It's a bittersweet victory for AS/400 professionals who say the demise of IBM's Magic Box marketing campaign is too little, too late. They claim IBM's failure to market the AS/400 effectively undercut the true value of a solid and powerful machine and may have ruined its future.
"IBM seems determined to push their Netfinity servers above all else. This means pushing NT/2000," said Patrick O. Townsend, MIS manager, Maryland Plastics, Inc. "This won't be the first of their own products that IBM has killed. This may be their worst achievement on what may be their best product."
Nearly 80 percent of the respondents to a Search400.com survey said it was about time IBM nixed the Magic Box campaign. Fifteen percent of the respondents said the AS/400 was compromised to the point of no return.
The Magic Box campaign, which debuted in 1998, has been a point of contention for AS/400 loyalists who complain that the ads did little to promote the AS/400 as a powerful line of business computers and weakened the AS/400 position with NT servers. The ads promote IBM servers as "magic boxes" that are capable of great things-but fail to identify them. According to IBM, the ads were designed to familiarize viewers with IBM servers without getting into the technical details.
According to Tom Bittman, an AS/400 analyst with the consulting firm, Gartner Group, the Magic Box campaign did hurt the AS/400, but he stressed that the AS/400 is not on a "death spiral." A 22 percent drop in AS/400 sales in 1999 was a result of Y2K-not the Magic Box campaign as some have suggested, he said.
"Magic Box was a good concept before its time," said Bittman. The campaign was a step toward brand identity, but Magic Box failed to clearly identify the server products, including the AS/400. The message IBM was attempting to convey about their servers turned out to be watered-down and washed out. Magic Box "might have helped the brand but not the servers," he said.
"It seems that I've never seen an ad, at least not on TV, that even remotely suggests what one of their systems actually do," said survey respondent Joseph Cattano, manager, IS Technical Support group, Goldman Associates, New York. "I see a lot of glitz and cute stuff, but nothing of substance. I have a lot of respect for IBM in terms of technology both from the hardware point of view and from the system software point of view," he added. "However, when it comes to marketing, I'm afraid they haven't a clue."
Bittman said that may be changing now that Al Jarosh, IBM's recently appointed AS/400 general manager, has taken over. Jarosh knows the AS/400 well, and according to Bittman, AS/400 will get a lot of attention because of it. "We'll see a lot of new messages about AS/400 popping up.
However, Bittman said that marketing has been IBM's number one problem for years and getting its marketing efforts back on track isn't going to happen over night.
For a number of AS/400 administrators, the AS/400 has suffered from an image problem for years. The Magic Box campaign only added fuel to the flame. AS/400 administrators say they have to constantly defend their systems because IBM has failed in its marketing.
"When I mention that I work in Information System's with the AS/400 system, people just give me a blank stare, they haven't a clue what I'm talking about," said Donna Olsen, senior systems engineer, Mercury Health Services. "You would think with the number of AS/400s installed worldwide, more of the general population would of heard about the system. IBM needs to advertise to reach the top levels of management who only seem to know about mainframes or Hewlett-Packard Unix systems.
"Our administrator is convinced that the AS/400 is "old technology", and with no enthusiasm for exploring the machine just tends to ignore it," said Cattano. "I'm afraid that if IBM doesn't aggressively market the AS/400 I and many others will be changing our careers to deal with much less capable platforms."
"I find it to be amazing that my clients, all IBM AS/400 customers, don't realize the full potential of the systems they acquired and use to support their businesses," Edward J. Koziol, an AS/400 systems engineer with Chaney Systems, Inc.
"They also don't realize that IBM's e-business machine is their AS/400," Koziol added. "Instead, they continue to bring in new PC's with an additional 30 points of failure and additional resources required to manage another platform. If nothing else, we've allowed AS/400 customers the opportunity to create a trend towards consolidation, by accident of course."
Bittman said IBM needs to figure out how to mass-market their servers if they expect those product lines to grow. Administrators "need their bosses to hear about it (AS/400)."J.D. Edwards branches out,
J.D. Edwards & Co. suffered through the same kind of horrendous year as all of its ERP competitors in 1999 but 2000 has been a different story. Rejuvenated by a rebound in the overall ERP market and a tripling of its stock price since last fall, the AS/400 financial software stalwart has cut a series of joint development and marketing deals with vendors like Siebel Systems, Inc. and Ariba, Inc. The alliances expand J.D. Edwards' product portfolio into sales force and customer relationship management and position the company to compete with the biggest players in next-generation ERP software.
In the process, J.D. Edwards has also expanded its product line broadly into the Windows NT and Unix business. But will that product diversification come at the expense of the AS/400 customers who have been the backbone of the company's success to date? Search400.com editor Paul Gillin caught up with J.D. Edwards President Doug Massingill to ask that very question.
Search400.com: Search400.com: How much of your business is now made up of AS/400 business versus other platforms?
Massingill: Somewhere between 35% and 40% of our revenue is now non-400. That has essentially grown from zero in the last few years. The dominant part of that non-400 business is Windows NT. But the AS/400 is still the dominant revenue contributor to J.D. Edwards.
Search400.com: How do you dovetail your interest in the growing NT business with the more stable AS/400 installed base?
Massingill: They're complimentary. There are many instances of NT being deployed throughout AS/400 shops. We also see that as the AS/400 community looks to adopt new technologies, they're more likely to look at an NT extension to complement their main servers than a Unix extension.
Search400.com: You've announced a spate of alliances, acquisitions and new products recently. Why so much activity?
Massingill: For the past 10 years, J.D. Edwards has been positioning itself for right now: we've been building out the product suite, rearchitecting the applications and getting into a position where we figure we're better positioned than anybody to supply software that meets the needs of e-business.
Search400.com: Last year was terrible for most ERP companies. Is this whole market ripe for a shakeup?
Massingill: I wouldn't term it a shakeup. What's about to happen is that the vendors who are in the leadership positions in the market now will continue to strengthen their positions. SAP will be dominant for many years. Oracle's application division is very strong. We feel that right now, in the manufacturing and distribution industries in particular, JD Edwards is in third place.
Search400.com: How does the AS/400 play into your joint ventures with companies like Siebel and IBM, which don't have all their products on the AS/400 platform?
Massingill: In the case of our Siebel partnership, linking the number one AS/400 software vendor (J.D. Edwards) and the number one customer relationship management vendor is a huge benefit to our customers. Siebel probably won't deploy their technologies across an AS/400 platform, but they can co-exist in a way that adds value to our customers.
Search400.com: Your alliance with Tradex check company name moved you into an area that is relatively unexplored by ERP vendors. What's the significance of that arrangement?Massingill: With trading exchanges, we're seeing the Internet give people the ability to create a new kind of buying and selling relationship, making the business transaction more productive, collaborative and communicative. It's imperative that we able to integrate that business process with an active supply chain-planning capability. Plasticsnet.com, for example, lets plastic resin suppliers bring their materials to a central site and have buyers put out their bids and facilitate transactions. J.D. Edwards allows these suppliers and buyers to conduct those transactions in an organized fashion.
We're trying to provide a 100% separation between business and technology rules. Regardless of which platform you're using, it's independent of how you have defined your business process for order flow.
Search400.com: This would indicate that you're increasing you focus on vertical markets. Are you going to make any organizational changes to address that?
Massingill: A lot of vendors took 1999 as a reason to lament what was going on. We looked it as anopportunity to structure our field delivery system along vertical categories. We are focused on three in particular: industrial manufacturers and distributors, consumer manufacturers and distributors and service companies.
Search400.com: You have also entered the application service provider (ASP) market with the intention of setting your company up as a supplier of outsourced application services. How will this affect your existing customers?
Massingill: We're confident that this will be a big market. Most pundits believe it will be between 20% and 40% of our industry over the next four years. We want to give our customers the choice of how to deploy of our systems. If they choose to do an ASP model, we want to be able to offer that. But we want to maintain the relationship with the customer, even though the applications are running at an independent third party site.
We have over 40 customers for ASP services today. We have no preference for how customers conduct the transaction. Buy or rent, we can facilitate either.