The Four Hundred

Two of the biggest complaints from the OS/400 community is that IBM does not do enough to promote new applications on the iSeries and AS/400 platform, and that it does not try to attract new footprints to the OS/400 installed base. Well, after two years of grueling research, IBM's iSeries team and its Small and Medium Business marketing unit have teamed up to launch a new $10 million campaign to help independent software vendors (ISVs) peddle products in Europe.

The new ISV marketing program is called "Galaxy," and, according to IBM sources, the company has similar but not necessarily identical programs in the Americas and Asia/Pacific regions. I was unable to get the details of these ISV comarketing initiatives outside of IBM EMEA (Europe, the Middle East, and Africa) at press time, but I'll keep chasing it down and let you know what I find out.

While $10 million may not sound like a lot at first, as Antony Reynolds, development manager for systems sales for the iSeries unit in EMEA, succinctly and cleverly put it when he told me about this ISV funding, it is a lot of money when you compare it to nothing, which is just about what IBM had been spending to try to get new ISVs onto the box and to try to find new customers who are uninitiated to the joys of OS/400 and the iSeries.

Reynolds hails from IBM's Industry Solutions group, a marketing unit that peddles hardware, software, and services to customers in various industries in a completely agnostic way. About two and a half years ago, he was given a job in IBM's Systems Group (what we used to call Server Group last year) and a mandate to get more ISVs on the iSeries and to get more new companies buying the box, particularly in the small and midsized business (SMB) sector. The trick for Galaxy is not to just throw money at all iSeries solutions, old or new, but to find those ISVs who had modernized solutions that could win out against Windows and Unix boxes in the same SMB market segment. IBM reckons there are about 7,200 different OS/400 applications available worldwide. Some are new, some have been ported from System/3X iron or Unix servers or even Windows, some have been modernized with Web front-ends, and some haven't changed much at all in the past decade.

Galaxy does not give money to ISVs that port to the OS/400 platform. IBM is not just interested in ports, says Reynolds, and rightly so. Porting an application from Windows or Unix to OS/400 is a very costly thing to do, and it is a very silly thing to do if there are established market leaders already on the iSeries in your geography that own that market. Here's an extreme example that illustrates the concept. Say you have a nice little ERP package and you want to sell it in Italy. You do the port on your own budget, thinking that, in Italy, the OS/400 platform is really popular. Well, there's only one problem. In Italy, what is really popular among SMBs is a Web-enabled RPG suite from Applicazioni Contabili Gestionali, which has more than 10,000 installations and a lock on the midrange market. If you spend money porting your ERP suite to Italian, you had better have something that can sell against Applicazioni Contabili Gestionali, or you are going to fail. Finito. Buona notte.

IBM has services and facilities to help ISVs port applications to the OS/400 platform, and it has had them for years. There are porting centers and a very low lease rate that ISVs can get if they are porting their applications to OS/400 or modernizing them. (And while I realize that IBM has recently upped the price on these leases, the lease rates are still not all that expensive when compared with actually buying the machines and software needed for a port.)

IBM Europe spent $1 million in 2001 and $1.8 million in 2002 to build the Galaxy marketing team for the iSeries and, more important, in buying a CRM system that allows IBM to bring together detailed information on more than 3,000 European ISVs in the OS/400 market. It qualifies ISV's wares by geography, how old or how modern they are, market position, and lots of other criteria that allows IBM to see the whole lay of the land in the European iSeries application space. With the help of this ISV CRM system, and the assistance of IBM's SMB unit, IBMers can not only see what is out there, but see where there are holes and fill them.

The Galaxy program turns the ISV situation on its head, or more precisely, on its feet. In the past, IBM would convince ISVs to port to the OS/400 platform, and maybe they could make sales and maybe they couldn't. With Galaxy, IBM is encouraging ISVs to look before they leap. In fact, the SMB unit has a yea or nay vote on the Galaxy funds, which are used for comarketing of OS/400 applications. If you port to OS/400 and the SMB unit doesn't think it will help the iSeries add footprints, you don't get any Galaxy comarketing funds. This might sound a little harsh, and it is definitely going to grate on ISVs that think they deserve Galaxy funds, but it seems like a very reasonably way to approach the problem of trying to sell modern iSeries applications to new customers. With 60 percent of iSeries revenue coming out of the SMB channel, which has more options than customers know what to do with, IBM must remain focused to get new OS/400 footprints against Windows, Linux, and Unix.

IBM Europe started spending money to help ISVs modernize and market their applications six months ago, and it has thus far shipped 75 leased development machines to ISVs for their modernization work. Thus far, 200 ISVs that knew they had Galaxy money waiting for them after they got their apps running on OS/400 have either ported their apps or modernized them. There were 50 new apps ported and 150 apps modernized. The Galaxy Solution Mall has 407 applications that have been given the Galaxy seal of approval (and presumably comarketing funds) that resellers can peddle in various countries in Europe, the Middle East, and Africa.