marketing program. It's a 75-25. We actually match up to 75% of the dollar that they put into their marketing campaigns. We actually help package ready-to-execute campaigns, making it easy for them to get into market. So that's one side of our marketing. The other side is IBM-led marketing. And it is very much focused on social and digital marketing. We subscribe to a paid-own-earned digital marketing approach that allows us to have paid media investments. But at the same time, what we find to be more attractive to us is that ownership, if you will, in the marketplace, perhaps around cloud, mobile, social, writing white papers, making sure we've got relevant and timely content at the right place at the right time. But the nice part is this idea of earned, letting other influencers like yourself talk about us. The cube is an amazing example of earned media right here. Crowd chat is earned media, street chats. But that's the new balance of the force of this whole connected social business model, right? I mean, you have now a new constituency, the audience, who are not only just receiving one directional messaging, it's total dialogue, it's a handshake, it's collaborative, but there's also fast travel of information. You can't keep your cards close to your vest anymore. It's total transparency. And I love the communities that have emerged too. So we actually participate with SpiceWorks, which reaches out to that IT level professional. Again, they might represent their own shop, or they may be an IT professional in a large organization, but we really felt it was important to touch that audience. The blue mix announcement that we just had is a huge thing for us to get out to our SpiceWorks community as an example. So what's the partnership with SpiceWorks? Talk about that. So SpiceWorks, we actually have midsize insider, which is a property that we have within SpiceWorks, so it allows IBM to have some branded content out there, but at the same time, have that interaction to your point, this collaboration, this idea of building and fostering this community with IT-like minded professionals that are focused on the small, medium business side of the marketplace. Are you anywhere with LinkedIn, LinkedIn groups at all? We have LinkedIn properties, we have Facebook properties. One of the things that I'm excited about too, just because we go to market with our business partners, we want to promote their success, so we have what we call the IBM engine of the week. We believe that they are our engine, and so we actually make sure that we help promote their client's success, and we promote it through both Facebook and LinkedIn properties. So talk about the co-op program again, and I want to back up, because of the IBM lead, you're essentially providing patterns to use the pure, the pure analogy. It basically, you're essentially- We can use some improvement on the patterns, but yeah. I hate to need patterns, but I want to say that in front of those guys, but I shouldn't have said that live, but I love patterns, these would be renamed. He didn't mean it. I didn't mean it, these would be renamed. The template of the recipes, whatever you want to call it. You guys are using your IBM lead, that makes total sense. Got a lot of leverage there. Great brand, of course. Great brand, boilerplate out, execute whatever channel they want to put in, but the co-op is interesting. Talk about the co-op. How do you guys manage the co-op when you have so many different channels to deal with? Now with social media, omnichannel marketing is a huge challenge. So we have a couple of things. One is in what I called ready to execute campaigns, we have some of those social and digital marketing templates that allow a business partner to leverage that kind of new marketing, if you will. That bootcamp, I keep going back to the bootcamp, but the first order of business that we had to do is make sure our business partners could embrace and use social media. So we got really basic with them. They loved it. And then now, I think even at Pulse, we've got some more advanced social media bootcamp sessions going on here, so that they can beef up their social selling skills within their respective sales forces. So they're obviously receptive to it. Where they, have they always been? Or did you have to kind of drag them in? I mean... You know, at first, you know, I know that some of our large business partners, some of their executives may not even have a LinkedIn profile yet, but we want to help them establish relevancy, credibility, get their brand out there in those properties and realize, oh my gosh, I'm actually potentially getting leads from this. And you know, it gets great. We do so much business online with our community. We have 58 million people. And having the ability to just randomly, socially handshake somewhere, or give them a fist pump, or favor their tweet, gets their attention. And you can have a dialogue, quick. I know one of the struggles that we all have still is how the measurability of social media. So we get that. We have a social media expert on our sales organization who runs our European practice. And he is a, he's great following on Twitter and LinkedIn, Facebook, you name it. He gets deals. He gets actual sales opportunities from these platforms. So it's trying to communicate those successes. And that's early on. So, you know, we see that social, like the web in 95, everyone sees it, they can, or 96, they're starting to come in. It's going into the business practice, but the tooling's evolving. And the innovators like yourself and what we're doing here at theCUBE and crowd chats, other things, we're out on the front end. The ROI is still elusive. How are you managing that internally where you've got naysayers or people up above you saying, show me the numbers. Is it more followers? Is it basic? Are you like, how basic are the reporting? When we started with some of our bigger properties, we were all about impressions, impressions, impressions. You know, like big numbers. Get the impressions up. We hear that all the time. Billions of impressions. So, you know, I'm really focusing my team and our agency partners to focus. It's no longer about impressions. It's about the engagement and then the conversion. And those are the numbers we look at every week, just to see, you know, do I need to adjust my paid media in order to keep my impressions going, but more importantly, again, that conversion rate going. How do you measure conversion when it's social? People don't want to be sold to. Well, that's the challenge. So, you know what we're using as industry benchmarks to see how are we tracking on some of these, you know, investments that we're making in the paid-owned, or earned side where we're seeing the greatest traction, though, is with our influencer community. Right, and one of the things we found is a lot of the traditional systems, whether it's the CRM system or, you know, the marketing platform, they can accommodate social, but the business process doesn't accommodate social. And so, there's still a lot of learnings going on here. Talk about the influencer thing. How do you guys get ROI on the influencers? We love the influencer programs. It's coming in through like our paid, or both organic and paid blogging community. People are writing about it. Sorry, I had to grab the data. Oh, I'm sorry. It's okay, it's okay. Go, go, go, go. You're getting paid. So... Long day, please. Oh, no, I was just saying that really, we get great value on traditional public relations, analyst relations, obviously being from IBM, but again, this influencer community that we've invested in, like SpiceWorks, like some of our paid bloggers, but then more importantly, people talking about us and just retweeting and seeing articles on its content. Its content is so... Being president is the number one thing in socials. Being there, not just fake, just being actively president. Sorry, Jay, go ahead. Well, I think that's the thing I wanted to say. No fighting, guys. I mean, well first of all, I mean, you look at the way that the buying decisions are made today. By the time you call the salesperson, you've done a lot of research, you've maybe already made up your mind. So a big part of social is trying to be involved in the conversation, participate as a peer, potentially and add value to the conversation. And then I think the other thing is, it reminds me of the story when, you know, when TV came out, all the radio executives say, why would a bunch of people want to watch a bunch of guys talking on radio? That doesn't make sense. And so they didn't really fully understand the power of the medium. And I think that's what we're seeing with social. You know, you can't get much more out of your email marketing. We've squeezed all the blood we can from that stone. And right now there's a lot of trial and error going on, a lot of experimentation. But, you know, I feel as though in a lot of cases it's working and the metrics, you know, will evolve. I don't know how you feel about it. Oh, I completely agree. I think we have a lot of learning to do right now with social. And I think that we'll see, you know, different new bars being set or industry benchmarks being set that we can measure ourselves against software. I watch software. I mean, they are, you know, I think setting a brand new bar for us inside IBM of how we should go to market more digitally. So. Now, just to redefine sort of mid-market, we, I think heard earlier, you guys define it sub-1,000. Is that right? Less than 1,000 employee size. Absolutely. And then do you break down small? So we do support small. We've got a number of different programs that help us reach that small business owner, whether it's a, you know, minority owned business or if it's the mom and pop down the street. So we've got an SME toolkit, if you will, that we do with some financial partners that helps small businesses, you know, just get started with templates, with planning kits, help them link up to financial institutions. So we also have programmatic support behind very small businesses as well. And your responsibility is global as worldwide. Absolutely. What are the regional differences that you're discerning? Are they there? And maybe you could describe them. Oh, absolutely. What I'm seeing in differences, just from a marketing perspective, is this adoption of social and digital. Not every country is embracing a paid owner model that I just set out before. So I know I've got work to do on my team to make sure I help educate and bring the right skills, both internally, but also externally. And then I think the other differences that we're seeing is that the transformation rate within our partner community is also very unique and different depending on the countries as well. Is the tooling unique as well? I mean, or is it Facebook, LinkedIn, Twitter? Different properties in different countries. You know, not everybody's embraced the Facebook, you know. Well, the early data is coming in. You're seeing the use cases. When our findings, we're big in social. We have our social media lab that we run and we have our own R&D and we look at the data. And the influencer is interesting. We see the same dynamic. Influences move the market and they're very, if you work them properly like you guys do and you're present, it works. I've seen some companies have an influencer program. It's basically the top blogger. And that's not the right influencer. Because you can now talk to customers and this comes back down to your point and when I get your perspective on this as we end the segment, small businesses are nimble. They're not fighting the back office, it's all front office. Word of mouth is critical because they ask other small businesses what they're using. And so on Twitter, that's like rapid, frictionless communication. I mean, it's like this rapid referral program, you know? I mean, it's like, oh, well, so on, so said, right? It must be good. I'm a big believer in endorsement marketing really comes into the word of mouth. When you start seeing, you know, you're judged by the company that you keep. And if you're winning, people will see that and people want to be associated with winners, not losers. So, you know, if you have a bad solution, word's going to get out pretty quick. I agree. Well, thanks for coming on theCUBE. Really appreciate it. Thank you. Mid-market's got a great opportunity. Heidi, great knowledge. We love your strategy. You get theCUBE endorsement. Dave and I both think you're amazing just in the vision. You're way ahead of a lot of the other companies in terms of social, seeing the digital. And again, you're onto this channel and looking at it differently, but yet keeping your eye on the prize is a nice job. Congratulations. We'll be right back to theCUBE after this short break. Thank you.