IBM India has fired at least three of its senior managers for alleged malpractices that included forging customer purchase orders (POs) and diverting materials sourced for customer deals to the open market.
IBM refused to comment but at the same time didn’t deny the news.
The company has also scrapped its popular stock-and-sell program, Easy Sell, which IBM partners said has been the main culprit behind the alleged malpractices.
In addition, at least three IBM partners have been sent termination letters for their alleged involvement in the malpractices. Industry sources say that more partners could be ‘blacklisted,’ a term used for the termination of an IBM partnership.
According to an IBM partner from Mumbai who didn’t want to be named, “The manipulation of the Easy Sell program has been known to everyone. In the past 2-3 years, distributors and partners, on multiple occasions, had asked IBM to scrap the program because it was leading to malpractices.”
According to a reliable source, the malpractices were reported by an IBM senior manager to the company’s worldwide audit team in early 2012. “Last March, a senior manager who quit IBM, exposed some of these malpractices by writing a mail to IBM’s worldwide audit team that looks into compliance and ethical practices. The audit team began investigating this matter from April 2012 and submitted its report in November 2012, on the basis of which the current action has been taken,” said the source.
One IBM partner explained the modus operandi of the alleged malpractices: “Let’s assume that for the OND quarter a large deal is expected to close which would help the IBM manager to meet his target and earn incentive. However, the customer delays issuing the PO till the next quarter. In such a case, the IBM manager would request/insist that the partner raise a forged PO and enter it into the system. The original customer PO may eventually come 10 days later (at the start of the next quarter), but what’s been captured in the system is a forged invoice.”
Partners admitted that in many such instances, orders are booked using forged POs without any customer deals in pipeline; and products are then diverted to the open market. “Once a wrong practice starts, different partners bend the system in different ways. For instance, there are also partners who buy IBM products from distributors on forged documents to only divert them to the open market because the products bought for customer deals come at a discount over those sold in the open market,” claimed an IBM partner from Delhi who spoke on condition of anonymity.
However, partners said that this is not new in the industry. An IBM partner who is also a partner of other vendors, said, “A couple of years back, a similar episode had happened at Lenovo and the company had fired some of its senior managers and blacklisted few partners. It has happened with vendors like HP and Cisco too.”
Usually, vendor companies, for certain sized deals and in named accounts, have a user verification program. However, often the verification process isn’t followed, either by design or by oversight, resulting in partners getting away with fake POs. “In case of IBM they don’t have any user verification process or at least we aren’t aware of any. Also for Easy Sell, customer POs have to be submitted to IBM distributors and they don’t do any verification. Hence bending the rules and systems becomes that much easier,” said an IBM partner from Delhi.
In the opinion of another multi-vendor partner who also didn’t want to be identified, “Legally and ethically, such practices are wrong. But when you see other partners doing it, and doing it with the knowledge of distributors and vendors, you think it is a non-issue. The onus of stopping such malpractices lies with the vendors and distributors. They should create systems and processes that are stringently followed and any deviation must be dealt with strictly.”
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