System iNetwork

March 2, 2008

Shearer Wants to Mainstream i5/OS by 2009

Last week my colleague Rita-Lyn Sanders and I spoke with Mark Shearer, who is now the vice president of Marketing and Offerings for the IBM Business Systems unit. The topic? The "i" in 2008. Obviously, the major change affecting the System i world is IBM's reorganization and the customer rather than product-oriented approach to selling IBM solutions. Shearer mentioned that he's been wanting IBM to go in this customer-focused direction for about seven years.

"From our clients' point of view, they are so happy we are moving to more of a consultative approach, taking all of our systems capability to them as a portfolio rather than having different product teams, dealing with them separately, competing with each other in front of them . . . so this client-oriented approach is something I really believe in. It turns out that the System i client base is probably our single most important client base in our general business space," Shearer said.

"More than 90 percent of the System i clients fall into our general business segment definition, and my role in this business systems division is that I'm responsible for marketing and the offerings, all of the product lines -- System i, System p, Blades, and System x, storage, and System z for the small and medium business-sized clients . . . but the System i franchise is certainly our largest and most prevalent client base, so I will continue to be very engaged with the i community," he added.

The conversation was a quick half-hour, covering a lot of ground, and I'll share the key excerpts and do a little after-the-fact deconstruction of Shearers comments -- sort of like reading between the lines.

Shearer:

"In my first two and half years in System i, I got an awful lot of feedback from clients that they wanted to pay for what they use, that they wanted us to improve the price-to-value ratio . . . and we relaunched our entire entry-level product line back in April -- that ultimately drove more than 25 percent volume growth last year in System i."

CM Note:

25 percent volume growth . . . definitely a nice uptick in sales. Volume is far different from revenue, of course, especially as the price of small systems edges lower.

Shearer:

"I got very positive response to the idea of this, 'Let me pay for what I use' in very granular elements or capacity . . . our offering structures going forward, we're going to continue to do the kinds of things we introduced last year in terms of the operating system itself, and in our larger systems, we're going to continue to make it more granular, by engine, by capability, so that people can pay for what they use. On the low end of the product line, we're going to continue to offer an end-user-based approach to i5/OS pricing because that seemed to play very well in the marketplace."

CM Note:

The idea of System i customers paying only for what they use is fantastic for some but a total transformation for others. Some customers expect "everything" to come bundled together in one solid, cost-effective package, and this change may spark some resentment, some feelings of being nickel-and-dimed. As long as the nickels and dimes create a favorable sum total, this won't be much of an issue.

Shearer:

"One of the things I'm really excited about . . . is the support of our BladeCenter product line. A lot of our clients have an awful lot of Wintel systems beside their System i, and the ability to run i5/OS in an IBM BladeCenter and integrate it with the Wintel or Lintel systems, I think it's going to spark the imagination in a lot of our client base. When all is said and done, I really think the secret sauce of the System i is the operating system, and we'll continue to focus on that discreetly."

CM Note:

There are two key points here: 1) IBM sees major SMB market opportunity in using the BladeCenter model as a consolidation and simplification play in SMB organizations that have the System i in place. Where the System i failed to capture market share as a consolidation box, the BladeCenter, which doesn't have a clear OS bias, may reign supreme in these organizations. If IBM can capture sales that would have gone into, say, a Dell box, IBM will not only better serve its customers, but it'll also rapidly scale the overall IBM share of the SMB's budget. Smart move, really. 2) Shearer is saying that i5/OS is the secret sauce and that IBM will focus on i5/OS. What does this really mean? Nothing that hasn't already been happening. IBM will continue to build hardware capable of running both AIX and i5/OS . . . and the System i as a system will likely cease to exist . . . while i5/OS will continue on. Important point: Shearer didn't say this. I'm reading between the lines, and this is what I think is going to happen.

Shearer:

Shearer said he thinks the i-focused industry is waiting for the POWER6 version of IBM's i5 systems in both the low end and at IBM's very high end, noting that the 570 has been very well received.

"The other thing that's going to be interesting for our i client base is PowerVM and really leveraging the virtualization capability of our hypervisor. You'll notice with the POWER6 introduction, we make the financial equation significantly more attractive for virtualizing Unix and i5/OS on the same system, and I think we're going to get a lot of interest there."

Shearer referenced a survey of IBM's larger clients, two-thirds of which said that if the economics were more attractive, they would want to virtualize their i5 and Unix capabilities.

CM Note:

OK, here's another point: IBM's larger clients want i5/OS and Unix on the same box. It doesn't take a private investigator to figure out that p and i are heading toward pi.

Shearer:

Shearer pointed out that quite a bit is happening in 2008 -- a new version of i5/OS (V6R1) and a lot of new POWER6 hardware.

"This is my fourth year associated with the System i, and ironically some of the things I started working on five years ago are coming to market this year," he said, noting that he introduced the BladeCenter five and a half years ago, and he wanted i5/OS support back then.

"At the end of the year, what I want our i clients to feel and feed back to me is that i5/OS is absolutely a mainstream operating system supported on IBM's hottest products, and I think we've got some pretty exciting steps we'll take over the course of the year."

CM Note:

First of all, Shearer wants i5/OS to succeed in the market, and it's clear that his vision for how this is likely to play out will be the transformation of i5/OS onto "IBM's hottest products" . . . which will likely head toward being OS-neutral, for all intents and purposes. Personally, I see this as a double-edged sword -- to put i5/OS on a blade in a BladeCenter is to make i5/OS just another operating system, which mainstreams it; but at the same time, if you put i5/OS on a blade, it has a chance to shine next to the other operating systems that also live on blades in the BladeCenter.

Shearer:

"The truth is, these i clients are spending three times as much on those Wintel systems -- they are spending a huge amount managing their Wintel environment, their SANs, and if we can simplify the whole environment instead of the part that already runs beautifully, I think we can really help our clients."

CM Note:

Shearer is likely thinking of how the BladeCenter can do this. This comment, of course, reinforces the idea that IBM's sales growth play will veer heavily toward convincing System i shops to buy more IBM products via the IBM BladeCenter.

Shearer:

Shearer noted that the Business Systems group is focused on a lot of products and will definitely go after new SMB customers -- for example, via Vertical Industry Program (VIP) types of initiatives.

"I do think System i is right at the heart of some of the BladeCenter S and POWER6 products that we'll be introducing."

CM Note:

No real comments here, but at this point in the conversation, I asked how IBM plans to introduce the solutions. Through a larger direct sales force? With more IBM feet on the street? How will IBM get in front of i5 shops with the broader message?

Shearer:

He said IBM would continue to work through Business Partners, noting that the SMB space is highly fragmented and can best be approached by invigorating local Business Partners and Independent Software Vendors (ISVs) through efforts like the VIP program.

"It's actually having a material impact in revenue and volumes, and we'll continue that approach rather than having IBM 'blue suits' calling on these clients because we need local expertise, we need industry expertise, we need product expertise, and in many instances we need to create a little consortium to make that work."

CM Note:

This is a good method. The more people who are invested in selling IBM solutions, the bigger the ecosystem IBM will be able to service.

Shearer:

"If we take an IBM-wide approach, I can create these local ecosystems with i5/OS, Unix, Linux, or Windows applications, and because of our more integrated product families with POWER systems and BladeCenter, we can combine these in a single infrastructure more smoothly."

Shearer went on to discuss how IBM's clients -- the business executives rather than technology managers -- are not particularly hung up on the technology . . . that clients are looking to buy business functions -- solutions -- more so than technology.

CM Note:

The "System i" as a complete box, in and of itself, as a technology solution best suited to run a particular application or type of application, as being better at anything than another system . . . I don't think we'll be hearing that kind of message from IBM.

Shearer:

"One of the messages I want the industry to hear this year is that i5/OS is going forward. We have used different processors, we've had different names, but we've protected our clients' investments in their applications for a couple of decades. When I really listen to what our clients are asking for, they want to move forward with systems but they want protection of their investment. We're trying to prepare i5/OS to be the secret sauce that allows them to exploit new offerings like Blades or POWER systems but still have the benefit of coming forward with their applications."

CM Note:

This message seems really clear to me. I don't think IBM is going to be explicit in saying this any time soon, especially with all the POWER6 systems that will hit the market this year, but the System i as we know it, as a black box, is disintegrating . . . and what's left -- the piece that will rise from the rubble -- is i5/OS.

Posted by cmaxcer at March 2, 2008 11:47 PM