The Once and Future OS/400 Ecosystem
by Mary Lou Roberts
Last week, I looked at how iSeries ISVs viewed what most of them saw as the decline of the OS/400 ecosystem. The causes mentioned by these vendors were many and varied, ranging from poor marketing on the part of IBM (not a news flash), fallout from Y2K, cost, the decline of manufacturing in North America and Western Europe, failure of ISVs (especially ERP vendors) to modernize their applications, and the old standby--Windows. But that was just half the story.
We can't change history, though we can all have different interpretations of the causes, outcomes, and consequences. More important is the prognosis for the future. Has the OS/400 ecosystem stabilized? Is it growing? Will ISVs continue to have enough faith in its potential that they continue to invest in application modernization and the development of new solutions that are so critical to the platform?
In a recent interview, Joyce Bordash, IBM's director of iSeries ecosystem development, asserted that the number of iSeries ISVs has remained stable for several years--roughly 2,500 to 2,600 companies worldwide. Last year's number, she says, was 2,608, based on IBM's Global Solutions Directory and iSeries Solutions Connection. How many of these are in the OS/400 market? Bordash claims not to know. "We haven't really looked at it that way. We've looked at our overall portfolio and the actual number of ISVs that we are engaging with and going to market with, as well as how many are modernizing and delivering new applications. But we haven't really segmented how many are i5/OS versus Linux versus AIX."
If that's true, it's amazing and telling. But Bordash does know about the number of ISVs that are new to the platform, and maintains that IBM has actually increased the number of iSeries ISVs in 2005, even though that wasn't a real focus. This new group numbers more than 175 new Linux ISVs and more than 100 AIX solutions. "This year our Innovation Initiative was really all about enablement and helping our current set of ISVs to strengthen their applications, introducing them to new technologies and extending their reach into the market. The fact that we got new ISVs out of that was wonderful, but it really wasn't a concerted effort on our part or one that we invested in heavily."
Just who were the 244 new ISVs that have been welcomed to the iSeries ranks, and are they contributing to a renewed growth of the OS/400 ecosystem? "The bulk of them have primarily been a result of our AIX and Linux on Power recruitment efforts" Bordash acknowledges. "We've got maybe a dozen or so that are brand new to i5/OS." Gaining these new i5/OS vendors caught her by surprise, she admits, given the fact that it was not a focus for 2005. But it will be for next year. "That's one of the things you're going to see us focus very aggressively on next year in 2006. We've got our senior leadership team very focused right now on two things. The first is recruitment of new i5/OS ISVs to the platform, and we're going to get very aggressive in that space. Secondly, you're going to see us focus on helping our ISVs enter new markets, building out a lot of offerings around the globalization capabilities of some ISVs, taking partners in Asia and helping them penetrate markets in the U.S. and vice versa."
I personally found these comments regarding IBM strategy to be interesting and, upon reflection, compelling. It would seem, based on Bordash's comments, that IBM used 2005 to grow the infrastructure of the iSeries platform itself, with little regard in particular for the OS/400 base, which she maintains will now be a major focus for 2006. I admit this rattled me a little. Isn't the OS/400 base, after all, the core of the iSeries? If, indeed, that core has been eroding for years, could the iSeries business sustain further erosion of the OS/400 base?
IBM's apparent lack of attention to the OS/400 base could lead some to share the belief of John Ball, vice president of marketing for ASNA, a company that markets an iSeries-to-.NET migration tool. For them, a decline in the OS/400 market means a decline in prospects--but there's a long way to go before (if ever?) ASNA runs out of candidates. Still, ASNA naturally keeps a close eye on the market. "The OS/400 market does not appear poised to grow at rates that will either protect or extend its representative market share," in Ball's opinion. "IBM's recent reinvigorated marketing efforts seem to promote the iSeries purely as a hardware platform--as a server, but not as part of any IT architecture strategy. IBM's efforts to inject WebSphere into the platform may have stalled and the platform does not seem to have an integral role in the support of contemporary IT initiatives such as Web services, composite applications, or service-oriented architectures. Perhaps 60 to 80 percent of the iSeries population runs RPG, but that combination seems to have been abandoned by IBM."
Further, Ball maintains that while OS/400 staffing levels have not declined at a rate greater than in other segments of IT, "the human capital associated with OS/400 is not expanding and, equally important, that same resource does not enjoy the same levels of participation in new development projects as that experienced by C# or Java development teams. Momentum is a critical element of any ecosystem, and every sign we read indicates that the momentum of the OS/400 market does not compare favorably with the momentum enjoyed by contemporary initiatives."
Contemporary initiatives? Ouch! Perhaps this is exactly the image that IBM wanted to focus on changing in 2005, saving, as Bordash predicts, specific attention to i5/OS for 2006. A few weeks ago, The Four Hundred ran my interview with Chip McClellan, IBM's senior marketing manager for market segments, in which he likened the iSeries to the building of a shopping mall where the most important consideration at first is the selection of the anchor store. From his perspective of the future, there may be Linux or AIX partitions--but "the 'anchor store' is always going to be that i5/OS with the application that you got to buy the machine."
This would seem to argue that IBM should have put a priority on making sure the anchor stores were healthy and happy; without them, there would be no mall. On the other hand, without the mall, what would exist for the anchor store to anchor? Although many iSeries ISVs have decreased the percentage of time and resources they devote to OS/400, having ported their solutions to other platforms (especially Windows), the large majority are still firmly rooted in the iSeries and have huge investments and large maintenance bases at stake. In short, they aren't running off in droves.
Most of the OS/400 ISVs (at least the ones with whom I spoke) seem relatively happy and optimistic with IBM's approach. David Wegman, executive vice president of high availability software maker Vision Solutions reports a high level of continued commitment to the iSeries from his own company, from the customer base, and in new accounts. "The reason seems direct enough: These companies want to run a business, not an IT shop. Our customers have told us that they are confident the iSeries delivers a strong, dependable system that supports their business with strong technology underpinnings requiring fewer people to manage and support. The value proposition is strong."
Based on this, Wegman maintains that the ecosystem is actually growing now, evidenced by increased footprints of the OS in the form of logical partitions in iSeries servers as well as in new account activity. "We have seen a terrific growth in the utilization of LPARs by our accounts as they consolidate footprints to gain better management, application integration, and asset utilization. We have seen an overall increase in the raw transaction count of opportunities in the last several years, combined with well over 35 percent of all new business being iSeries business. We think we will see continued innovation on the platform due to IBM's continued focus and investment on ISV enablement and the value proposition on a single hardware server."
Eric Figura, sales and marketing manager for BCD Software, measures the health and growth of the OS/400 ecosystem on his company's number of new customers and total customers, number of partners, and analysis of year-over-year trends. "I also use the number of downloads of our products and tradeshow booth traffic, client and partner satisfaction levels, and annual maintenance rates."
As an ISV that markets WebSmart, a product that actively and sometimes heatedly competes directly with IBM's WebSphere, Figura is delighted with what IBM is doing, reporting that since the launch of IBM's iSeries Initiative for Innovation and the extension of the iSeries Developer Roadmap, BCD has added more than 35 new partners to its business partner network. "The value proposition we always wanted to see on the iSeries-AS/400 has arrived for most," Figura believes. "IBM has continued to hear the cost of ownership issue as time moved on, and has responded by continuing to lower that cost and improve the operating system to make it more effective and more manageable than in the past. With IBM's recent announcement of the i5 520s, the value proposition, stability, security, and absence of need for database administrators has made the new iSeries a superior choice to Windows-only server farms. I've said it before and I'll say it again: I love what IBM has done with the iSeries hardware, the operating system, and the value proposition."
Figura says that the fact that IBM is finally seeing revenue growth in the iSeries is not a coincidence, but a direct result of the more open view IBM has taken with the iSeries. Whether or not this will translate to growth in 2006 and beyond for IBM or BCD remains to be seen. Figura says he is seeing renewed interest in new development projects on the iSeries as well as new partners coming onto the platform, which would seem to be good leading indicators for sustained growth. Tool vendors like BCD are not directly tied to IBM's iSeries announcements and how well or poorly IBM is doing in any given quarter, but rather to the vast installed base and what OS/400 shops in aggregate are doing. Over the short haul, these companies can do well even if IBM falters. But over the long haul, the iSeries has to do well for tool vendors to do well.
Not all are quite as satisfied with the cost of the iSeries as Figura, however, and cost is one of the gating factors to the growth of the iSeries market. Bill Langston, director of marketing for New Generation Software, says, "We work with thousands of companies that IBM calls small and medium business (SMB) customers, and the iSeries remains a terrific platform for them. But we'd like to see IBM make the platform more affordable to the 'S' segment of that market--$10 million to $75 million in revenue with 50 to 250 employees--but that may not be a market IBM wants to pursue with this brand. That would be a disappointment to many smaller ISVs because this is a market segment the top tier ERP vendors and even Microsoft have a difficult time selling to. It's the point in the growth cycle where many of today's larger and loyal iSeries customers first came to the IBM midrange."
Certainly 2006 will be a pivotal year for the iSeries. In 2005, IBM successfully turned around the revenue trend for the platform, got its marketing act together, launched the iSeries Initiative for Innovation, and greatly heightened awareness, luring new AIX and Linux ISVs into the fold. But can they stabilize or grow the OS/400 base?
I agree with Langston, who sums it up by pointing this out: "An ISV with a Linux or AIX solution that's been ported to the iSeries to meet the needs of customers who want that compatibility is not going to promote the iSeries like the business application developer who needs you to choose iSeries to run his software. Customers who never had an iSeries don't buy their first one to run a Linux, AIX, or Windows application. They choose the iSeries if it's the platform they need to run the best business application for their company. IBM must attract ISVs to i5/OS and the integrated DB2 environment for the platform to have a bright future."
That's exactly what Bordash says IBM will be doing in 2006. Let's hope Big Blue makes it happen.
Mary Lou Roberts, a 35-year veteran of the information systems industry, is a new contributor to IT Jungle. In addition to her work as a reporter in the iSeries space, she has spent her career as a marketing and communications professional working exclusively with information technology publications and companies. She can be reached at WriterNewf@aol.com.
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