IBM and ISVs Launch VIP Program to Reinvigorate System i5 Sales

Published: February 5, 2007

by Timothy Prickett Morgan

As last year was coming to a close, executives at IBM said that in 2007 the company would be cooking up some sales and marketing schemes to bolster the System i5 channel and do a better job pushing the box and the solutions that run atop of it. Last Friday, IBM announced the Vertical Industry Program, or VIP, which is a fine-grained operation that will target very specific industries in various geographies to marry customers looking for applications to the independent software vendors who have the software they need.

According to Kevin Patterson, director of worldwide System i sales at IBM, the VIP program has been cooking since late 2005 or so, when Big Blue began to do very detailed market intelligence, working out from the metro areas around the globe where there are local ISVs who provide precise, best-of-breed applications for those areas that also run on the System i5 platform in one way or another. These days, with the System i5 supporting i5/OS, AIX, and Linux natively as well as Linux and Windows on the Integrated xSeries Server and on externally attached System x servers using iSCSI links, the kinds of solutions that ISVs can bring to bear have expanded beyond the OS/400 and RPG combination of the salad days of the Application System/400.

While IBM last week was talking about its efforts to sell into the hospitality and gaming industry--where the AS/400, iSeries, and System i5 has ruled for decades but which has also come under pressure from Microsoft and its ISV partners, who are peddling Windows solutions--the company is actually launching the VIP effort with 80 different sales niches identified. Here is a sampling of these niches, so you can see just how fine-grained it is:

• France: Distribution --> Wholesale Distribution --> Retail Suppliers --> Large Scale Distribution
• France: Distribution --> Wholesale Distribution --> Beverage Distributors
• BeNeLux: Distribution --> Wholesale Distribution --> Fruit and Vegetable Distributors
• Spain: Distribution --> Wholesale Distribution --> Local Wholesale Distributors
• India: Distribution --> Retail --> Small Regional Retailers
• Japan: Distribution --> Retail --> Wholesale --> Intermediate Products
• Australia: Distribution --> Retail --> Small Local Retailers
• United Kingdom: Public Healthcare --> Small Health Facilities
• Central Europe: Financial Services --> Banking --> Retail Banking

Patterson is not in a mood to give out the full list of 80 targets in 15 countries that are part of the initial VIP effort, and for good reason. "To give out that information would show our competitors how we are going to do battle," he explains. "We feel comfortable talking about VIP as it related to hospitality and gaming because the System i5 is already well known in this area."

As we reported last May, IBM worked with four key ISVs in the hospitality and gaming industry to create a solution it called "Casino in a Box," with the box being the System i5 server. Those ISVs included Agilysys, Bally Technologies, InfoGenesis, and SSA Global, which is now part of Infor. The five companies worked to provide an integrated solution. Specifically, it included property management, inventory and procurement, document management, guest express kiosk, and wireless software from Agilysys; casino management solutions, slot management systems, and table management systems from Bally Systems; point of sale, cashless payment, dining management, dining reservations, and self-service software from InfoGenesis; and financial management, human capital management, customer relationship management, corporate performance management, and workflow software from Infor.

With the VIP effort, IBM is also working with local colleges and universities to leverage students who will gain expertise with the System i5 platform. In the case of the hospitality and gaming VIP target, the University of Nevada, Las Vegas, has joined the System i Academic Initiative and is expected to guarantee that there is a supply of System i5 experts that casinos in the area need to run the platforms that IBM and its ISV partners are trying to sell to the casinos. The availability of trained i5/OS and DB2/400 experts is an issue when competing against Windows and Unix platforms.

As part of the Vertical Industry Program, IBM is also putting together studies to show the advantages of the System i5 platform compared to alternatives, and in the case of the hospitality and gaming industry, IBM has commissioned a report from International Technology Group that shows the substantial total cost of ownership advantages of the System i5 platform compared to the Windows platform running the same suite of software. (You can read the ITG report by clicking here.) ITG has been commissioned to look at SAP R/3 and Domino workloads running on the iSeries and System i5 platform compared to other platforms in the past.

The ITG study focusing on hospitality and gaming was released in December, and it shows the three-year cost of three different scenarios covering small, medium, and large "properties" running a suite of software. Specifically, the ITG comparison looked at the cost of configuring the Agilysys Lodging Management System (LMS), the Bally casino management system (CMS), and a set of Infor financial management software (in this case, not the SSA BPCS suite, but the Infinium suite, which runs on the i5/OS platform as well). i5/OS and Windows platforms were compared for these three different sized casinos, covering the cost of the hardware, software, maintenance, personnel, and facilities over the three-year term. For the small property configuration, ITG calculated that the System i5 platform would cost $195,300, compared to $460,300 for the Windows platform.

Because the Windows platform takes more boxes and more people (system administrators, database administrators, security managers and so forth) to run, it costs 2.4 times as much as the System i5 platform. (ITG did not provide the details of the server configurations, nor did it say whether these boxes delivered roughly the same performance. But presumably this is the case, or else the comparison is void.) This comparison from ITG did not include the cost of the application software, either, and it is unclear if Windows-based hospitality and gaming solutions cost less than those available on the System i5. For the mid-sized casino, the System i5 in the ITG study cost $266,900 over three years, compared to $583,300, and with the large property scenario, the Windows box cost $957,200 compared to $467,000 for the System i5.

Interestingly, the ITG study says that the i5/OS platform accounted for 74 percent of the casino management "workloads" in 2006 at hospitality and gaming companies in the United States in 2006. Workload seems to be a measure of installed base, but it is unclear if ITG is measuring transaction loads, box counts, or some mix of the two. In any event, the i5/OS platform has 82 percent of the HR workload, 86 percent of the financials workload, and 93 percent of the lodging management workload across companies in the United States engaged in hospitality and gaming.

With the Wynn Las Vegas casino famously adopting an all-Windows platform and Las Vegas formerly having an exclusively OS/400 and i5/OS market share, it might be reasonable to assume that the Vertical Industry Program is a defensive maneuver on the part of IBM and its ISV partners in banking, insurance, manufacturing, and distribution--the key industries that have adopted the OS/400 and i5/OS platform for decades. But the VIP effort is probably more of a combination defensive-offensive maneuver--like acquiring a company to make sure it doesn't fall into a competitor's hands and to use what it has against that competitor. (This is a tactic that is used all the time in the IT industry.)

"I have never thought of this as a defensive solution," says Patterson in describing the VIP effort. "I think of this as a getting back to basics approach. You take best of breed solutions and you put them together with the best of breed system. Customers see a solution that is leading edge, and a platform that has total cost of ownership, integration, ease of use, and high security. So the customer gets a double whammy."

Patterson says that he has not been given specific targets to hit--such as increasing System i5 sales by X percent or bringing in Y thousand new customers in 2007--for the Vertical Industry Program. IBM has a matrix of 80 niches it thinks it can chase with the System i5 with very precise partners in specific cities and countries, and it is trying to maximize its marketing money to chase those places where the i5 can and should win. In some cases, IBM will be helping ISVs to modernize their applications; in others, IBM will do co-marketing and lead generation; and in other cases, it will do both. And the 80 targets the VIP effort is aiming at hitting before the end of 2007 is just the beginning. "We will be rolling this out as fast as we can, and these 80 are just a start," says Patterson.

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