New cost incentives could be iSeries' savior

New offerings by IBM make it very appealing to buy new or upgrade to an iSeries. But the key to success will be if Big Blue can put up enough marketing brawn to sell these milestone changes to the platform to the outside world.

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IBM today announced major enhancements to the iSeries that are expected to be well received by the platform's installed user base. The changes, which include new hardware upgrades, such as on-demand capabilities, as well as what essentially amounts to free software, represent an attempt to grow the platform by offering unprecedented cost incentives.

But some analysts warn that if Big Blue doesn't aggressively promote the new and improved system outside the ranks of current iSeries users, this major initiative could fall flat on its face.

"The concept here is to drive growth, and they have to drive growth or this fails," said Tom Bittman, an analyst with Stamford, Conn.-based Gartner Inc.

Bittman said it's clear that this announcement will go over big with the installed base, but IBM isn't just trying to woo its current customers here, nor should it be. Bittman said the hope for the platform's future is to make these offerings visible to the outside masses. "For them to be successful, they have to do this," Bittman said. "This is a last-shot, big jolt to drive growth."

The changes are indeed significant and, in fact, mark the first major upgrades to the iSeries in 10 years.

IBM's announcements include the addition of four new server models.

The new iSeries 870 and iSeries 825, both Power4 enterprise servers, join the i890 at the high end of the iSeries family. All three models are capable of running OS/400, Windows, Linux and Unix, and all feature on/off capacity upgrade on-demand, which provides temporary capacity. This new technology allows customers to turn on processors when they need them and turn them off when they don't -- potentially saving businesses tens of thousands of dollars, experts say.

The iSeries 810 and iSeries 800 are the new low-end additions to the iSeries family. The iSeries 800 is a new single processor model -- starting at $9,995.

In addition to the new servers, IBM said it would include WebSphere Express as part of its standard offering in the new models. In addition to WebSphere Express, the iSeries Enterprise Edition systems also include IBM Lotus QuickPlace and Sametime, Tivoli, and DB2 database software.

According to analysts, the changes make the iSeries an extremely good buy, particularly for the small to mid-sized business (SMB) customer. The SMB space is a huge growth area for the platform and a major priority, it is said, of the recently appointed Al Zollar.

Two weeks ago, IBM announced that Lotus executive Zollar would replace Buell Duncan as the head of the iSeries.

"If you look at [it], the most significant part of the announcement for the smaller customer is that we've delivered in an affordable fashion the right kind of pricing with e-business apps across the line," said David Bruce, IBM's worldwide iSeries Web marketing manager.

Bruce said that, for the mid-tier customer, the big news is that IBM has delivered a server with the Power4 processor "much further down the line." In addition, he said, the new servers offer a "great set of capabilities and expand capacity on-demand," again, down the line.

Dave Jenkins, spokesman for Arkona Inc., a developer of management software for the auto dealership industry, said that the bundling of WebSphere on the iSeries will help his company promote the iSeries to its customers and ultimately expand its business. The Salt Lake City-based company has about 300 customers. Its business runs primarily on the AS/400 and iSeries platform.

"This will encourage dealers to invest in the iSeries, which would make it easier on our end," Jenkins said. "A lot of our dealerships are going to have to upgrade, and this will be great for them."

Jenkins added that a growing number of dealerships are demanding that their businesses be Web-based. Having WebSphere embedded in the price of the iSeries could make it extremely appealing to his customers.

"It makes it much more attractive to stay with us as a customer and use IBM as a solution," he said.

According to analyst Maria DeGiglio of the Westport, Conn.-based Robert Frances Group, the pricing implications of this announcement are "incredibly significant." DeGiglio said that the on-demand capability, which allows users to use the system only when they need it, will bring big savings to users. In addition, the bundling of software as standard on the iSeries saves thousands in not only pure software costs, but in implementation costs as well.

Raising the potential for cost savings is the demise of the 5250 interactive feature, a feature Bittman referred to as a "cash cow" for IBM. By eliminating the 5250 feature, IBM has reduced the number of software tiers and simplified pricing. For example, if a user buys the standard edition of the model 870, it comes with zero 5250 CPW. The enterprise edition of the model 870 comes with an unrestricted amount. There is no restriction. So whatever the processor rating happens to be, that's the amount of 5250 CPW the user has.

"We've offered them a choice," Bruce said. "Customers were saying, 'we either need it or we don't.' They haven't been asking us to eliminate it, just the restriction of it and the pricing of it."

Upshot: if they need it, they have it. If they don't, they don't pay for it.

"In many ways, it's amazing that they've made that move, and it might be very risky," said Bittman, although he agrees it could also prove to be a very successful strategy.

Bruce said IBM is on very solid ground with this announcement, and he's confident that these changes will easily attract new customers.

"What's key here is that IBM has established a new revolution -- e-biz on demand," he said. "The iSeries is in a unique position. It's the first [platform] to offer a truly integrated middleware stack for the mid-tier customers. [Users can] jump into that e-biz on-demand world."

DeGiglio agreed. "I believe that IBM is aggressively going to market this product. And the fact that it fits into the whole e-biz strategy… it's ensuring a future for the product."

FOR MORE INFORMATION:

iSeries community pins hopes on Zollar

IBM to push on-demand computing in 2003

Users speak their minds on the iSeries, IBM's treatment of it

Can the iSeries now lure new users? Take our poll.

Comment on this story. E-mail Kate Evans-Correia, News Editor

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