Remarks of Peter Bingaman, Vice President of Marketing, iSeries Division

iSeries Town Hall Meeting, Fall COMMON, September 18, 2005

As I was building my remarks for this year's COMMON, I was reflecting back on Chicago, and I remembered two things, well several things, one of which was my entrance up on stage, at which point I tripped and my mike came undone and that was my first impression. So that wasn't a very good one.

But the other things I recalled were the comments that I made onstage regarding our strategic priorities and our intent to invest more aggressively in those priorities in order to return the iSeries to a growth business. And many of you embraced those priorities. Many of you said, "Bravo, great, go for it, we urge you to move forward, we support you, tell us what we can do, go make it happen."

And many of you--well some of you--were quite skeptical, and rightly so. If you look at our recent history, where our business has been declining, in some cases where we weren't making investments we told you we've made. You thought that you had heard that before, you thought that we were too traditional in our thinking, our investments were too conservative. In fact, some of you would even go as far as to say IBM's policies, practices, politics, processes, and even our other priorities were significantly weighing us down.

You see this is sort of the picture that came to mind [Bingaman shows a picture of donkey elevated into air by massively overloaded cart], we're sort of the horse, others call it something else. And IBM was this big weighted package over here, but this is sort of the way many of you were feeling we were executing, I think.

Since then, we really have our feet on the ground, no pun intended. But in fact it's really the broader IBM that has enabled us to execute as well as we have. The broader IBM is the IBM that has put more investments behind our advertising. It's the broader IBM that has been willing to make a bet ahead of the curve in our iSeries Initiative for Innovation. It's the entire community of IBMers that has allowed us to grow.

It's not only IBM, but it's the fact that the market has been moving over the sweet spot, as Mark said, we continue to see that and everything that we've talked to our customers about, the hard data that we're seeing in the market. Our customers are begging for integrated solutions. They're aching for simplicity. And it's these factors, these capabilities, these concerns, these pain points, that have been giving us permission and actually setting expectations for our team, to grow the business on a sustained basis.

If we do this right, we're going to build a foundation in our business, and we've started to do this already, that will make us smarter, more creative, and a whole heck of a lot faster than the competition. You see in this case [he shows a picture of a zebra on a motorcycle escaping cheetahs], the competition is the cheetah and we're the zebra now. And the motorcycle is our sales and marketing plan, if I can say so myself.

So we do believe we have the opportunity where competition will be running after us. Not to say we're going to beat them in market share any time soon. But we'll grow faster, and we will provide the thought leadership in this industry that the competition will find themselves going after as well.

The solutions we've put in place are pretty simple. It's a basic, very simple plan. The three priorities that were articulated to you back in March have not changed. We're bringing the iSeries voice to the market very aggressively, we're investing in the vitality of our partners, and we've now pulled the entire IBM community, partners, around what we call the iSeries Initiative for Innovation, and our effort to extend the strength in our portfolio of applications. And I'll talk about the results of those, and I'll go into what's next.

So far, for the first half of this year we're up in awareness 20 percent year to year. That's an incredible growth rate. I've been in this business for about 20 years now and am hard pressed to come up with maybe results like that just the first half of the year. And the reason we've been able to do that is that we've put a full-court press on the press. We've had maybe 450 to 500 articles now written about us in the news. That's twice as many as we've had to this point versus last year. We're publishing analyst articles. The analysts are being very bullish on the iSeries these days. We've got 20 papers out there talking about the business value the iSeries presents to customs versus the competition. Powerful stories of the business value of this system.

And we're running the advertising around the world. We're seeing it in Japan, in China, in Italy, in France, it's running in Germany, it's running in the U.S., we're getting it into the U.K. And we're covering a whole lot of other countries around the world through ISVs who are investing in our program we have intended to get them doing more co-advertising. We have 178 ISV advertisements in the market today. All advertising their applications on the iSeries platform. It's a powerful capability we give to ISVs, and they're taking advantage of it. So a lot of progress in the awareness.

On the partner side these days, I told you we're investing in the vitality of our partners. Many of you know that 85 percent of our revenues come through our partners. They're an incredibly important piece of our business. So we increased our investment substantially, not just to get them to sell more hardware, but to get them selling more solutions, because that's what our customers want, so we're putting the money where the opportunity is, and our partners having been biting at it and are eating it up.

So we initiated this incentive plan in the first quarter [Opportunity Certification is the technical name of it], and by the second quarter, already our partner revenue hit double digits. That's outstanding progress. And every sign we have going forward, this year, next year, indicates that that growth will continue. The growth will continue but more so we're actually seeing our partners invest more in the iSeries, in skills and in sales that we need to grow the business. It's a great story with our partners.

And lastly, on February 24 of this year, we introduced what we call the iSeries Initiative for Innovation. This was the biggest marketing announcement we've made in maybe a decade. This truly is IBM at its best. The Application Innovation Program, designed to bring more new applications into the market; the Tools Innovation Program, designed to open up our developers roadmap; and the iSeries Initiative for Innovation, designed to bring a whole new roadmap to the iSeries.

Today we have over 300 new applications running on the iSeries in the market, and we have about 540 more are going to modernized in the pipeline. And the tools innovation program, we started with a handful of WebSphere tools partners, today we have about 97 tools partners ready to add functionality for our ISVs, capabilities for our partners. This is capability we haven't had in years. This is the foundation of this program.

In fact the great majority of the modernized application have been accomplished because of this open developers roadmap where we are able to bring together these tools partners with our ISVs to drive functionality that quite honestly was more appropriate than some of the WebSphere or the IBM technology would be. A lot of these tools players are SMBs at their best: low prices, more appropriate functionality, and relationships. This is what being open is all about, it's about collaborative innovation.

And with the iSeries Initiative for Innovation, we've implemented advisory councils with our ISVs this year to identity new requirements for the system. And just last week, we created and attended and actually drove an event with a number of VCs we met up in Boston where they brought their portfolio of ISVs who are building applications that are really far out in their design, and partnering them with us so we can figure out how to leapfrog competition in the industry we're targeting. Great discussion and great opportunity here.

So a lot of progress this year on all of our investments. The question now is what's next. There's still a lot of work to do. We're still in good shape. We're moving forward and making progress. That's not enough. We can't be comfortable. There's a lot of work still to do. One of the things that Mark just referenced is the Academic Initiative. I want to make sure that you all understand the importance of this. It's a big play for us next year, to pump up this investment and we're going to fold this under the iSeries Initiative for Innovation so that we make stronger connections to the ISVs, to partners, and to customers involved in that program. Create some more robust capability.

Now, on the awareness side, we're continuing with the advertising, the analyst reports, the press. We're going to continue to push that aggressively with the market. One of the interesting things we're going to open up now is our marketing. We're working with a company called Plan B. At this point, I'd like to introduce you to Alex Wipperfurth. Alex is sort of the brain trust of this newly organized company--can't say they're too new because they've worked with a number of Blue Chips--Coca Cola, Astor, Red Stripe, P&G, and Amazon.com. What these guys do is they essentially call marketing out of its ivory towers and bring it to the grass roots, bring it to you guys, allow you guys do the thinking, have you guys lend your creativity to us, your thoughtfulness, your thought leadership, your understanding, your experience throughout the iSeries, so that we can reflect that back into the market and make a much more powerful statement of what the iSeries is all about. It's your voice that we're going to bring to the market at the end of this year and next. We're going to call this--right now we're calling this open source marketing. So Alex is running a few sessions Monday and Tuesday. We'll essentially be putting stimulus out into the market and asking you to react to it, give us your thoughts, help us shape the way our marketing should happen over the next year, year and a half, maybe beyond. You guys hold the magic in building the iSeries and what it needs to be, and we're going to take advantage of that. So we'll ask you to attend Alex's session to see what this is going to be about. And stay tuned. There will be a lot more to come in the weeks to come. So that's Plan B.

We've already started some grass roots stuff. You heard me talk about blogs in March. There are a number of blogs out there now, in Canada and India and many other countries around the world. So we just decided to focus our efforts a little more on podcasts, you heard Frank earlier, where you can listen to The Podfather. You can also listen to a new psychiatrist who's has made his way into the market, Doctor Kleinemfinger, Felker, something. So let me just talk about Dr. Kleinempfänger. His expertise is in the id, the ego, the superego, and the i. Here's a little clip from his podcast. [Plays clip.] So we're trying to have some fun with the podcasts. Go to podcastaways.com to get your podcasts and spread it around.

We are going to have to some advertising in the second half, it's very exciting. And I think one of the things we always trying to do with our advertising and everything else is to cut through the clutter. It's very very important that we tell the unique story of the iSeries, and it's very important that we bring the unique personality of the iSeries to bear in the market place. I'm not going to suggest that this is it, but I think it does get the point across that we are trying to be different, we have a different story to tell.