Because the System i can run at redline speed all day long . . .
Along the lines of yesterday's Q&A, Kevin Fratzke, vice president of System i Solutions Practice for MSI Systems Integrators, is seeing similar interest in the 515 and 525.
"We are selling quite a few i515s and i525s to our existing customers, and we have sold a few to new customers," Fratzke says. "The changes in packaging and licensing to user-based have helped a lot in approaching the smaller customers that have gone dormant and are on older hardware."
His point about dormant customers is a good one and one that I hadn't considered before. The last time I heard much about IBM going after dormant customers was three or four years ago. In all the IBM-specific talk about the 515 and 525, however, none of the IBMers I've talked to have mentioned going after dormant customers as a strategy. Either IBM was pretty successful in 2004, or, more likely, the company is focused on driving new growth through the Vertical Industry Program (VIP).
Either way, there's obviously an opportunity for IBM Business Partners to get in front of customers who already have some affiliation with the i and bring them back onto modern solutions and presumably (re)become System i enthusiasts. Of course, these customers are still very small customers and may have a questionable growth curve you know, the idea that small companies become big companies . . . not always true, even if big companies like IBM, Oracle, and SAP are in love with the concept and spout it whenever they have an SMB strategy to share.
Pricing Is the Driver
With the full processor unleashed in the 515 and 525, which is more important to sales horsepower or price?
"The pricing model is driving most of the activity," Fratzke notes. "The horsepower doesn't hurt, but it's secondary when approaching dormant accounts they typically do not need performance it's more economics. With new customers both factors are more equal."
The Up and Down of Cost
Obviously, selling a lot of low-cost System i 515s and 525s is a good thing for expanding the use, market, and knowledge base of the System i. The downside is the cost and the profit for both IBM and Business Partners. It's tough to sell a commodity product that's fundamentally different from the other commodities on the market you need volume to make a profit, and volume is tough when you have to educate your buyers for nearly every new sale. There's no easy answer, and while Fratzke is seeing positive movement, it's not all glory and roses.
"Profitability is down due to the new pricing model on a per unit basis," he says. "IBM also has fewer protections in place for Business Partners who invest in i515 sales that can lower profits."
Net New Sales
Incidentally, while most of the 515-525 sales have been replacements in existing accounts for Sirius (as noted in yesterday's post), Sirius has made two sales into brand new accounts with no previous System i, iSeries, or AS/400 in place. If this were October, I'd be raining dogs all over this single digit number, but these boxes haven't been available that long. Baby steps, right?
Posted by cmaxcer at July 10, 2007 8:25 AM

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