Q&A: iSeries GM Borman to Focus on i5/OS Sales
by Timothy Prickett Morgan
Mike Borman, the new general manager of the eServer iSeries business, started out in 1977 at IBM as a programmer after getting his degree in computer science. He eventually held the legendary position of an IBM Systems Engineer before moving into OS/400 and Unix sales, marketing, and then several general manager positions. Who is Borman, why is he running the iSeries business, and where is he going to take the OS/400 platform?
With this appointment, Borman has been the general manager of both the AIX and OS/400 server units and has also been a general manager for IBM's PartnerWorld reseller channel. He also left IBM for a few years to run a software company (Blue Martini Software) during the dot-com bubble, but came back to Big Blue to run PartnerWorld. When you add all of his engineering, sales, channel, and management experience up, it is clear why Borman is qualified to run the iSeries business. Read this interview and see for yourself.
Timothy Prickett Morgan: I know that as we do this interview, IBM is in its quiet period before it announces its third quarter financial results and I know that you are fairly new to the general manager position, but can you give us a sense of how the new eServer i5 machines are being received by the market?
Mike Borman: I spent the first couple of months in this new job doing a lot of traveling, mainly to get out and meet with customers. I've been all around Europe and the United States meeting with customers--I haven't made it to Asia yet--and I will tell you that the reaction overall has been extremely positive. And I will tell you why.
No matter what kind of server you are talking about, there is always concern among customers about how viable the platform is, and customers mainly think about the underlying hardware technology when they are expressing their concern. The zSeries customers worry about that in certain years, the iSeries or pSeries customers do in others. Everybody is always worried about the viability of their platform. When we came out with the new Power5 "Squadron" technology, and customers understood all of the performance and reliability associated with it as well as some of the neat features like virtualization, I think iSeries customers are relieved and delighted that we have this state-of-the-art technology that is better than anything Hewlett-Packard, Sun Microsystems, or anybody else has in the marketplace.
Customers have to go to a new operating system to use the Squadron servers, and they are all trying to figure out if this is an easy job or a hard job. They are trying to figure out how soon can they and should they get there to take advantage of the new technology. Without going into any numbers, as I talk to customers, my feeling is that the customers in general have a strong acceptance, mentally, for the new technology.
TPM: Over the past several years, with the consolidation of the pSeries and iSeries lines, one of the things I heard time and time again is that the consolidation somehow meant that the OS/400 platform was going to go away. What I have tried to communicate is that no matter what server IBM ships, there will always be something that can run OS/400 and its RPG applications, and that this should be a comforting idea. The volume economics of having a consolidated line ensures that there is a greater--not lesser--probability that the OS/400 platform will be around for a longer period of time.
At the same time, we have seen the installed base of OS/400 shops decline since the peak in 1998, and it has gone down considerably. People argue about the numbers, but the shape of the curve is something that I think everybody agrees on. Although we have seen a little bit of growth in the past year, it was modest. What is it that you can do to try to convince these customers that are still worried about the longevity of the platform and prove to them that it can, in fact, grow? A growing installed base is was attracts independent software vendors to support the box. Or is IBM's strategy to have a box that can support OS/400, AIX, and Linux is enough to keep ISVs interested?
MB: I don't have all the facts perfectly memorized, but from what I've been shown, the attrition rate of this iSeries brand is not that high--it is less than two percent in a given year. So it is not as if the people are abandoning the platform at a great rate. At the same time, we do get thousands of new customers each year. So I think we need to grow faster than we are growing, clearly. I have never been in a brand or a company where I was growing as fast as the company thought I needed to grow.
We need to do better, and you hit on two areas that are important. For the existing customers, they are happy to get the new technology and we have improved price/performance by 40 to 60 percent. That's a huge price/performance improvement. They are also happy that we can run multiple workloads. All of those Intel-based servers out there in their companies that are doing mission-critical file, Web, or firewall serving can now be brought into the iSeries, and some customers are starting to do that.
To put it simply, we have a two-prong strategy. Get the current ISVs on i5/OS V5R3, and get new workloads on top of that ISV base. We have over 200 Linux applications, for instance, that can now run on the iSeries.
TPM: In general, how big is that active base of iSeries ISVs?
MB: We have an i300 and an i3000 program to work with ISVs. The first works with the top 300 ISVs, who we are in contact with on a continual basis. The i3000 group is a new initiative to build the program that is underway, right now, as you and I are talking.
TPM: I've known a lot of the general managers of the AS/400 and iSeries divisions over the years, and they all have different styles and approaches. Given your background, what are you going to do the same and what are you doing to do differently as a general manager of the iSeries line?
MB: I can remember back when Bill Zeitler was the general manager of the AS/400 back in the mid-1990s. I picked him up at O'Hare Airport when I was the area manager in the Midwest, and he and I drove down to Caterpillar together to make an AS/400 call with the CIO, who I knew pretty well from my job in Chicago, and then we drove back and he got on the plane and left. I knew Bill, and the GMs before him--John Thompson, Steve Schwartz. I know that I am not any better than any of them, but I do know that each one of them brought a lot to the brand based on their background.
If you look at my background, most recently I was in the channel, and as you know, business partners are important to the success of the iSeries brand. Buell Duncan and Tom Jarosh also had that background. Jarosh managed IBM's Unix business, just like I did for a while. I was probably in sales more than any of the prior general managers. I also spent four years in Asia, and controlled IBM's SMB initiatives and channels there. I ran the SMB business when I came back to the States, too. I think that my sales experience, and linking particularly into the IBM SMB team, will be important. This brand was built on the teamwork of the entire IBM Company, not just the brand sales guys. One of my key responsibilities to the brand is to make sure we have a great partnership inside of IBM.
TPM: IBM made a conscious choice in 1988 to have the OS/400 platform pushed through the partner channel rather than on a direct basis. While IBM controls a lot of very large OS/400 accounts and has done some direct sales for smaller iSeries configurations on the Web, IBM has increasingly relied the business partner channel to push sales. Is there a reason or a way to boost i5 sales and increase the penetration in the market by moving to a direct sales model? Is it just a foregone conclusion that the channel is the way to do all i5 sales?
MB: I wouldn't say that the channel is the way to do all i5 sales. When I was back in Chicago, I would sit down with one of our AS/400 specialists, and she once showed me her 89 sales opportunities that she was working in her territory, which was basically a couple of suburbs of Chicago. There was no way that she could cover these 89 customers.
So she had a set of partners engaged on most of those deals, and that is the way I like to think of it. I think of the partners as leverage in the marketplace, and they are also the ones that have the solutions customers want. IBM doesn't create application software, so I desperately need partners that do and, incidentally, partners that can sell or partner with others who can sell the i5 hardware.
There will never be a point where our partners will do all of the i5 sales. We need a brand sales specialist team, engaged around the world, which we currently have with close to 1,000 people. But we feel that you can always get more leverage using partners. If I sold Boeing 767 aircraft, I probably would not have a partner channel. But when I have an installed base of over 400,000 OS/400 machines in the world, each with upgrade potential, there is just no way I can cover all of those opportunities without using partners.
TPM: While this has been IBM's strategy with the AS/400 and iSeries, at the low end of the X86 server market, companies who want a server that is in roughly the same server processing capacity as the entry i5 Model 520s go and buy it directly and install your own software. I am trying to figure out, for the low-end i5 machines in particular, is there a way to go direct which boosts the volumes high enough to make it possible to create a lower-cost i5 platform. I am worried, as you are, about the number of i5 boxes that come out of Rochester. Volume is the critical determinant in the IT industry. I don't know that the business partner channel can absorb and push more iSeries and i5 iron than they have already been doing. It strikes me that they are running as fast as they can to keep trained on the newest technologies and chase the accounts that they can, but the partners are a limiting factor.
MB: I would say that one of the important things for partners is that they have more choice in what to sell than they had five or six years ago. I think they could sell a lot more iSeries, and I have told them that. Six years ago, Intel servers were not that competitive and neither was Windows NT. And today, smart people still don't want a lot of Windows. But Windows hardware and software have improved, and so has the pSeries. So partners have more choice on what to sell. It is really important for me and for the brand to be able to differentiate on why i5/OS is the best choice for customers.
If I thought I could get i5/OS similar in terms of usability and understanding and image in the marketplace as its competitors, then I could go to more of a volume play. But right now, my view is that i5/OS is more of a push product, where you have to sell the features and function, compared to Windows, which is a pull product.
TPM: Which brings me nicely to my next question. Most OS/400 shops--somewhere in the neighborhood of 85 percent of them by some estimates--have multiple Windows servers running side by side with their AS/400 and iSeries machines. Given that IBM is already working with Microsoft to create a hardware abstraction layer to run Windows on the next generation of xBox game machine, which is based on PowerPC chips, one of the things that IBM could do, is get Windows running natively on logical partitions on the i5s. This would allow customers who have external Windows boxes--customers who by and large do not want to make the jump to Linux--to move their Windows boxes under the skins of the iSeries but have the flexibility of dynamic logical partitions.
This is a thought experiment. Does it make sense to put native Windows on the i5, and as a general manager of the iSeries Division, can you make it happen.
MB: Nothing that I have seen shows that we are working on running any Windows software on Power servers.
I have to be honest with you. I have been thinking about it in the opposite way. I have been trying to figure out where I can sell a lot of i5/OS. Clearly our Power technology is the best in the industry, and the combination of Power and i5/OS is perfect for these customers. I have to figure out how to pump up i5/OS volumes, not just sell more i5 hardware.
TPM: I agree. But, just to play devil's advocate, the funding money to push i5/OS might come through a big boost in i5 hardware sales that is enabled by Windows partitions.
MB: I will take a look at the idea. Of all of the things that I have been working on, that has not come across the radar screen.
TPM: Let's revisit that other good point you just brought up. What practical steps can you take to boost the number of i5/OS licenses you sell?
MB: If you look at some of the skills that we have provided to our sales people and our partners in the past few years, we have been more geared toward technology as opposed to talking about the features and functions associated with the great i5/OS operating system. One of the things we are currently working on is getting our field sales force and our partners trained on what differentiates i5/OS from alternatives in the marketplace.
TPM: Is there enough of a differentiation? Back in the late 1980s, when the AS/400 came out, Unix was just getting rolling in commercial environments and Windows did not exist. OS/400 had a lot of stuff back then that made it exceptional, and IBM sold $4 billion to $5 billion a year in servers, storage, and operating systems associated with the platform. As Unix came on strong in the 1990s and Windows got traction, driving down prices on all midrange servers, OS/400 server sales started to decline a bit, and bubbled some in 1998 with the Y2K issue. OS/400 server sales have been on a decline since that time. I realize that part of that decline has to do with shifting sales to the channel and price/performance increases as well as weakening sales volumes. But I worry that the feature and total cost of ownership (TCO) differentiation that OS/400 enjoyed 15 years ago is not as strong. Windows is pretty good now--even if it isn't great--and it has a lot of applications and inexpensive hardware. Moreover, we are programming at a much higher level with Java-style coding, which insulates programmers from system complexity much as RPG and integrated DB2/400 did with OS/400.
It seems to me that IBM needs to quantify this TCO, and demonstrate that running an identical set of applications on i5/OS and other platforms will result in the i5/OS shop having fewer administrators, fewer security headaches, better uptime, and what have you. We all know this anecdotally, but no one really puts hard numbers on this TCO argument. Anecdotes do not sell servers; data does.
MB: I think you are right on target. As a matter of fact, I just brought in my worldwide sales team in the past two days. My whole team was there, and we talked through what was going on in the market and what they need. And we had several discussions on total cost of ownership, and we want to get more current TCO data out in the field's hands because this is an important element to the i5/OS platform.
When you talk about integration, when you talk about ease of use, and when you talk about the whole value proposition of the box, it is there. It's real. People know that i5/OS is easier to install, use, and manage than Linux or Windows. But we know we need the TCO argument because we are more expensive. So we are going to get some studies done to prove this right away.
TPM: As general manager of the OS/400 platform, the OS/400 community has a high level of expectations for you. What are the limits to your power, particularly in an eServer-centric server world? The differences between IBM's platforms are more subtle now, and they share a lot of technologies. Just how much can you shake up the i5 business? I don't think you have a lot of maneuvering room, but I think that the OS/400 customer base thinks you do.
MB: As far as limits go, I think we always do what is best for the customer. I don't think we have any limits when it comes to satisfying customers. Given that our CEO, Sam Palmisano, and the guy I work for, Bill Zeitler, both have had a lot of personal involvement with, a passion for, and a long-term understanding of this platform, they have given me all of the support that I need to make sure that the i5 thrives out in the marketplace. There are no two better people in the world to support me than Sam and Bill, and they have both given me strong support from the day I was announced in Rochester as general manager. I have all the support I need inside IBM.
I think that if there is one thing that I will certainly do, it will be to tap our customers to support what we want to get done as well. I view our customers more as partners than I see us in a normal vendor-customer relationship with them. They are the most passionate, loving, satisfied group of customers that you can have in almost any industry you can imagine. My goal is to listen to our customers and to do what is right by them.