Q&A with Mark Shearer, the New iSeries GM

by Timothy Prickett Morgan

As we reported elsewhere in this newsletter, there is a new general manager of the iSeries business, and his name is Mark Shearer. His appointment came as something of a surprise to the OS/400 community, with his predecessor, Mike Borman, so new to the job. But IBM needed Borman to run software sales, so the iSeries gets a new GM. So who is Shearer, what does he know about the iSeries, and what are his plans for the platform?

Shearer took the time to call just before he was getting on an airplane to head out to IBM's Rochester labs to talk to the people who design and make the iSeries. Here's what we talked about.

Timothy Prickett Morgan: It must be nice to be in charge.

Mark Shearer: It's a pleasure to join the iSeries team, that is for sure.

TPM: I know I only have a short amount of time with you before you get on a plane to Rochester, so I am just going to dive right in with the most important issue facing the iSeries. You've been involved with the Server Group for a number of years, and you know the ins and outs of the technologies and marketing strategies, so we don't need to go over that. The one thing that I want to try to get a sense of is what you can do, as the iSeries general manager, to try to grow the iSeries business. I am trying to get a sense of what kind of revenue growth and shipment growth is practical for the product line going forward. This is the main thing that all of us sitting out here in the OS/400 ecosystem are concerned with.

MS: Let me start by saying that, during the past six months, Mike Borman really did an outstanding job of setting us on a very solid direction that seems to be resonating with the business partners I have spoken to, and also many of the iSeries clients that I have heard from in the past 24 hours.

Last year, we introduced the new family of iSeries products. We have a very solid product line in place now. But I think that the really excellent work that Mike began was beginning to simplify our value proposition and to articulate our story in more business value terms. I think the work Mike started for improving the value proposition for our distribution channels and enabling our partners and making this a good business for our partners is very important. And I think our return to focusing on the solutions dimension and the simplicity of the solution is really critical. Some of these key directions that Mike set, I certainly plan to continue going into 2005.

Now I have had the opportunity in our systems business to work on very different ecosystems, with very different sorts of IT environments. I worked on the mainframe during its transition year back in 2000, where we really needed to make the mainframe relevant to our customers again, to position it in the new world of IT infrastructure. I also worked on the BladeCenter, which we started from scratch, and the BladeCenter is really based on an integrated value proposition, but a whole new market, a new ecosystem, and a new approach to standards and specs. I have worked with our technology group a bit, with the Power architecture, and setting up Power.org. So I have had different types of experience in our systems business, but I am very excited to be able to focus on the iSeries now.

TPM: What is your experience with the OS/400 platform?

MS: My iSeries affinity goes back more than 20 years, to when I was a marketing manager in New York City, with my largest customer having hundreds of System/36s and System/38s installed. It was a company called Home Insurance, and we were frequent visitors of Rochester and the technical support team because we were doing bleeding-edge things with the System/36 and System/38 many, many years ago.

When I was general manager of the telco industry in Asia/Pacific, I had some large telecommunications carriers that used the System/3X and AS/400 systems at the heart of their customer care and billing systems. I even acquired, for IBM, a software company that had applications that ran on the AS/400 platform. The company was originally called DPI, and it created a solution called ICMS, which in the 1990s IBM sold as a customer care and billing system to telcos and cable companies around the world.

TPM: I recall that, in the 1990s, the telecommunications business was one of the key drivers of the AS/400 business, and this must have been one of the big drivers of that.

MS: Absolutely. I was the executive sponsor of that acquisition, and that was my second deep dive into the predecessor of the iSeries.

I have spent 18 years in client-facing roles prior to my marketing roles. I am sort of a long-haul player in our Systems and Technology Group, and I am really excited to be able to focus on the iSeries, partly because the iSeries client base represents a huge percentage of our total hardware relationships in the marketplace.

TPM: The AS/400 and iSeries base represents about half of IBM's total customers, right?

MS: Yes. Absolutely, and that base and IBM's relationships with those clients is one of our most amazing assets.

TPM: So that brings me back to my original question. How are you going to grow this iSeries business? I only get to watch and armchair quarterback. The iSeries has just gone through a transition year, with some revenue declines, and I realize that some of that decline is due to the move to new machines and IBM's practice of pushing more business into the partner channel. Is there a way to get revenues and shipments up? We're at half the revenues and shipments that we were at in the late 1990s, and those two metrics are the key things that drive excitement out there in the software development community. Can we get shipments up even if we cannot get revenues up? What is the strategy?

MS: I think the key is relevance to today's marketplace, and that is really dependent upon a solutions focus and a very simple business-based value proposition. Essentially, we are returning to some of the basics that made this platform so successful years ago.

TPM: Does that mean that IBM is going to focus on trying to sell i5s into the AS/400 and iSeries base? Just getting those companies to upgrade would be a huge business. But I am still unclear where you are aiming the i5.

On the mainframe, you took the zSeries and you offered low-cost engines running Linux and discounts on the operating systems and other systems software for supporting new workloads that made it attractive for mainframe customers to pull workloads onto the mainframe, to use its partitioning capabilities to simplify their networks, while at the same time driving up utilization. This lowered the cost of their aggregate hardware and software bills and made it easier for them to manage their infrastructure. I am impressed by the amount of mainframe MIPS IBM sold last year, and impressive is the only word for it. Technically speaking, the i5 can do exactly the same kinds of things, but the trick is actually getting customers to do it.

MS: I think that what we did with the mainframe franchise over the past few years is that we made it relevant to today's workloads, and we communicated in a way that was understandable and had business value. There is just no question that today's iSeries platform is a heck of a good platform in terms of its ability to run applications in the i5/OS environment, in the Linux and AIX environment. I think the platform is very solid. We need to do a better job communicating the value proposition to the ecosystem, to the business partners, to the clients. I do think that we can do a better job communicating why the iSeries has business value.

TPM: And having done that, this is where the revenue growth comes from?

MS: I believe that to be true. I think that a lot of our existing clients are going to find that they can reduce the cost of managing their infrastructure by integrating some of their Intel and Unix applications into a more consolidated environment. But we are also really reaching out to ISVs to modernize their applications and to take the long-standing value proposition of a business solution to market--and not just to our current customer base, but to the SMB marketplace at large.

TPM: Can this box sell, as a solution box, against an integrated stack of Microsoft software--which now includes applications as well as an operating system, a database, and middleware--and an Intel-based midrange box of equivalent processing power?

MS: I believe the iSeries can win among clients who are looking at the simplicity, security, and reliability of the platform, which has minimal labor costs for managing it. I believe the iSeries can win in the solutions market.

TPM: I believe that, too, by the way. It seems to me Windows is not a very secure platform and it is not necessarily easy to manage.

MS: I definitely believe that a lot of small and medium-sized businesses understand the benefits of simplifying their IT infrastructure.

TPM: But can you sell a system with a higher initial price to SMB customers? I run a very small business, and the one thing I cannot do is lay out a lot of cash up front for a solution that pays out over the long haul. Small businesses can't always think for the long term. Customers want to be able to buy a Cadillac but only pay the Chevy price.

So do you think there is some way to do a subscription-style pricing model for the i5, like Sun is talking about for its Unix servers? Can we get back to a rental base for the i5 and get the whole idea of acquiring a server out of the equation and move to a utility model?

MS: I think that this is where the uniqueness of IBM's breadth really helps us out. Obviously, IBM Global Financing is a huge asset to us, in terms of making solutions more affordable on a time basis. For years, we have been experimenting with different network-delivery solutions for Siebel CRM software and the like. And we are experimenting, as you know, with on/off capacity and variable cost models. So I think we will continue to look at the business models of how we deliver the iSeries technology, and I think this is a worthwhile thing for us to focus on.