Marketing missteps, unclear updates and other issues curtail channel profits
IBM channel partners say poor marketing and customer confusion about recent technology refreshes are hobbling sales of iSeries servers, one of the most successful server lines ever.
Traditionally one of IBM's more profitable server lines, the iSeries suffered from flat sales this quarter after three consecutive quarters of growth, solution providers said. They blame the product's sales lull on factors that most IT vendors dream about: falling prices and rock-solid performance and reliability. Yet new iSeries updates also have customers confounded over whether to upgrade their server infrastructures and how to do so.
Many iSeries channel partners agree that IBM has done a terrible job of marketing the server. "The iSeries has always received inappropriate PR," said David Browning, executive vice president of Advanced Systems Group, Tustin, Calif. "iSeries customers get it; others don't."
iSeries customers may have "gotten it" too well. Harvey Najim, president and CEO of San Antonio-based Sirius Computer Solutions, the world's largest iSeries partner, said there's a huge iSeries installed base that's dormant because they're happy with the product. "When they buy, they get extra capacity and don't need to get more," Najim said.
A big part of the problem is the channel, which IBM officials said accounts for about 90 percent of iSeries sales. VARs find it difficult to make money selling the iSeries because its price-performance is accelerating too quickly, said Jerry Munson, senior vice president of the Technology Solutions Group at Data Systems International, an Overland Park, Kan.-based IBM solution provider. New models unveiled last May, which use the same Power5 processor as the IBM's pSeries Unix servers, have so many new features that customers are "taking their sweet time" to evaluate them, he said.
"It's a great deal for the customer, but for the [IBM] Business Partner, we could sell the same machine at half the price," Munson said. "It's hard to maintain a revenue growth model. That is at the heart of the channel's challenge to maintain growth with the iSeries."
In the past, IBM didn't treat its iSeries customers properly, according to Browning. "They were treated differently because of their loyalty," he said. "They might pay twice what other server customers might pay. Now IBM has eliminated the initial investment disadvantage, which should breathe new life into the line."
Yet other problems exist. One solution provider, who requested anonymity, said IBM's move to use the same processor in the iSeries and the pSeries--and even to name the latest models i5 and p5--will continue to bewilder customers.
"The i5 box is exactly the same as the p5 box," he said. "There are some differences in how they handle I/O. But over the years, they've been getting closer. Now they are merging. The i520 is the same as the p520. The i520 can run AIX, just like the p520 will be able to run OS/400."
IBM recently cut the price of i5 hardware by about half, but that move was accompanied by a hike in operating-system and software prices, which means the i5's net cost remained roughly the same or even rose slightly, the solution provider said. As a result, the i5 actually is more attractive to customers looking to run AIX on the platform or port their Sun Solaris applications to AIX on i5.
"I'm not sure if it was the wrong way to go to market, but it's confusing to us," the solution provider said. "So you can imagine that for the customer, who is not as close to the iSeries as us, it's even more confusing."
Still, those features and customer loyalty are what have made some solution providers focus heavily, or even exclusively, on the iSeries. Those qualities, too, are luring new iSeries partners such as Houston-based PCPC, which was certified for the line five months ago.
"I'd need to sell a boxcar full of xSeries servers to make the same as an iSeries server," said Joe Vaught, PCPC executive vice president and COO. "The product is solid, and customers are loyal. You have to pry it out of their hands."
IBM sharpened its focus on the iSeries with its recent appointment of Mike Borman, the company's top channel executive, as general manager for the iSeries line. Borman ran the pSeries line before moving into IBM's channel organization, and he has experience in both channels and in branded servers, solution providers said.
"What guy ran channels at IBM the last however many months? Mike Borman. He's the best guy there," Sirius Computer Solutions' Najim said. "He's a great leader; he'll do a great job. We'll get through this hiccup, and it's just a hiccup."
Going forward, Borman will be a big plus in steering the iSeries, the anonymous solution provider said. "His appointment is a Band-Aid on the line," he said.
Borman also could provide valuable input on any other changes IBM may have in store for its server product lines and channel, the solution provider added.
SCOTT CAMPBELL contributed to this story.