IBM wants to make two messages crystal-clear to Wall Street analysts, consultants, Business Partners, and customers. First, the opportunity to rake in big bucks by converting brick-and-mortar businesses into click-and-mortar e-businesses is absolutely huge. IBM is fired up about e-business, not only because it helped create the concept but also because e- business expertise and marketing is Big Blue’s best defense against its many competitors in the IT marketplace. The second thing that IBM wants to make clear—and this is reflected in its new brandless Enterprise Systems Group organization—is that it has become platform- agnostic in its pursuit of server growth and e-business opportunities. The second message is perhaps most striking to midrange customers because it codifies a sales philosophy that has often seemed to be the attitude of many IBM sales reps even if it wasn’t explicitly the law of the jungle inside IBM.
Talking to Wall Street analysts recently, Sam Palmisano, general manager of IBM’s Enterprise Systems Group, said that IBM has surveyed more than 3,000 IT shops (many of which do not have IBM iron as their central server) during the past three years. He explained to the analysts on a private conference call that 81 percent of the companies surveyed said they already have multiple platforms in their data centers and that 48 percent said they have three or more platforms. Only a mere 5 percent of the companies surveyed said that they have only one platform.
The surveyed companies ran the gamut of industries and sizes, so don’t think IBM’s survey doesn’t reflect what is going on out in the AS/400 base. The AS/400 Division was transformed into the Mid-Market Server Division because AS/400 shops use a mix of platforms, including UNIX, Windows NT, NetWare, and, maybe soon, Linux. The same holds true for S/390 shops. S/390 mainframes, like AS/400s, can support the full portfolio of IBM e-business applications, but it may not matter, because IBM itself is becoming platform-agnostic. This change is occurring because IBM knows that most S/390 and AS/400 customers will not put e-business software on those machines, regardless of the operational benefits. The cost differential is too high compared to Windows NT/2K, Linux, and UNIX platforms.
In Palmisano’s presentation to Wall Street, the list of platforms for supporting Web and application serving included RS/6000s and Netfinities. That’s it. Not AS/400s. IBM fully expects customers to double up on these machines to get respectable availability. Apparently, it does not expect many customers to choose an AS/400 as a Web and
application serving platform. If they do, that’s great for IBM because it is happy to sell customers whatever they want. But if you think IBM cares about the AS/400 as some special kind of box with a unique culture more than it cares about getting growth in its overall server business and taking market share away from Sun, Hewlett-Packard, Compaq, or Dell, you’re wrong. IBM doesn’t care about brands anymore, because that approach has failed. This new brandless attitude is also what makes IBM dangerous, at least for those of us who want to see the AS/400 pushed as a premier platform for e- business. The impact marketing of the AS/400’s Rolling Thunder campaign does not make up for a crack sales team and Business Partner channel that is highly motivated to sell AS/400s specifically because these are the best machines on the market.
IBM has its eyes on a bigger target, and the only way to hit that target is to let people choose the platforms that they want. Big Blue reckons the worldwide IT market was just over $1 trillion in 1998 and that the market will grow at about 11 percent annually to reach almost $1.7 trillion by 2003. However, the traditional portion of the worldwide IT market, which accounted for about $580 billion in sales in 1998, will only grow 5 percent annually to reach about $740 billion by 2003. Contrast this estimated growth with that of the e-business portion of the IT market, which is expected to grow at about 19 percent annually between 1998 and 2003. The e-biz piece of the IT market is already worth several hundred billion dollars in annual sales, and IBM expects it to grow to about $765 billion by
2003.
Exactly how much of this e-biz business will take place in AS/400 shops in unclear, but the 250,000 AS/400 customers in the world will undoubtedly want to use Web technologies to create business-to-business e-commerce links between themselves and their suppliers, partners, and customers. Suffice it to say that there will be tens, if not hundreds, of billions of e-biz dollars at stake in the AS/400 base between now and 2003. That’s bigger than Y2K—much bigger. The AS/400 Business Partner community should work fight hard to keep as much as possible on the AS/400. If IBM really wanted to be platform- agnostic, it would unbundle AS/400 hardware and OS/400 software features and prices and cut prices enough to show that an AS/400 can meet an equivalent PC or UNIX server on its own turf. IBM doesn’t have to unbundle DB2 UDB, the 5250 protocol, or other features from OS/400 from a technical standpoint, just from a pricing standpoint. That way, the AS/400 hardware is only a slight premium over a PC or UNIX server, and customers pay extra fees for services above and beyond the base operating system—just as they do in the Windows and UNIX markets. This would be true platform agnosticism on the part of IBM, and a welcome change.
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