Re: IBM Spin Doctors on AS/400 Marketing - Long

An exerpt from Summit Strategies (well written), it can be found at the
AS/400 site at url:
http://iws.as400.ibm.com/CGI-BIN-I/LANSADRVR?HPMGEN+INDEX+661642+SIGNON

I quote:

Make New Friends, But Keep the Old
 IBM's biggest challenge in building a next-generation
 solutions business is to increase AS/400 awareness and
 sales penetration in the fast growing small and medium
 enterprises (SME) market. It's debatable whether new AS/400
 product enhancements and benefits even register with
 non-AS/400 installed base customers and channel partners
 who are bombarded with Windows NT and Internet PC server
 pitches via every media outlet.

 IBM must recruit PC ISVs to the AS/400 ranks and persuade
 conventional AS/400 developers to create small
 business-oriented versions of their applications to address
 this market. In addition, the vendor must reduce price and
 perceived cost barriers for both AS/400 systems and
 applications software. IBM has launched a three-fold AS/400
 application strategy to build the right portfolio of
 applications for the small business market: Recruit
 best-of-breed PC ISVs to the AS/400 fold; persuade existing
 ISVs to develop less expensive, "lite" versions of their
 products; and establish Java as a key AS/400 application
 development language.

 But, Microsoft's NT Server has had enormous success in the
 small business market, while Novell is fighting to retain
 share and attract small business customers with its
 IntranetWare for Small Business offering. Traditional PC
 channels and ISVs must be offered compelling evidence that
 the AS/400, which represents a huge leap from their current
 comfort zone, can really add revenue and generate
 bottom-line profit.

 IBM is having an easier time maintaining the allegiance of
 established large corporate accounts than moving into the
 small business market. The vendor has maintained strong
 loyalty among this base and is growing its year-over-year
 revenue. In addition, IBM is investing heavily to reach
 new, international corporate customers; 65 percent of
 AS/400 revenues now come from outside the U.S., further
 solidifying its large account presence.

 IBM's applications strategy for large accounts is to
 recruit industry-leading developers of specialized,
 industry-focused Unix solutions, such as ERP. Premier Unix
 ISVs like SAP and PeopleSoft, which are top-tier NT Server
 ISVs, have been won over to the AS/400 ranks. In addition,
 IBM is nurturing its mainstay allies to ensure that these
 ISVs keep AS/400 marketing investment levels on par with
 those for newer, competitive platforms. For example, the
 IPCS offering is critical in sustaining support of
 important AS/400 ISVs such as J.D. Edwards' OneWorld
 application, which requires Windows NT Server.

 The vendor has also identified data warehousing as a
 critical enterprise target market. The existing market of
 over 450,000 AS/400 servers make DB2/400 databases among
 the largest online data repositories in the world. IBM is
 determined to keep these customers on the AS/400 as they
 implement new data warehousing solutions. And, IBM is
 promoting the AS/400 as an ideal Web server in its
 network-centric computing paradigm.

 Although AS/400 has achieved some significant wins over the
 last couple of years, most have come from its loyal
 installed base. IBM must find ways to infiltrate off-base
 turf more effectively. The vendor already has
 well-established, international distribution channels to
 sell to large accounts. It is now wooing Digital and
 Hewlett-Packard proprietary and second-tier Unix partners
 to offer AS/400 as an alternative to these systems. As
 Microsoft and PC server vendors move up the food chain, IBM
 must vigilantly defend its current base and find ways to
 win ground in new large customer sites.

 IBM is investing heavily in its AS/400 Partners In
 Development (PID) program to address these challenges. The
 vendor has 14 PID centers throughout the world, which help
 over 8,000 partners to understand network-centric
 computing; design Web-enabled server solutions and extend
 the life of existing server solutions with products such as
 the Webulator; develop Java front-end user interfaces for
 existing applications; and extend applications with data
 warehousing and Domino capabilities.

 While the program has established a broad geographical and
 technical presence, IBM must do more to keep AS/400
 development and channel activity from flatlining. It must
 aggressively and effectively implement several key
 strategies, including:

    * Ongoing recruitment and promotion of tools partners;

    * Maintain and nurture ISVs in critical vertical
      markets;

    * Create more vertical verticals;

    * Bring ISVs and resellers together to sell AS/400
      solutions;

    * Aggressively recruit Novell CNEs and Systems
      Integrators;

    * Demonstrate commitment to developing the small
      business market; and,

    * Provide low-cost hardware, software and financing
      packages.

 The vendor also plans to roll out an advertising and
 marketing campaign this summer that will introduce the
 AS/400 to a new generation of PC and Internet customers
 who, in all likelihood, have never considered the AS/400 as
 a server alternative.

 Place Holder or Real Alternative?
 Let's give credit where credit is due. IBM has done a
 phenomenal job of giving the AS/400 a new lease on life. As
 IBM pursues its vision of network-centric computing, the
 AS/400 has been retooled, giving many existing AS/400
 customers sufficient reason to stick with the tried, true
 and updated AS/400, rather than implementing some Unix
 variant, or more likely, NT Server. Why rip, replace and
 retrain for NT or Unix if one can keep the old known and
 loved rock-solid reliable AS/400 which is already installed
 and refreshed with new Internet, data warehousing or ERP
 applications?

 So, for the time being at least, IBM has managed to prove
 the skeptics wrong. The question now becomes how much
 longer can the AS/400 continue to maintain its current
 installed base and grow new business? In reality, if IBM
 cannot generate new customers at a rapid enough pace, its
 current installed base and partners will become more and
 more rattled by its inability to grow, diminishing their
 loyalty over time.

 IBM must refocus market interest on the AS/400's refreshed
 network-centric role and expand market penetration beyond
 the AS/400 installed base. It's questionable how long and
 to what extent IBM or any other proprietary or Unix vendor
 can realistically expect to fend off Microsoft and
 NT--regardless of how brilliantly they may strategize or
 execute. To date, however, the AS/400 story has been a
 remarkable case study in longevity and in beating the odds.

 But, with the advent of Java, Network Computers (NCs) and
 network-centric computing, could the worst be over for the
 AS/400? Certainly, the folks in IBM's AS/400 division are
 hoping so. Even Microsoft is stepping up plans for "Windows
 terminals" based on multiuser NT technology that it will
 license from Citrix and Prologue SA--the same type of
 terminal technology that it has traditionally denounced as
 rigid and inefficient. If the pendulum swings back, maybe
 IBM has kept the AS/400 alive long enough for a new window
 of opportunity to open and give it another chance to
 survive and flourish through the next wave of network
 computing.


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