The Four Hundred

In a down economy, when companies scramble to do as much as they can with their shrinking revenues, no one wants to get caught on the wrong side of a big product transition. And no vendor or reseller wants to incur the wrath of its customers, because a dramatic product transition--like the one IBM made with the jump from the System/36 to the AS/400, or from the old iSeries to the new one--can cause it to lose as many customers as it gains.

It was bound to happen sooner rather than later. We hear on the grapevine that IBM and its resellers are quietly poking around, asking customers who purchased equipment in the months before the January 20 revamping what kind of compensation they might want for having been kept in the dark about the radical nature of the change in pricing and packaging for the new iSeries.

This is the kind of thing that IBM and its reseller partners do not want to talk about, but the subject of compensation was one of the first things that occurred to many of us after examining the repackaging on the iSeries. It is obvious that any customer who just spent hundreds of thousands of dollars, or maybe even millions of dollars, on iSeries interactive features and a wide selection of OS/400 systems software and WebSphere middleware would want to get some sort of compensation because of the radically lower pricing on the new iSeries line. If this were not a recession, and companies were flush with money, as many were three or five years ago, the radical transformation of the iSeries and the improved economics of the new machines versus those that are only a year old might not have been such a big issue. Not so in 2003. It's an issue for shops that just spent a lot of money--or, more precisely, what is for them a lot of money, but may seem like small potatoes to a behemoth like IBM.

IBM's top brass conceded during the launch in January that its biggest customers would be able to wring some concessions out of Big Blue. That's just the way the world works. I haven't heard directly about what's going on at big OS/400 shops, but I know it must be going on. What I have seen, and what other people in the reseller chain have seen, however, is talk of concessions among customers with small iSeries machines, too. I expected this kind of back-scratching among Model 840 and Model 890 shops, and maybe big Model 830 customers, but I'm hearing Model 820 shops talking about and working on getting some concessions from IBM because they just bought their boxes and feel a little betrayed by the new pricing and packaging. It might just be the way the installation pyramid works: There are a lot more Model 820 customers than Model 890 customers, so the odds that one of them sends me an e-mail informing me of what is going on in their shop is much higher for the Model 820 shops than for the Model 890 shops.

In any event, one customer that just shelled out $250,000 for an interactive feature 1526 on a Model 820-2438 last fall tells me it wants its $250,000 back, or wants free stuff of equivalent value or big price breaks on hardware and software as it moves into the new iSeries line. More than anything else, this company wants its money back, which obviously is not going to happen, but it is also considering asking for a OS/400 V5R2 Enterprise Edition on its Model 820 without having to upgrade to a Model 825. (That's an interesting idea.) Others are making similar requests. Heaven knows what IBM is going to do, but this much I do know: If you never ask for something in this world, you sure won't get it.

If your reseller or IBM is talking to you about compensation and concessions, or if you just want to send me a note telling me what you think IBM ought to do in these cases, drop me an e-mail at tpm@itjungle.com.

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