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This newsletter has spent the previous few weeks delving into the center of the eServer i5 “Squadron” servers, their Power5 processors, and i5/OS V5R3. This week, I are looking to focus on IBM‘s marketing and income plan for the platform. based on the true brass in the iSeries division, IBM is going to be pushing on a number of fronts to are trying to develop the OS/four hundred server business and pump up the OS/four hundred ecosystem on which it depends.
I lately had a chance to talk to Al Zollar, generic supervisor of the iSeries line, and Cecelia Marrese, vice chairman of advertising for the iSeries, about what they hope to achieve with the brand new product line. not that this is always indicative of the health of the iSeries line, but from those meetings i can inform you that they each seem to be a lot more comfy and positive about where the iSeries is and where it goes. this is mirrored as a great deal in physique language as in what they observed.
Zollar instructed me that he desired to keep the iSeries line, now the eServer i5, in the press and in the minds of consumers as they trust platforms. And one element IBM will do to make this turn up is to hold giant iSeries bulletins coming out at a steady tempo and with the newest IBM applied sciences. “we're moving far from huge bang bulletins and relocating on a roadmap the place we've whatever thing colossal to say to their consumers every quarter,” he defined. “this may preserve a degree of interest and vitality within the platform.” it's going to additionally support with publicity, as the IT exchange press it really is consumed via IT workers, from device admins to chief suggestions officers, will see a steady circulate of i5 announcements.
however the strategy goes far beyond that. whereas the consideration is first rate, the top-quality kind of revenue pitch is a competitive price for OS/four hundred servers and their connected utility. To that conclusion, as they explained a couple of weeks ago, IBM cut memory fees by means of 20 to 60 % and cut storage costs with the aid of 20 p.c, it dropped the expense of activating Power4 and Power5 processors on the iSeries and i5 line, and stated that it could preserve the ordinary accessories (similar to server processors, reminiscence, and disks) at parity with the pSeries (soon to be “eServer p5”) Unix server line, which has historically had tons reduce checklist fee tags and a great deal higher discounts than for the iSeries. whereas IBM will very nearly by no means close the hole at the retail stage (despite the fact that clients herald solar Microsystems and Hewlett-Packard with competitive Unix, Linux, or home windows techniques), the hole is considerably smaller, and the interesting merits of the iSeries over the alternate options make it possible to promote in opposition t those options. earlier than, the decal expense became so high on the iSeries that business companions couldn’t even get their foot in the records middle door to make a pitch. With these rate cuts, which americans like me have been clamoring for when you consider that the mid-Nineties, the records middle door has opened a crack, and the i5, with its subtle partitioning and numerous operating device support, has a decent chance of basically compelling CIOs and VPDPs no longer handiest to open the door but also to bring in companions to pitch the computing device to clear up their issues.
IBM has all the time understood that the box count number for the iSeries had to remain high if the OS/four hundred ecosystem turned into to not simplest continue to exist, however to thrive. And the expense cuts are key to IBM’s plan to raise the box count coming out of the iSeries factories in Rochester, Minnesota, and in Dublin, ireland.
Of path, with such big expense cuts for servers, memory, disk, and different core components, this begs the query of how IBM can retain iSeries hardware income, a good deal less boost it. I have argued for years that the OS/four hundred server market is greater elastic than IBM’s advertising model counseled. IBM had its explanations for charging excessive-expenses–it crucial the margins as a result of its manufacturing fees were excessive, and to help pay for its very aggressive combat towards solar and HP within the Unix market, the place it's controversial that IBM might also not have broken even as it makes use of pricing as a way of gaining market share.
Now that IBM has large credibility with the power-AIX servers, and solar and HP have backed off a little on fee cuts, IBM has a little more space. (I pointed out a little.) IBM additionally has a bit bit extra space seeing that the iSeries and i5 machines sold in Asia/Pacific are now being inbuilt ireland, the place labor is more affordable and delivery expenses to Asia are lessen. (The pSeries manufacturing for Asia/Pacific shoppers additionally has been moved to ireland, and IBM additionally has a bulk take care of United Parcel service to ship from eire to Asia. This, combined with hundreds of tiny alterations in the give chain of materials that go into the iSeries, and in how the product is manufactured and delivered, has enabled IBM to get iSeries expenses reduce.
IBM cares plenty about earnings growth, nevertheless it has always cared more about earnings increase. So with costs on the iSeries almost cut by using forty percent with the i5 launch, can IBM develop revenues and preserve profits?
The reply looks to be sure. Zollar says that IBM’s plan is to sell greater containers, which is obtrusive adequate, but that he additionally expects IBM and its companions to be capable of sell richer configurations of the bins. My wager is that the typical selling fee of a box isn't as low as you may consider, because the mindset shift from spending as little as viable to do the bare minimum of work on an iSeries to spending about the identical sum of money or slightly more to do much more things with an i5. here's the guess i'd make, and it's certainly the guess IBM is now making. (Heaven aid us all. and that i wish IBM had done it five years ago.) “I believe there's a huge pent up demand for reminiscence and disk storage,” says Zollar.
Marrese says that the eco-friendly Streak promotions in late 2000, which finally resulted in the revamping of the iSeries line in January 2001, had been step one within the transformation of the OS/four hundred server right into a aggressive container. but a beta check in March of this yr for the mannequin 520 and OS/400 categorical packaging that debuted in early may also looks to had been what pushed IBM over the edge to delivery reducing expenditures. Italy, Marrese defined, has a labyrinth of tax laws that make it painful to run a big company, and that's one of the the reason why the nation is teeming with small groups. a lot of these small groups, it turns out, have acquired AS/400 model one hundred fifty and mannequin a hundred and seventy servers. and that they just preserve using them and don’t upgrade as an awful lot as IBM would like. within the beta program, IBM took an iSeries model 800, packaged it like the model 520 express computer (low fee, loads of utility, able to run out of the field), and located out that if it reduce the fee of this configuration in half, in comparison with the cost of constructing it with normal iSeries mannequin 800 pricing, it offered twice as many bins.
yet another area that Zollar says he's focusing the iSeries division on is without doubt one of the average drivers of the product line: high availability. “because of the traditionally high reliability of the AS/four hundred and iSeries, their consumers are very under-invested in high availability and resiliency.” whereas high availability and device clustering software were the largest drivers of AS/400 and iSeries revenue in the past decade, my guess is that only about 10,000 of the 215,000 OS/four hundred stores on earth have implemented excessive availability options. With more cost-effective and easier-to-use excessive availability software, and an awful lot more affordable i5 bins, IBM should still be capable of make it up in extent.
Zollar says he has implemented a few other adjustments to help boost income. For one aspect, he spoke of that the enterprise is attaining out to the legion of small iSeries partners with simplest a couple of dozen accounts to try to get them lower back into the game. IBM is giving decent coupon codes to companions that purchase model 520 express configurations in blocks of 10 or 20, and the business will now not promote the new i5 machines direct in competition with its channel, which accounted for roughly 85 % of iSeries salary in 2003, in keeping with Zollar. whereas iSeries income boom in 2003 was in the “fit double digits” for midrange and excessive-end iSeries machines (Zollar noted the quantity “all started with a two” when I pressed him to nail it down somewhere between 10 and ninety nine %, and my bet is around 25 % profits boom), it's the low volumes of entry machines that has been a drag on both iSeries shipments and iSeries profits. Shipments were flat and revenue have been up 7 % in 2003 across the iSeries line. obviously, getting companions enthusiastic about promoting the i5 mannequin 520 express configurations is a key to the new approach.
however isn't the handiest probability IBM is looking at. Marrese says that IBM booked round $100 million in Linux-related iSeries server revenue in 2003, a factor of six higher than Linux earnings on the field in 2002. She says income to support typical green-monitor functions changed into flat or down, and that Domino, excessive availability, windows integration, and WebSphere are key drivers. however what has Marrese smiling is the arriving guide for native AIX inside logical partitions on the i5 machines. because it turns out, almost forty,000 OS/400 shoppers also have Unix servers of their stores, of which the huge majority are working HP-UX purposes. Getting even a percent of these valued clientele to port their HP-UX functions to AIX and move them onto the i5 aiding both their OS/400 and AIX workloads will go a long approach toward boosting universal iSeries earnings.
in all probability more than anything else, the timing of the i5 announcement with a recuperation in the international economic system is auspicious. Marrese says that, in 2003, iSeries revenue in Italy, German, and France picked up, that North the usa began off amazing, and that Asia/Pacific international locations like China are exploding (albeit from a extremely small installed base). “shoppers were purchasing to do the naked minimal,” she says, “but now they have become the eco-friendly mild to spend once again.”
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