by Joe Hertvik

Just in time for COMMON's fall conference in Minneapolis this week, IBM has announced a new line of iSeries machines that are branded with the WebSphere moniker. These machines are preconfigured with its WebSphere Application Server V4.0 and also include WebSphere Development Studio for application development as well as a new start-up program for quick deployment of e-business sites on iSeries boxes. Named, rather boringly, the eServer iSeries Powered by WebSphere, these new servers will come in entry and growth iSeries Model 270 configurations. These machines will ship in late November or early December. As you might expect, we have already dubbed the new servers the Bumblebees for WebSphere, borrowing the nickname of the Dedicated Servers for Domino machines that were announced a few years ago.

Rather than being a new concept, the iSeries Powered by WebSphere bundle is the latest example of how IBM has increasingly been selling AS/400 and iSeries machines based on workload type, as well as on processor technology. Going back as far as 1994, IBM sold system and server AS/400s, where the system machines ran traditional RPG and COBOL business applications, and the server machines had a governor to artificially hold down green-screen processing performance. The server machines, targeted at batch and client/server application workloads, were at a lower price than the systems. In 1997, IBM debuted mixed-mode machines that supported both traditional and server workloads and allowed customers to pick from the various interactive performance levels on a single machine. About a year later, IBM even started selling the so-called Bumblebees (nicknamed by former AS/400 Division General Manager Tom Jarosh because they featured a yellow stripe on the AS/400's black case), which ran Lotus Domino messaging and groupware applications (and deactivated the green-screen portions of OS/400 in the process). And just last month, IBM started shipping the IBM eServer for J.D. Edwards, a special bundled box for running ERP applications from J.D. Edwards & Company, which we have dubbed as the Bumblebee for JDE.

With the Bumblebees for WebSphere, IBM is trying to closely associate WebSphere with the iSeries, the same way they closely associated Domino with the AS/400 and iSeries through the Domino Bumblebees. With more than 250,000 customers worldwide, IBM wants WebSphere to be adopted by a big portion of that AS/400 and iSeries customer base: the company is willing to give a little money back through bundling to get customers to buy a preconfigured WebSphere server. This tactic has worked with Domino. While lagging far behind Windows-based servers, the OS/400 platform has become the number-two platform on which to deploy Domino, ahead of Unix servers and mainframes.

If the Bumblebees for WebSphere are successful, don't be surprised if IBM announces a second WebSphere bundle that adds the WebSphere Commerce Suite to the package, so that its customers can have an out-of-box experience in setting an e-commerce site on their iSeries. For physical packaging on the iSeries box itself, IBM will be using a "Powered by WebSphere" logo on its deliverables, but that logo won't appear on the box because of an undisclosed trademark issue. These machines will look the same as IBM's other iSeries boxes.

The WebSphere Bumblebee server is based on a specially configured Model 270 machine, WebSphere Application Server V4.0 (which reached general availability for the iSeries on October 19), the WebSphere Development Studio software for application development, and new wizards for installation and configuration. The wizards are part of the value-add of the WebSphere Bumblebee (hardware, software, and wizards), and they will not be available to customers who are just buying WebSphere V4.0 to run on existing iSeries hardware. This might seem like a strange approach--withholding ease-of-use functionality for existing iSeries and AS/400 owners who are upgrading or buying WebSphere V4.0, while providing it to WebSphere Bumblebee customers--but IBM will probably change its mind after customers start griping about this situation. It is also likely that non-Bumblebee WebSphere V4.0 customers will pressure IBM and its Business Partners for a separate distribution channel for the wizards, which would only be fair. IBM is also saying that it will provide custom technology services from Rochester for WebSphere Bumblebee customers at a discounted rate, which may be another reason for buying the bundled package.

Hardware details (processor features, memory, disk capacity) weren't expected to be available until a couple weeks after the announcement, but IBM sources say the entry Bumblebee for WebSphere machine will be a one-way iSeries Model 270, while the growth machine will be a two-way iSeries Model 270. There is also no word yet on how many Web-based users IBM expects the WebSphere Bumblebees to handle, and this could become a tricky issue.

IBM says the WebSphere Bumblebee is intended to help midsize businesses reduce the cost and complexity of e-business. And since IBM also says that small and midsize businesses with up to 1,000 employees will represent 52 percent of the total server market by 2004, I would expect that the WebSphere Bumblebees will be targeted as intranet, Internet, and B2B servers for midsize companies with well-defined workloads. I wouldn't expect IBM to target high-volume Web sites and e-business providers, as that would cannibalize their pSeries marketplace. And selling to midsize customers in this manner would be keeping with IBM's previously defined role for the iSeries as the premier B2B platform.

The other interesting point is that, like the AS/400 servers of earlier years, the WebSphere Bumblebees are not intended for interactive 5250 use and will not have green-screen capabilities built in. These machines are intended for Web-based applications, not standard RPG-style business apps.

IBM will not be releasing WebSphere Bumblebee pricing until November, but we can speculate on what the pricing might be. Right now, the two Bumblebee for JDE configurations sell for 8.5 and 9.7 percent below the list price for hardware: that's $77,689 for the low-end model and $117,785 for the high-end model (see our September 24 issue for details). So you can expect something similar with the WebSphere Bumblebee hardware, since IBM says that the WebSphere Bumblebees are modeled after the JDE offerings. Given that IBM is now running a promotional special for WebSphere Application Server V4.0, Advanced Edition for iSeries, of $8,040 per processor, which is 33 percent off the list price (see our September 10 issue), the software portion of this package really shouldn't be more than that for the time being. If you do add up the cost of the Bumblebee for JDE hardware and the promotional WebSphere V4.0, you get a discount of about 10 percent on the combined bundle.

by Timothy Prickett Morgan

Feeling the pinch of diminished demand and wanting to boost sales in the fourth quarter, IBM last week announced a significant increase in its upgrade prices for customers upgrading from Northstar-based Model 7XX servers to the Pulsar and I-Star generation Model 8XX servers. The price increases, which range from as low as 1 percent to as high as 28 percent, do not take effect until January 2, 2002 and are clearly designed to get customers who are thinking about upgrading to a Model 8XX machine to both think and spend a little faster.

by Alex Woodie

Kisco Information Systems has launched a new version of SafeNet/400 that increases the user's ability to restrict network PC access to AS/400 and iSeries servers.

While OS/400 provides rock-solid security features that, when properly configured, make it practically impossible to break into an AS/400 through the standard 5250 interface, your AS/400 is vulnerable to a range of networking protocols supported in OS/400, including SQL, FTP, ODBC, Telnet, and others. Several security products on the market, such as SafeNet/400, help AS/400 shops monitor and restrict network access in these troublesome areas.

SafeNet/400 works by constantly monitoring AS/400 network access attempts and either granting or denying access, on a user-by-user basis. SafeNet/400 logs all access attempts and provides the AS/400 system administrator with audit reports, showing who is accessing the server and how. It allows the system administrator to limit access to server functions according to user profiles and can completely turn off certain functions, such as FTP, or limit access to certain objects. Additionally, it can deny Internet or intranet access according to the IP address of the client PC, as well as limiting which users can submit commands to the AS/400 remotely.

Features in SafeNet/400 6.0 include time-of-day controls that open and shut access points depending on when they are accessed, and day-of-week controls that shut access points on days when they should not be in use, such as holidays. The new version also features enhanced FTP controls, Dynamic Host Configuration Protocol (DHCP) control, and enhanced remote-execution command controls.

Additional exit points have also been added to SafeNet/400's repertoire, bringing the total number of exit points covered to 42, the largest number of exit points covered by any OS/400 network security product on the market, Kisco says. The company also says that administration and maintenance facilities of the product have been improved.

by Timothy Prickett Morgan

IBM last week released its financial results for the third quarter, and considering how major IT players are seeing revenues contract by 30, 40, or 50 percent, IBM's contraction in revenues by 6 percent in the quarter seemed like no big deal. In fact, it seemed like a relief. While IBM should gloat a little bit about its ability to make sales in these tough times, Big Blue's decade-long move away from its hardware and software roots toward a services-oriented business model has played mightily in its favor. And a move away from services and toward a do-it-yourself approach to e-business applications, which could be one effect of a protracted economic contraction, might shift IBM's fortunes the other way--much as a move away from mainframes and toward Unix and Intel-based servers and client/server computing nearly bankrupted IBM in the early 1990s. I'm not saying IBM isn't right--it clearly has the right strategy at the right time--but what is right has a chameleon quality in this fast-paced IT industry. The pendulum could swing away from IBM, as it has done before.

Here's the way the numbers stacked up in IBM's third quarter. IBM's overall revenues were $20.4 billion, down 6.2 percent from last year's third quarter. Revenues in the Global Services unit, which surpassed hardware as IBM's dominant category in the second quarter of this year and will likely stay there for the foreseeable future, were $8.7 billion, up 5.4 percent. Hardware sales were down dramatically, mainly because of poor PC sales, poor Intel-based server sales, as well as poor chip, disk, and other component sales by IBM's Technology Group. All told, hardware sales were off 20.9 percent to $7.5 billion. Software sales--bolstered by increased operating system sales on mainframes and AS/400 and iSeries platforms, as well as by increased middleware sales on mainframes, Unix, and, Windows servers--were up 9.7 percent to $3.2 billion. Because of the reduction in PC and server financing deals, IBM's Global Financing unit saw revenues drop by 4.3 percent to $822 million. IBM's cost of sales increased because it takes more time to close deals these days, and that, coupled with declines in reasonably profitable Unix and Intel-based server sales, drove IBM's profits down 18.7 percent to $1.6 billion.

IBM's chief financial officer, John Joyce, spoke to Wall Street analysts last week and indicated that IBM did comparatively well in the quarter because about a third of its revenues and nearly half of its profits come from annuity- like revenue streams, including equipment and software leases, mainframe software rentals, maintenance contracts, and services deals. IBM booked $10 billion in new services contracts in the quarter, and increased its services backlog to $97 billion. Joyce also said that IBM's services pipeline for the fourth quarter looked better than IBM has ever seen. This is obviously great news for IBM.

What the fourth quarter holds for server sales is anyone's guess right now, but odds are that it will be a little bit better than the third quarter. IBM said that iSeries and AS/400 hardware sales were up 10 percent in the third quarter, pretty good compared with the first two quarters of this year. (That percent change is in constant currency, which is a measure of how well sales were in each geographic region IBM does business, without taking into account currency effects when exchanging those sales to dollars.) Joyce said further that iSeries sales were up across all geographies, including the Americas.

While I like happy stories, I am a stickler for details. I remember that IBM's iSeries and AS/400 sales were not so hot in the third quarter of 2000--in fact, by my calculations, it was the worst quarter IBM has suffered in 13 years of selling the OS/400 platform--so a 10 percent gain is not as wonderful as it might at first sound. IBM has threatened customers that it will be increasing AS/400 7XX-to-iSeries 8XX upgrade prices on January 2, 2002, and it is doing so to try to force customers to buy an upgrade during the fourth quarter instead of waiting until next year. IBM isn't doing this to be mean, but it is determined to drive sales in the last quarter of this year--so determined that it risks the enmity of customers who do not appreciate price increases, particularly in a bad economic environment. (See the separate story in this issue for more on those price increases.)

Joyce said that RS/6000 and pSeries Unix server sales were down 9 percent in the quarter, but IBM believes that the overall Unix server market was off 35 percent and that IBM doing comparatively better will result in the company gaining somewhere between 5 and 6 points of market share. Sales of xSeries and Netfinity PC servers were off 25 percent, which IBM characterized as being consistent with the Intel-based server market at large. Incidentally, PC desktop revenues were off 30 percent, and notebook sales, a boon for IBM for several years, were off 28 percent in the quarter.

On the software front, Joyce said that operating system sales were up 3 percent in the quarter (again at constant currency), and middleware sales were up 18 percent. Operating systems comprised about 20 percent of IBM's overall $3.2 billion in software sales in the quarter, with middleware (including databases, transaction monitors, WebSphere, MQSeries, Domino, and other programs) making up the other 80 percent. Joyce said that sales of middleware programs on Unix and Windows server platforms were up 32 percent in the quarter, and that sales on host-based machines--such as mainframes and AS/400 and iSeries servers--were up 14 percent. A lot of the growth in that latter host system category did not come from WebSphere and MQSeries sales, but rather from IBM's new mainframe database tool line, which grew at 300 percent in the quarter. Joyce said that overall WebSphere sales were up 75 percent in the quarter, with MQSeries sales up 129 percent, DB2 and IMS database sales up 31 percent, and Lotus Domino and related software sales up 18 percent.

This time last year, IBM's mainframe sales were off 24 percent, iSeries and AS/400 sales were off 6 percent, operating system sales were off 4 percent, and middleware sales were up only 3 percent, even with WebSphere and DB2 sales on Unix and Windows platforms doubling and tripling, respectively. IBM was suffering from severe component shortages in the iSeries and pSeries product lines and was not yet shipping its zSeries mainframes. Clearly, IBM has been well served not only by its services strategy but also by getting its server act together. The various Server Group teams deserve some credit for getting organized and getting products out the door.

by Alex Woodie

As expected, iMessaging Systems formally announced the release of the young company's first new product at the COMMON conference in Minneapolis yesterday. iVoice 2.0 is an interactive voice response (IVR) system designed for customer service organizations that want to give customers access to OS/400-based account information over the phone. iVoice features advanced IVR technologies, such as voice recognition, which allows customers to actually talk to an iSeries, not merely press buttons in response to preprogrammed voice menus.

iMessaging Systems was founded late last year by Karen Sedlar, former chief executive of IVR vendor RMTi, and has been selling RMTi's older IVR products in lieu of the release of iVoice, the company's flagship IVR solution. iMessaging Systems is headquartered in Merrimack, New Hampshire, and employs several people who used to work at Missing Link, another IVR vendor in the AS/400 market.

Sedlar, who is the president and a major stockholder in iMessaging Systems, said the explosion of online services has increased demand for telephone-based services. "IVR is again emerging as a key communication vehicle," she said. "The demand for voice applications has reignited, following the post-Internet explosion of the last three years."

In addition to the voice recognition technology, which other software vendors in the OS/400 market have tried but failed to build into their own applications, iVoice includes a number of other advanced features. One such feature is its text-to-speech capability, which allows the computer to "speak" names or numbers from a database, as opposed to just playing prerecorded messages. Other iVoice features include the ability to place outbound calls; support for caller ID, digital, and analog phones; and the ability to connect to up to 96 phone lines, a vast increase over RMTi's former IVR offerings, which iMessaging continues to sell as an entry-level product.

iMessaging touts the host-controlled programming design of iVoice. What the company means by this is that RPG programmers have control over which parts of their company's existing RPG/400 or ILE RPG applications are connected to the outside world through iVoice, using iVoice APIs that are inserted into the code as program or procedure calls. Most of the iVoice application actually resides on a hard-wired controller box that runs Windows 2000 and connects to the AS/400 or iSeries box (in V3R7 and up) via TCP/IP.