IBM's iSeries: To Serve and Protect

Chairman Lou Gerstner did so in the mid-'90s, bringing the whole company

back to life with a new IT services plan. More recently, IBM Software Group

executive Steve Mills breathed new life into a waning software business and grew brands like DB2 and WebSphere from also-rans to leaders of the pack.

But IBM's iSeries eServer may well be the ultimate symbol of IBM's survival skills, having grown from early incarnations as System/36 and System/38 computers in the 1980s to the popular AS/400 in the early '90s. It has endured multiple branding changes, architectural redesigns and painful evolutions to become one of Big Blue's mightiest and most successful products.

Still, the iSeries gets surprisingly little attention from the industry mainstream, taking a back seat to more heralded e-servers such as the pSeries and its "supercomputer" p690 model, or the zSeries mainframe, which is synonymous with IBM itself. The iSeries seems to get slighted in a way that would make even Jan Brady sympathize.

Not everyone, however, has dismissed the iSeries. Longtime partners,which make up its core following,again put the server model at the top of the 2002 VARBusiness Annual Report Card (ARC) this year to win its fourth consecutive title for midrange servers; it also captured the ARC Lifetime Achievement Award. Peter Rowley, general manager of IBM Business Partners, isn't shy about iSeries' success. "I personally haven't heard of one customer that wasn't satisfied with iSeries or the AS/400," Rowley says.

Analyst firm Gartner Dataquest reports that IBM held the overall lead in server-market share with 29.6 percent revenue share in the second quarter, and iSeries' 500,000 supported systems worldwide certainly contributed to that success. But while iSeries has a strong customer base and a core of dedicated VARs behind it, it's come to a crossroads of sorts, contending with a sour economic climate and facing an uphill battle against the growing competition of the Windows-Intel and Unix-based models from HP, Sun, Dell and even IBM. Critics say the integrated architecture of the iSeries and its hybrid OS/400, the operating system for the server,both the AS/400 and iSeries models,are old and face extinction.

But don't count IBM out. The Big Blue medics are on the job with new strategies and programs to protect iSeries' skills, boost server sales and steal customers from rivals.

"The Wintel and Unix server market is large," says Buell Duncan, general manager of IBM eServer iSeries, "but there's ample room for iSeries, particularly at a time when customers are looking for ways to get their arms around total cost and the complexity of distributed computing. IBM's iSeries is the ideal solution."

Partner Power

In talking about iSeries' obstacles, Rowley expresses the same candor as when he speaks of the server line's merits. Because the integrated server gets most of its revenue from a solid customer base and has seen little new business during the recession, Rowley sees a gloomy market for integrated midrange servers. "In the midrange market, most new server business is around Intel or Unix-based servers today, not iSeries," Rowley says. "Nobody comes out of college today with iSeries skills. So, our job today is to protect the customer base for iSeries and keep the partner skills sharp."

Of all the IBM products in the market, the iSeries may be the most dependent on the channel, which currently accounts for a whopping 85 percent of iSeries sales. "We've had a channel strategy the whole way, ever since the first days of the product, so partner skills haven't dissipated, and neither has our commitment," Rowley says. "We've been consistent and tried to implement changes slowly."

The changes have been numerous, too. Many iSeries customers and VARs began working with the server more than 15 years ago when it started out as a transaction computer known as System/36. After introducing the AS/400 in 1988, the model went on to sell more than 500,000 units and emerged as the dominant business computer. In the '90s, however, businesses flocked to Unix and Windows, and the AS/400 was left out of the party as the IT industry boomed.

Ever the master of revival, IBM methodically revamped the AS/400, ditching the server's reputation as a proprietary system and positioning it as an integrated e-business transaction server. The company rebuilt its operating system, OS/400, to support Windows, Lotus, Unix, Java and, most recently, Linux applications. IBM improved the hardware as well, adding copper and silicon-on-insulator processors and IBM's PowerPC RISC architecture for better performance and scalability. The result: a 64-bit integrated server that keenly combines disk storage and memory, comes with a built-in relational database in DB2, backward binary compatibility and logical partitioning, and can run just about any application customers want. There are more than 200,000 iSeries customers worldwide, with an estimated 750,000 units sold between the iSeries and AS/400.

Perhaps most important, solution providers say the iSeries is as rock-solid and reliable as ever. Joe Baumgardner, co-owner of Central Technologies, a systems integrator based in Oklahoma City, has worked with it for nearly 15 years. Central Technologies' hardware services are almost exclusively based on IBM's AS/400 and iSeries machines.

"There are certain things the AS/400 does really well, like accounting transactions and e-mail," Baumgardner says. "The one thing about IBM iSeries that's better than anything else is that once you've set it up, it pretty much runs on its own and doesn't go down. Most of our customers don't have large IT departments, and reliability and stability are key."

Rowley says the best iSeries partners are local VARs that have adapted to the changes and built strong skills around the model over the years.

"We've been working with the iSeries for years,since before the AS/400,and we've kept our skills up," says

Walter Camp, manager of business development for Cothern Computer Systems, Jackson, Miss. "There's not a more loyal group of customers and partners on the planet than the iSeries bunch."

It would be hard to dispute that claim, as IBM iSeries

posted some of the highest loyalty scores in the ARC during the past two years. With strong partnerships, the iSeries has carved out a stronghold in the small and midsize business market.

Kim Stevenson, vice president of iSeries eServer marketing, believes midmarket solution providers are the key to keeping iSeries successful. "The midmarket is still the fastest-growing segment of the server market," Stevenson says. "The advantage is having local resellers that have the reach for a particular region and have superior insight into those midmarket customers."

A New Generation

IBM, no doubt, has its work cut out for iSeries, as other server-makers are pushing Intel and Unix platforms. IBM's iSeries also faces competition from within; Rowley says the xSeries eServer is probably the No. 1 threat to its integrated counterpart.

Still, Big Blue is finding ways to improve iSeries' standing, positioning the server as a more scalable, cost-efficient alternative to the restrictive Windows-Intel platform and the higher-end Unix systems. IBM is also playing up the model's robust integration features, storage-virtualization capabilities and ease of deployment for VARs.

Not content to rest on a solid customer base and let the competition come to it, IBM took iSeries to the competition,literally. When Hewlett-Packard last year announced plans to discontinue its HP 3000 midrange server, IBM saw a whole new customer market and immediately began working on a migration strategy for iSeries. Big Blue even traveled to HP's World conference in Los Angeles last month in an attempt to steal away HP 3000 customers. "We've gotten a fair number of prospects for customers and ISVs so far, so I'm encouraged," Duncan says.

Cothern Computer Systems is currently offering conversion services for customers looking to migrate to the iSeries. Camp says the company had done a couple of conversions already and expects the business to grow as the deadline for the HP 3000 approaches and interest grows in iSeries.

IBM also hit the road with a series of nationwide training sessions for roughly 500 iSeries partners. "It was all about how to leverage the changing dynamics of the server market to their advantage," Stevenson says. "The most prevalent issue for businesses is cost. How do they keep cost down?"

No doubt, pricing is an issue for iSeries, which starts at $10,000, well above the $649 xSeries Intel-based systems and $2,699 pSeries Unix-based systems. Cothern's Camp, however, says starting prices can be deceiving. Unix servers are typically harder and more expensive to maintain, he says, while the less expensive Windows-Intel platform is not as robust or reliable. "It's got a great cost-of-ownership edge against Unix," Camp says. "Windows isn't the answer, either. The server is like a pacemaker. Do you want the cheapest one, or do you want the one that's going to last the longest and won't quit on you?"

Still, many customers aren't thinking of three- to five-year cost-efficiency studies and long-term ROI: They just want the most inexpensive midrange server on the market. To that end, in August, IBM launched its Green Streak program, which offers AS/400 customers up to 50 percent off on hardware costs to migrate to iSeries. Orders must be placed by Dec. 13, and installations must be completed by year's end. "It's early, but we think it's off to a good start," Stevenson says.

The Future

IBM could certainly feel the tide turning against the AS/400 in the early 1990s, but rather than give up, the company stuck by one of its best products and made substantial improvements. Now, 10 years later and in a similar predicament, IBM looks to repeat itself.

One of the most important tasks, according to Rowley, will be keeping the software offerings for iSeries fresh and exciting. During the past few years, IBM has integrated its own software onto the server, including DB2, WebSphere application-server platform and Lotus Domino, and has also integrated applications from premier software companies such as J.D. Edwards. Now IBM is focused on recruiting more ISVs for the iSeries.

"We have to make sure customers don't move their workloads to other servers, and to do that we need more ISVs to build applications for the iSeries to expand its capabilities," Rowley says. "The best VARs are working hard to build strong alliances with software vendors to improve the offerings on iSeries."

Sales may have decreased, but partners are still finding steady work around iSeries. "The server market is...still very good for iSeries and AS/400 servers," Baumgardner says.

One thing is certain: IBM is committed to growing one of its most successful products ever. "The challenge is to make our customers aware of how different iSeries is in terms of its capabilities," Duncan says. "Our energy is focused on incenting, motivating and educating our business partners around those new iSeries technologies and capabilities, and we're starting to see some real traction."