What does a company do when thousands of its customers write to its headquarters year after year, complaining about the lack of marketing for their favourite product, suggesting a stream of technical improvements, and even going as far as to send in complete television scripts for product advertisements? The correct response is probably not to defy conventional marketing wisdom and create confusion and even more disillusionment by forcing yet another name on the product – its third in six years.
IBM’s mid-range line – which entered the decade as the AS/400, became the iSeries and was, in February, rebranded as the System i5 to reflect its use of the IBM Power 5 processor – has one of the most illustrious pedigrees and loyal followings of any business computer. But behind the chilly reception for the new name, from both user organisations and the vast ecosystem of IBM mid-range value added resellers and application vendors, there was a palpable sense of triumph: The accompanying announcements of refreshed hardware, the promise of a move to a service-orientated architecture and new pricing plans have all signalled that IBM is now fully committed to taking the proprietary range of servers into its fourth decade.
Those signals were not always there in recent years. Over the turn of the decade, IBM showed clearly that it favoured Linux and Windows-based systems and Unix on Power processors over the AS/400 and then the iSeries.
That culminated in 2002 when IBM senior management considered the prospect of relegating the range to legacy status. And perhaps with good reason.
While sales were growing across IBM’s other server ranges, revenue for the iSeries fell by 13% in 2002, the poorest performance of all the company’s server products. The diehards put that down to a lack of marketing and low spend on R&D.
Only when new CEO Sam Palmisano took over the helm from Lou Gerstner in March 2002 did the iSeries receive a fresh lease of life, with a revamped mid-range server emerging ten months later. Fast forward three years and the decision to reinvest in the iSeries is paying dividends. Revenue is at its highest point in nearly 10 years and in 2005, the iSeries experienced three consecutive quarters of growth, including a record third quarter which saw revenues up 25% over the same three months in 2004.
“We are 100% committed to radical marketing.”
Malcolm Haines, IBM
What IBM has succeeded in making clear is that the System i5 platform has long ago quashed the old AS/400 association with its 100% proprietary systems software and ‘green screen’ interfaces, and replaced that with a highly flexible platform that offers organisations the ability to consolidate their workloads from a number of different operating systems onto one single system. At the same time, it has retained its longstanding reputation for high-reliability, ease of use, and application robustness.
And as a badge of confidence in that new formula to persuade current customers to bet longterm on i5 and to win over a whole new generation of customers, IBM is undertaking its first marketing campaign for the iSeries in almost a decade.
The quest for clarity in i5’s positioning is evoking – as always – high passion among IBM mid-range executives. “If you are not clear about what you stand for, you’ll die,” says Malcolm Haines, eServer iSeries marketing director at IBM. “We are 100% committed to radical marketing.”
But telling IBM staff, such as those in its services and outsourcing divisions, what the strengths of the platform are and what it can offer customers might be easier than convincing organisations to invest in the new line of mid-range servers.
Currently, over 245,000 organisations are using System i5, iSeries or AS/400, with over 400,000 systems installed worldwide at companies such as Banco di Brasil, Woolworths, Ricoh Europe, Adidas-Salomon and Arcadia Group. But while revenues might be in the ascendancy, it is too early to predict whether this revival is a one-off occurrence triggered by frustrated demand among captive elements of the existing customer base or indicative of a continuing upwards trend driven by renewed faith and new customer wins. This ambiguity is not made any clearer by IBM’s reluctance to identify how much of its i5 revenue is flowing from new licence sales.
Haines is looking to ‘viral’ marketing to spread the word about i5. Emphasising some of the ‘no-fuss’ operation of its progenitors, Haines sees the i5 as being in the same category as Google and the Apple iPod where growth – at least initially – has flowed largely from word-of-mouth marketing. “Google has over 120,000 servers running the most ‘poetic’ algorithms in the world. Yet all you see is a white screen and 30-odd words,” he says.
But while this strategy of ‘viral’ advertising works well for new-generation lifestyle products, the iSeries suffers from a more deep-rooted problem: an antiquated image.
“There still exists a notion that the iSeries is an old technology,” says Matthew Ashton, director of the UK’s iSeries User Group COMMON. “Many still see it as a dark horse that simply plods along.”
To shake this image, IBM needs to alert the market to the fact that companies like Microsoft are using the Power technology that underpins i5 in new, high-performance hardware products such as the Xbox 360 games console, he adds. “And that’s not because they want to use old technology. It’s because they want new, leading edge technology giving them the market share that they need,” Ashton says.
“There still exists a notion that the iSeries is an old technology. Many still see it as a dark horse that simply plods along.”
Matthew Ashton, director of the UK’s iSeries User Group COMMON
Certainly, the sense that Intel is winning the mid-range server race, boosted by rapid adoption of Intel servers in IBM’s traditional server heartland of mid-sized businesses, has not helped the company in its quest to dispel many of the myths about iSeries and i5.
But Ashton maintains that customers are often naively drawn to the platform that is easiest and cheapest to use, not the one that is most robust. The Canadian division of sportswear manufacturer Adidas-Salomon, for example, found the performance of its two Dell servers to be lacking. In the interest of optimal availability, the company migrated its applications to the web and integrated legacy applications, operating systems and hardware platforms, by consolidating the Dell servers onto an iSeries machine.
That argument might not be strong enough for some. The iSeries faces an uphill battle as many organisations are consolidating and reducing the number of servers they use, says Ian Brown, research vice president at IT analyst group Gartner. “Windows and Linux reliability and manageability is proving ‘good enough’ for many customers, especially as Intel price/performance on small low-end servers is improving so dramatically from year to year,” he says.
As more businesses use the Intel platform, more independent software vendors (ISV) are drawn to Microsoft’s .Net development environment. And as their applications become available for Intel, more are encouraged to turn their back on the IBM’s proprietary mid-range operating system – even though it can run Windows applications in a partition.
TLC for the ISV
One reason for this migration to Intel-based platforms is that many of the iSeries applications are out of date. IBM’s assistance and incentives to modernise iSeries applications can’t come too soon, says Brown, referring to the need to rewrite many RPG and COBOL applications running on the iSeries. And although RPG – the i5’s ‘native’ language – runs very efficient language on the iSeries, it is not well-suited in the kind of web-technology based environment that businesses are increasingly looking to implement.
However, many companies are still running mission-critical applications that use RPG or COBOL, but as developers shift to other environments, such as .Net, RPG skills are becoming in ever decreasing supply. As Ashton points out, “the number of RPG applications currently out there is huge.”
IBM recognises that dilemma and is trying to stabilise and widen the network of their ISVs through a programme started in 2005 called the ‘iSeries Initiative for Innovation’. According to Greg Hurlebaus, eServer solutions enablement manager at IBM, the programme is a way of reaching out to its ISV partners and expanding the numbers from mere ‘hundreds’ of ISVs into ‘thousands’.
The initiative focuses on the applications market of the iSeries, and IBM is offering an array of support and marketing services to over 2,600 independent software providers.
Notwithstanding the challenges posed by the dominance of the Wintel platform, increasing the number of applications and tools using the ISV network would give IBM resellers more depth in selling the System i5 to customers. And by increasing the server’s reach, IBM may persuade new buyers that the System i5 is a modern, flexible machine.
Some of the expansion of the ISV network may come from new quarters. According to Bob Djurdjevic, president of Annex Research, IBM has barely touched the surface of the small to medium business market in vast eastern European countries such as Russia. And with the new pricing plans announced in February of this year, the System i5 is well positioned to attract new customers all around the globe.
In spite of on-off marketing, the System i5 family of servers has provided IBM with a stable revenue stream, and although IBM, like most global IT vendors, is putting more emphasis on the business services it offers rather than its hardware, the System i5 is likely to strengthen its reputation as a ‘turnkey’ product with the introduction of greater flexibility.
Whether that message gets across to anyone other than the iSeries faithful depends on how well IBM can turn an old reputation into a hot brand.
From System/3X to System i5: A brief history
The current System i5 was first introduced by IBM in June 1988 as the Application System/400, a purpose-built, all-in-one server designed for general business and departmental use in small and intermediate sized companies.
The AS/400, previously known by its development code-name Silverlake, was a combination of the System/38 and the System/36 and was unique in its design, introducing the concept of the single-level store with the operating system, database, hardware and software all integrated together into one machine. This concept has been an important part of the server’s success as it allows programme developers to change both the hardware and operating system without any recoding or recompiling any of the underlying software code used to run the applications. Therefore, a program written and compiled on an old System/38 program can be restored onto an iSeries machine, for example, and run without any modifications.
In 1998, the iSeries left behind its so-called 5250 ‘green screen heritage’ and IBM extended the machines support for the Internet, although the cost of connecting RPG and COBOL-based applications to the web proved high.
The AS/400 lost its name in 2000, as IBM renamed it to the iSeries as part of its eServer branding exercise. Its current i5 moniker came about in 2004 when the series was extended to use IBM’s POWER5 processor chip.
On 31 January 2006, IBM formally announced that the iSeries range would be known as the System i5 platform, and that it would run i5/OS (the follow-on from OS/400), Unix and Linux natively on Power 5 processors, with the option of adding in Intel Windows and Linux environments via xSeries plug in boxes and boards.
IBM’S decision to rename its iSeries server range as System i5 may have been made to emphasise its use of the company’s Power 5 processing technology, but the negative reaction from users to IBM’s mid-range was swift.
Matthew Ashton, director of the UK’s iSeries User Group COMMON and an ardent fan of the IBM mid-range since the AS/400 was launched in 1988, is one customer who disagrees with IBM’s decision to give the line its third name in six years. “I don’t believe they have done it correctly,” he says. “IBM is going to have to go a long way in convincing the marketplace and the users who are passionate about this machine why they have gone down this route and changed the name.”
But executives at IBM are more sanguine. “If our traditional customers still want to keep referring to it as the AS/400, I don’t have a problem with that,” says Nigel Adams, iSeries product and sales program manager for the enterprise systems group at IBM. “In a way, it’s probably more relevant to new customers because it’s signalling how much more you can do with the platform now.”