Important story - Re: Finally...someone speaks out... -- MIDRANGE-L

Following is Bob Tipton's address to COMMON.  IBM claims it was way to
negative, and shouldn't have been used for the opening, but the customers
thought it was a very well done reality check...
-----------------------------
Robert Tipton, Partner and Director of Technology, Whittman-Hart
Remarks Presented at Spring COMMON, March 12, 2000

I was a little bit awed and humbled, to be honest with you, that they asked
me to present here at COMMON as the opening speaker. My first COMMON
meeting was here in San Diego in the Spring of 1981. There were about 400
people in the entire conference. A lot of things have changed in the last
19 years.

The first thing that has changed is that I have three more children. I've
missed two conferences in the history of COMMON since then because children
number two and number three were showing up. Certainly technology has
changed a whole lot in that time as well. What I'd like to talk to you
about is the future of the AS/400 in e-business. You're going to hear a lot
about e-business. You can't escape this. The problem is we have hype and we
have reality, and I want to bring some sense between the two. What I also
want to cover with you is a little history. We'll go back in time a little
bit to see where things are. I'll also talk about the basics of
e-business--what is it and how does it all fit together. I probably should
spend more time talking about e-business, but I really want to talk about
the AS/400 and its role in e-business.

And I want to say a couple of things to IBM, because there are some IBMers
in the room here. I want you to look at this session as putting you on
notice at this COMMON meeting. I want you to feel uncomfortable. I want you
to know that there is a different way that we can look at the AS/400 than
maybe what we are getting from IBM. So if there are IBMers here, I want you
to feel a little nervous. And for the users here, I want you to feel
passionate about this platform. [Clapping.] We don't hear enough about
passion and the AS/400 in the same sentence. And then we'll compare the
AS/400 to other lands, and the land I plan to compare it to primarily is
Apple. You can't see this, because it is hidden behind the podium, but this
presentation is brought to you on Apple Powerbook. I've been a Macintosh
user since 1984, and there are a lot of parallels between the two
platforms. And then, I want to get into what IBM really thinks about the
AS/400. I'm not going to make anything up here, I'm not going to
editorialize. I am just going to be objective about what's going on at IBM
and where it is all heading as it relates to the AS/400.

First, the basics of the world of e-business. The only thing that
e-business is is a marketing term. That's all. There is no Harvard degree
program you go through. There is no body to negotiate and compare
e-business standards to see if we are doing it right. And as a result,
snake oil abounds everywhere. The message that we get is that it is simple,
it is easy, it's cheap, it's fast. All you have got to do is put up a Web
site and everybody flocks to your business. The reality of it is that it is
easy to be a successful e-business just like it is easy to lose weight.
[Laughter.] How do you lose weight? All you have to be willing to do is
change everything about your life. [Laughter.] Being a successful
e-business means being able to change everything about your business. It's
really simple. But what we hear in the marketplace is that you had better
be an e-business or you file for e-bankruptcy. It doesn't make any sense,
but we are running lemming-like toward this e-business reality that many
people are trying to put forward. We see it everywhere in stock prices.
I've got some stock prices that I will breeze through, but I just want to
show you the world that we live in. As of early March--and I realize that
the stock market is a very mercurial thing--the market cap of Priceline.com
[$10.9 billion], which sells airline tickets online, is almost equal to the
that of American Airlines [$8.5 billion] and United Airlines [$2.7 billion]
added together. Now, let's put it into perspective. Priceline's revenue is
$35 million a year and $134 million in losses. American Airlines' revenue
last year was $17 billion with profits of nearly $1 billion. This is a buy
high and sell higher sort of reality, and that doesn't matter [if it makes
sense or not] because this is the world we live in. The thing you have to
look at from an AS/400 perspective, though, is the AS/400's place in this
world. Is it playing in the perception world, because that is the reality
at this point. It's weird when you hear IBM talk about e-business, and they
use things like Windows 2000 and Linux. Is the AS/400 playing in this
"either you get it or you don't get it" world of e-business.

Anyway, here's my chart for Priceline. You can see the market cap at well
over $10 billion. There is no price-to-earnings ratio on this chart because
there isn't any earnings. [Laughter.] AMR, the parent corporation to
American Airlines, you can see here with a market cap of over $8 billion, a
price/earnings ratio of 13.8. Earnings per share of $5.55. Wouldn't that be
a great thing to have? The really amazing thing if we look at United
Airlines is that it has a price/earnings ratio of 5.1. Qualcomm has a P/E
ratio of 270. It doesn't matter, though, does it? The weird thing when you
think about e-business is this: how many of these e-businesses will be here
in a few years? How many of them make soap, fly airplanes, and deliver
goods to warehouses? How many of them make anything? You know, we've done
this to ourselves twice in the last two hundred years. First it was radio,
and then it was television. Now it's the Internet. We'll see what happens
next. Another thing about the basics of e-business is this--and I've been
in the IT business for 22 years and I am a third generation IT guy--I've
never the business people and IT people have to work together before. Have
you? It used to be the came down the hall, threw a list if requirements
into the cube and said, "Do them." And we did it, and we showed it to them
and they said, "That's what we asked for, but that's not what we wanted."
[Laughter and clapping.] Most of the people in business don't know what
e-business is all about because they don't know anything about technology.
What they do know is what they see on CNBC or in Fortune. Unfortunately,
though, there are too many people on our side of the fence who are still
willing to preserve IT at the expense of business. We don't know enough
about the business to contribute at the meetings either, so what we get is
a bunch of sophisticates on both sides. However, time to market is
different now. Supply chain opportunities will never be the same.
Everything is being shortened. Customer relationship management--we all
want intimacy with our customers through technology. Things are different,
but we still need creative capital for things to be successful. Even if
these e-business numbers are not realized, your business may be ignored
because you don't seem to "get it" in the marketplace. You got to be an
e-business today. Is that what is happening to the AS/400? Is it being
ignored in the marketplace because people feel like [IBM's AS/400 Division]
doesn't get it? Interesting.

What is the AS/400 of today? The platform has been around for a while,since
1988, and in fact it was conceived in the 1970s. It's been around for about
30 years as a technological idea. It is the most successful minicomputer
ever. It dethroned the king at the time, the VAX, the target that the
AS/400 was aiming at. Hundreds of thousands served, making it the most
successful minicomputer in history. It is an outgrowth of the System/36 and
System/38. However, I don't know if you knew this or not, but if we go back
to 1984 or so, they wanted to kill the System/38, which was the predecessor
of the AS/400. IBM wanted it dead. Memos were written, meetings were held.
Many of us got our System/38s in 1980 and 1981, about the same time I
started coming to COMMON. Terrific machine. All 22,000 were hand-made
systems, and it became very successful. A large, vocal group of users
started using them, and memos inside of Rochester said we're going to make
it go forward, but to get funded we're going to have to call it something
else. They had to put the politically correct System/36 architecture on
top, but really what it was a System/38 enhanced. The AS/400 is a tour de
force of technological innovation. If you look back at the history of the
AS/400, it's unbelievable. Stuff that Microsoft, Sun and HP are calling
their new, unique, and special technology, we look at it and say, "So what?
We've had it for a while." So we have these things. [Single-level storage,
object-based architecture, technology-independent machine interface,
integrated hardware and software, openness and portability.] Who cares?

We had an identity crisis with the AS/400 back in the early 1990s. It
almost died again in terms of market awareness. It was way too expensive,
way too slow to adopt changes and so on. [IBM had an] almost glacial-like
response to the open systems movement of the late 1980s and early 1990s,
and it lost favor in the eyes of many decision makers. For some people,
that's still the AS/400 that they remember. The one of the early 1990s. Is
that the one that is out there today? It's not even close. Today's AS/400
almost bears no esemblance to the one that most people who write the checks
that pay for them remember. Almost none. It has a highly advanced
technological architecture. After all, it's one of the most highly
available, reliable systems that you can buy. It runs all the time. You
have all these different servers inside your shop. And the one that
everybody is always paying attention to is the squeaky wheel that keeps
crashing all the time. AS/400s don't die. They just run, and run, and run.
How many platforms support all these technological environments? [Web
serving, Java, Domino, Netfinity, UNIX.] However, it appears that IBM, the
overall corporation, doesn't appreciate these strengths. IBM Global
Solutions loves solutions that require lots of consulting. That's not the
AS/400. IBM Software Group loves add-on software. That's not the AS/400,
because it is all integrated--operating system, database, systems
management, and so forth. [Here's where our tape player stopped recording
temporarily. Tipton went on to explain that IBM is a services and software
company now, not a hardware company. He then compared and contrasted the
AS/400 with the Apple Macintosh. He discussed the famous 1984 Super Bowl
advertisement and pointed out that IBM was the Evil Empire back then that
Apple was targeting with that ad, which showed an IBM logo being smashed
with a sledgehammer. That ad only ran once, and it served notice to IBM in
the PC market. He went on to discuss how Steve Jobs was an absolute jerk,
but that that the fact that he was a maniacal visionary who would do
whatever it took to make Apple succeed and went way outside the box in his
thinking. By doing do, said Tipton, he forever changed the approach people
had in interacting with computers by virtue of the graphical user
interface, networking and other technologies. And Apple went through its
own identity crisis in the 1990s, with Jobs ousted as Microsoft platforms
ate market share. But loyal, committed, vocal zealots for the Mac would not
let it die, and because of that, Apple had time to invent and sell the iMac
machines, which are among the most popular PCs sold in the retail channel
today. It bears little or no resemblance to the Mac that most people
remember, he said, calling it the K-car for Apple in reference to the
inexpensive, fuel-saving sedans that pulled Chrysler back from the brink in
the 1980s. We got the tape going again as Tipton shifted topics back to
market perceptions.]

Isn't it interesting that two or three years ago, Microsoft was thought of
as a sure thing? Absolute. No doubt. You never got fired for recommending
Microsoft. Today, just a little bit of reasonable doubt has been thrown
into it. Microsoft, in the time when the Nasdaq stock market has doubled in
the last year, has returned a 28 percent gain. In fact, back at its height
of over $120 a share, Microsoft has lost market cap back down to the point
where it is equivalent to McDonalds, Coca-Cola, Pepsi and American Airlines
added together. That's how much market cap you've lost if you are a
Microsoft share holder. Next, IBM. The e-business company. All the
advertising messages out there talk about IBM being the e-business company.
Do people buy into it? If you are an IBM shareholder over the last year,
the stock is down 33 percent.You can see where they gave their earnings
warning back in October 1999, where it took a big dive. Which one is the
darling of the stock market, the technology platform? Sun Microsystems. If
you are a Sun shareholder, you have nearly tripled your holdings. Sun has
taken off because they are the dot in dot.com. And which one has succeeded
the most? Apple. We didn't want to buy Apple. It's dead. It's going away.
It will never be worth anything anymore. It's an old, tired technology
hulking its carcass to the tar pits of oblivion. Have you heard that
before? [Laughter.] Let's compare decision making between IBM and other
organizations. Here, we have decision making among these maniacal geniuses.
[Shows a slide with Steve Jobs, founder of Apple, Bill Gates, founder of
Microsoft, and Scott McNealy, founder of Sun Microsystems, who are all
currently CEOs at those firms.] Don't you love the picture of Sun? I mean,
who would have an ego big enough to actually have a picture with the Sun
literally behind your head? That Scott McNealy, he fills the room all by
himself. [Laughter.] We all know about Bill Gates and Steve Jobs. The
interesting thing about these guys, though, is that they are passionate.
They are driven. They are maniacal about what they want, and no one is
going to move them off of that. They know exactly where they are going.
Furthermore, each of these men has been involved in the inception of the
products that their companies sell today. Love or hate them, they inspire
fierce loyalty among the people who know them and they have changed forever
how we look at technology. Steve Jobs, the way we look at interactive
systems; Bill Gates, the portable, mass marketed software; Scott McNealy,
the network is the computer. Let's compare that to the decision making at
IBM. [Laughter. Shows a herringbone server platform cause-effect chart.]
You know who really makes the decisions about a lot of what IBM decides to
do? MBAs who work in New York. How many of those MBAs come to your office
to ask what's important to you? How many of those MBAs actually spend time
in a shop where an AS/400 exists? All they see is numbers and dials that
they twist, and the outcome of this was the Tragic Box advertising
campaign. [Laughter.]

Who's the champion of the AS/400 product set and its heritage? Who is it?
[Shows a slide of Frank Cary, John Opel, John Akers and Louis Gerstner, the
four IBM chairman who have reigned since the advent of the System/3X and
AS/400 minicomputers.] How many of you even know who Frank Cary or John
Opel are? John Akers wanted this thing [the AS/400] killed. Lou Gerstner. I
once had the chance at COMMON to ask him a question. He took three
questions, and mine was one. I said, "Mr. Gerstner," because my Mom raised
me to have good manners, "Why do you have three platforms that compete in
the same strategic market sector?" You could see that he had one of those
'I am pinching your head' things going. ['I am going to crush your skull,'
from Monty Python is the reference.] 'Pipsqueak consulting out there, you
ask me a question like that?' And his response was--and I am never going to
forget this--"If you want it, we'll build it." Is that leadership? Is that
vision? Or is that what you do with Oreos? You can see at the bottom of
this chart the names of  people who have run the AS/400 Division and then
moved on. Tom Jarosh, you got to give him some credit. He's been in the job
longer than two years. Usually that's it. He must have really made somebody
angry in New York. I guess now he's stuck. [Laughter.] What do they really
think about the AS/400? I went to IBM's Web site and pulled out the history
of IBM. Here's the overview chart. Do we see an AS/400? No. We see a
mainframe, we see  a laptop, we see an IBM PC and we see Deep Blue. So I
went a little further into the history charts. Let's look at 1980 when the
System/38 came out. Is it one here? No. It's not on there. They don't have
it listed. We have other technologies on here, like a laser printer.
[Laughter.] Next chart. Move on to 1981-1992, the heyday of the System/36
and the System/38 and when the AS/400 came out. And in 1988, when the
AS/400 came out as the significant offering, what do we have listed?
National Science Foundation network. I don't even know what that is. Let's
look at 1993 to the present, the Lou Gerstner era. How many times has IBM
changed the AS/400 technology, how many times have we seen significant
advancements in the incredible capability of this platform? IBM does not
highlight it on its Web site. Do we see it here anywhere? No. What we see
is a ThinkPad. Many of you who were reading ahead in my presentation were
probably wondering what this was. [A blank page labeled 'Top Secret Slide.]
I'll tell you what it shows. This is the maniacal visionary at IBM. [Much
laughter and clapping.] There he, she or it is. What do we think in terms
of market perception? Here's the AS/400 Web site: very corporate looking,
very blue. Very unappealing. They dress it up a little bit. We have a
little color now, and different servers being shown. But that's it. Is this
the old economy or the new economy where it doesn't matter what the results
are but how you feel about it. Another company that does a very good job
with this is Apple. "iMac. Internet expressway." Yum. "Think differently."
You instantly know what they have and what you are looking at here. What do
they find on the AS/400 site? What do you see? We'll move on.   The Tragic
Box campaign. Fortunately, we don't see it much any more."AS/400e: The
all-in-one, worry-free solution for business intelligence."

What do you do with that information? Should I buy some? What
differentiates it? What feeling do I get when I have one? Is it cool? Final
thoughts. I want to leave you with a few things. What do we do now with the
AS/400e? What should we do? It's this wonderful technological platform. We
can all say great things about the AS/400. The problem is, we've been
relying upon IBM to say things for us. Too many AS/400 user group meetings
are like--and please forgive me the parallel--Alcoholics Anonymous
meetings. [Laughter.] What do I mean by that? You come in through the back
door, and you don't want people to see your car in the parking lot, and you
don't use your last name when you go. And you go and you talk about the
AS/400, but you really don't want to share too much. If we want the AS/400
to be different in terms of its appeal in the marketplace, we can't rely
upon IBM. Would somebody at IBM--please-- realize the value of this
machine.

You know who gets to tell them? We do. [Clapping.] Get the corporate
homogenizers out of the way. Get us out from underneath the thumb of the
rest of IBM. The AS/400 is not like any other platform that IBM sells. The
longer it remains under the thumb of IBM, the less chance it has of
succeeding long term. Let the system loose. Here's a rumor I can start.
Dell wants to buy the AS/400 Division. Oh, yeah.  [Hoots and hollers.] It's
just a rumor.

[Smiling.] But wouldn't that be fun? Wouldn't that be different? How about
if they sold the business and we got out from under the rest of IBM? Do you
think it might succeed a little differently? [Clapping.] Reinvigorate the
market presence. We need to have the "Yum" come off the tongue with the
AS/400 like we do with the Apple iMac. How do we make that happen? I tell

you what we need to do. We need to return the heart of the machine. Do you
know Dr. Frank [Soltis] tried to quit? Do you know that? In fact, he did.
IBM put him back on contract. Who is the heart and soul of the AS/400
inside of IBM? Are you here, Dr. Frank? [He wasn't.] I'll tell you what we
need to do more than anything. I want you to tell IBM,  right here, right
now, this afternoon, that the AS/400 is a wonderful machine. We love our
AS/400s! IBM, we just thought you ought to know: We're not going to take it
anymore.


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