Remarks By Mark Shearer, COMMON Spring 2005

[Transcription from the show]

[Note: Before Shearer's remarks, IBM showed a video promoting the iSeries, which we did not have access to at press time. We do have pointers to the other videos IBM showed. Read on and we will point out where they were shown and where you can get them online.]

It is my pleasure to be at today's iSeries Town Hall meeting. This is my first of many town hall meetings, and I want you to know, you're going to see a lot of things. I love that video, it will be everywhere. I want you to take one thing away from this meeting: 2005 is the year that IBM is going to speak out again about the unique position the iSeries plays in the industry, and you have my permission to use every asset I can touch to really re-establish this category of computing that iSeries represents, and make dramatically broad awareness of the iSeries.

Did you happen to notice on your seat this advertisement?

[Shearer was referring to a printing of the four-page "Why i?" ad that IBM has been running in magazines and newspapers for the past several weeks, which were placed on everyone's seat prior to the keynote address.]

[Applause]

Before coming here, I had a chance to read through the minutes and notes of many of the recent COMON meeting. And one thing is really clear from everything you've told us for years is you really want us to speak out again and talk about the value of iSeries in the industry. When this four page advertisement ran several a couple of week s ago, it was really just the launching point of a much bolder attitude about what we want to do with the iSeries. In a few minutes, Peter Bingaman [the new vice president of iSeries marketing] is going to come up and tell you about our overall marketing plans, but this year we really intend to tell the iSeries story in a loud voice, through your voice. We're going to talk about the customer value of the iSeries, and the really unique peace the platform offers the industry.

I'm really looking forward to the question and answer part of this town hall meeting. I've heard all about those sessions. To get things going, I wanted to do a few things really briefly. First of all, I wanted to introduce myself to you. Then I want to share with you my views of where the industry is headed. I've had the chance to work with the software and systems business for years, and I just want to share some perspective that give me great confidence the iSeries will be a growth part of the industry again. Then finally, I want to briefly summarized some of the marquee elements of our business strategy this year.

Let me start with my own relationship with the iSeries. I have been working with System/36, System/38, AS/400, and iSeries products since about 1980. I learnd about the iSeries through the eyes of my customers when I had clients in NYC like the Home Insurance Company, with a network of hundreds of System/36s and Citicorp, which had a network of hundreds of System/38s. Later in my IBM career, I lived in Tokyo for four years and I had responsibility for the telecommunications industry, and at that time I was sponsor in IBM to purchase a customer care and billing system that some of you may know as ICMS. I worked with many telcos around the world to implement customer care billing apps. In my first 18 years in IBM, I spent them in front of clients like you. And I actually spent some time with the bleeding edge iSeries clients that were really pushing us to the limit, which is really how I got to know some many members of our Rochester team. So my experience with iSeries really is longstanding and I really got to understand what made the platform special.

Fast forward. In the past four years, I've had a chance to work for Bill Zeitler, first in our zSeries business and then across our entire Systems and Technology Group portfolio. So I actually have been pretty active in sort of the resurgence of the zSeries core business four years ago. I picked up a hobby a few years ago, a product called our eServer BladeCenter, and worked on that product for a couple of years before it was introduced. Most recently last year and the year before, I'd been working on what we called the "Squadron" program, what you now know as the eServer i5 and p5 and TotalStorage 8000 systems.

So I have a had recent experience working with the iSeries team. I had overall marketing responsibility across STG, and it's very clear to me that we need this year's focus on dramatically increasing the marketing that Peter will take you through. So although I'm new to iSeries I'm really not new to the product line. And I made a commitment to Sam Palmisano, our chairman, that I'm going to be here for a period of years until we get this business back to where it really needs to be.

[Applause]

Over the Christmas holiday, I got the phone call that I had this opportunity. There were about 10 different things that I thought Bill Zeitler might ask me to do. I just wasn't expecting this particular opportunity. But as I thought about it, I really developed a very strong sense of confidence, that this product, the iSeries product, would in fact grow again in IBM and in the industry. And it really has to do with some marketplace fundamentals. It's really not just about having some advertising for the first time in ten years. It's not just about speaking out. It is really about some fundamental shifts in our industry.

Starting with our clients trend to want to simplify their IT infrastructure. Around the world, regardless of the type of platform our clients are using, there's just this tremendous wave of interest in simplifying and consolidating anything that can be managed in an easier way. As you know, for every $1 that we spend in IT infrastructure, you probably are spending $3 managing it. This idea of integration and simplification. The idea of integrating middleware with hardware in a much simpler tighter package. The idea of running multiple operating systems on a single platform, and being able to manage it and share DASD. These ideas are really fundamental to the iSeries and its predecessor products. I really believe the industry trend toward simplification really creates a hotspot for the iSeries and the iSeries family.

The other fundamental thing that's going on in the industry is our clients more and more are shifting their focus from wanting procure technology piece parts to wanting to create business solutions that solve business needs. During the past six, seven, eight weeks, my first eight weeks, I've only been in the office for three days. No I haven't been on vacation. I've been traveling around the world talking to clients and business partners, to IBMers, and last week, this point about solutions really hit home to me. I had two sequential customer calls to Singapore, both to CIOs, one from a good-sized bank in the region and one on a quite famous retailer. I was all set with my AIX and LPAR discussion and how great Power5 technology is. I'm being facetious. But what was really fascinating, in both meetings, and they were both hour and a half discussion, we never really got around to talking about the iSeries technology plans and roadmaps. These CIOs were absolutely obsessed with their business priorities, and the things that IT has to do to enable growth in their businesses.

This focus on solutions, once again, this is the heritage, this is core to the iSeries value proposition. That's why this year we are investing tens of millions of dollars addition to help reinvigorate the iSeries community around the iSeries ecosystem and platform. Solutions. Integration. Simplification. These are marketplace realities and they're really indicating the market is moving right over the sweet spot of what the iSeries is really good at. And this makes it even more important that IBM speak out about the iSeries. There are many segments of the market where the iSeries should be IBM's lead-with strategy. So we've got a lot of work to do. And I'll briefly summarize three streams of work we're focused on and a fourth personal priority of mine.

The first thing we're trying to do is we're trying to clearly develop our brand image and our brand presence in the marketplace, and Peter Bingaman is going to talk about that in just a moment.

The second fundamental area of business focus we've made is all around the ecosystem of service providers, integrators, and resellers that support the iSeries platform. A couple of weeks ago, we announced something called the iSeries Initiative for Innovation. This is sort of something we're borrowing from a couple of other playbooks from our systems business. This is really all about making the iSeries a platform for innovation in the industry. And this is about inspiring other companies to invest on the iSeries platform, invest in the iSeries platform, to broaden the range of solutions that will be available to you, our clients. When I was working on our BladeCenter program, I noticed--as we had zero percent market share in the beginning, which is a really tough place to start in any business--I noticed as we opened up the ecosystem, we started with a handful of partners, including Intel. Over time, we ultimately opened up the specifications for the BladeCenter and then we had about 500 hardware and software companies innovating on top of the BladeCenter platform. And it really propelled us forward to the number one position in the marketplace.

My personal lesson from experience was that it's not about the billion of dollars that IBM might be investing in these platforms. It's really about the investments that the industry at large is making in the platforms. No one company--even IBM--can create all the innovation required in today's industry. So our iSeries Initiative for Innovation this is rally all about IBM's commitment to cultivate the ecosystem around the iSeries. There are many different constituencies that we have programs for. Peter will talk about this briefly.

But also as part of this, we announced the IBM charter for iSeries innovation. When you have a chance down in the Expo center I really encourage you to pick up this document because it puts it really simple words a statement of IBM's commitment to the iSeries, not just for 2005, but for many, many years to come. This is about our sustained investment in the underlying technologies and processors. But it's also about our commitment to customers, our commitment to our ISVs, innovators, our business partners of all sorts. This is just one example of how we are going to get much more proactive in telling the iSeries story.

Lest you have any doubts, from a pure business point of view, in our systems business, the iSeries product line and its future is a absolutely essential if IBM is going to stay in the hardware business. More than 50 percent of all of IBM's relationships with clients related to hardware are based upon the iSeries platform. If IBM doesn't have the iSeries platform, we are not going to have the competitive Power-based systems that we use across our product line. iSeries is fundamental. We have more client relationships depending on it than any other single product. So IBM could not be more motivated than it is to invest to continue to investment, and to really crack open this business. So rest assured. We are serious about the iSeries. We've always been serious about the iSeries. We're just getting a lot more vocal about it.

[Applause]

The third area of focus in our business plan really has to do with the business model around our business partners. As you probably know, about 85 percent of our iSeries business is actually distributed through our business partner in one form or another. We are working with our business partners to make the iSeries is the most attractive and profitable part of our hardware product line to represent in the marketplace. Since they play such a vital role in our distribution, it really is important that we reinforce our partners' business models. So that's really the third element of our strategy.

In addition to these three things, I have just kicked off a personal initiatives around sustaining and continuing to improve the quality of the iSeries product. When you think about the iSeries, it's really come a long way from the AS/400 days. Now we've got multiple operating systems. We've got high availability configurations. We've got a robustness of capability that inherently could make it difficult to maintain the same level of quality. In my hundreds of client and business partner discussion so far this year, everyone this year has reinforced the unique expectations you have about the quality of iSeries. VJ Lung, one of my counterparts and colleagues in our development team, and I have kicked off an initiative to ensure that going forward quality be absolutely be built into our future iSeries products. I want you to know that I realize that you depend on these platforms. And the quality of our hardware, of our system software, of the overall operating environment, is just fundamental. You have high expectations, as you should. The quality of our Power platforms really has helped us differentiate in the marketplace. So quality is a program that I haven't delegated. I am engaged in that process weekly at least. And I'm going to stay on that so long as I'm in this position.

So we're focused on market presence, we're focused on solutions with business partners, and quality. Before that, I'd like to show you a video that our cracker jack marketing team acquired, of our competitors presenting to one of you.

[Note: After Shearer's remarks, IBM showed another video, which you can download at ftp://ftp.software.ibm.com/as400/web/iseriesmyseries/video/ and see for yourself. This one is called Covered.mpeg.]