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IBM's 15-year-old iSeries mid-range server - still better known to many by its former name, AS/400 - is an unlikely survivor. And even today, despite its enormous customer base and its repeated technology refreshes, many believe its future is by no means assured.

In the last five years, unit sales have fallen by more than half and although this is partly because customers are buying more powerful and expensive iSeries models, according to analysts at IDC, the overall business is still in decline. In 2002, when sales of all servers rose slightly, iSeries revenues fell by 13% - the poorest performance of all IBM's server product ranges.

So when Sam Palmisano took over as CEO of IBM in March 2002, the choice he faced was stark: relegate the iSeries to legacy status and simply milk the installed base accordingly, or try to reinvigorate the range with new technology, new machines and more enticing prices.

Most companies would have chosen the former, but IBM has a long history of backing its iSeries (and AS/400) business in the face of adversity. Palmisano and the then iSeries general manager Buell Duncan chose to stand and fight. It may have worked: When IBM unveiled its 'iSeries new deal' in January, analysts and customers were unexpectedly delighted. "It's a pretty complete tearing apart of the old price and charging models," says Ian Bramley, managing director of analyst Software Strategies.

Bramley's point is a crucial one. In the last big refresh in 1998, the iSeries shed its so-called 5250 'green screen heritage' and extended its somewhat tentative support for the Internet. But the transaction-based licensing cost of the software used to connect old RPG- and Cobol-based applications to the web required them to pay a substantial premium for the privilege.

Abolishing the "5250 interactions" tax will improve the price-performance of the iSeries by up to 80% when customers upgrade, says Henrik Schlegel, European vice president of iSeries sales.

Longer term, Schlegel is hoping that a number of new technologies will keep the iSeries' 250,000-strong customer base happy. IBM even hopes to add new sales by attracting refugees migrating from Hewlett-Packard's soon-to-be discontinued HP3000 server - once the biggest competitor of the iSeries.

The price cuts have been partly made possible by a consolidation of components; the iSeries now shares 80% to 85% of components with comparable IBM pSeries Unix servers.

In addition, iSeries users will be able to turn on extra microprocessors when they need them, and turn them off again when they don't. They will pay only for their usage of that extra processing power. Not everyone will benefit from this, however. Like the software bundle, the 'capacity upgrade on demand' feature is not available for purchasers of the entrylevel, $9,995 iSeries i800/i810 machines.

On a broader strategic level, the support for 'capacity upgrade on demand' is part of IBM's strategy to position the iSeries as a server consolidation platform for small and medium-sized businesses.

The machine is clearly capable of fulfilling this role. In addition to a (varying) number of built-in xSeries Windows servers, of which up to 48 can be added to the biggest machines, users can also run up to 10 Linux partitions on each microprocessor.

Using the iSeries' virtualisation capabilities, applications running on these different operating systems can share the same storage with little intervention required from the user - all managed by the iSeries' OS/400 operating system. "It can also give you virtual network links between partitions, between OS/400 and Windows, which can be set up in seconds without any switches or cabling," says Bramley.

This indicates where IBM is hoping the iSeries will find salvation - as a highly flexible platform for server consolidation, where users can start at a lower level than they can with, for example, HP's rival utility data centre (UDC).

One of IBM's big problems with the iSeries is that many new customers won't even consider it. But now that the licensing and cost issues have been resolved, potential customers may be more inclined to listen to IBM's pitch.