IBM Keeps the Wheels Turning on Express
July 26, 2004 Dan Burger
Three years ago, IBM began formulating a campaign to stake a greater claim on the small and midsized business market. The territory was not foreign to IBM, given its long history in the midrange, but Big Blue is far better acquainted with the business elite of the Global 2000 than it is with what plays well in Peoria. The centerpiece of IBM’s focused SMB strategy has been the Express portfolio of products, which have been rhythmically rolled out and put in play, primarily through the business partner channels, which remains IBM’s conduit to reach SMB customers. The Express portfolio now includes more than 60 products, covering all the eServer bases. On the software side, the myriad packages have flourished, chiefly around WebSphere and Domino, but with significant offerings in other areas as well, such as DB2 and business intelligence. In just the past several weeks, IBM has introduced Domino Messaging Express and five new templates for a variety of Express products. On the hardware side, the new Power5-based eServer i5 Model 520 servers are already being produced with Express configurations, while the iSeries Model 800 and 810 servers have been available in Express configurations since January. To make Express fly, IBM invested $500 million in a program it calls the Small and Medium Business Advantage. (Exactly where that money went and how much of it was new budget rather than rebranded budget is unclear. The odds are that something close to $500 million was already dedicated to the SMB channel and that the Express initiative just brings those marketing and development dollars into sharper focus.) In November 2002, the first Express product was announced. In June 2003, the first products became available. More than 60 products in 20 months is a pretty fair achievement. What else has been accomplished, and where is the impact on the SMB market? A big part of that $500 million budget has been designated for lead generation, training, and sales incentives for the business partners that have traditionally catered to, and have the solid working relationships with, companies in the SMB space. At the top of this list are the independent software vendors (ISVs), system integrators, and resellers. One of the programs IBM has put into place to help business partners is called Solutions Builder Express, which is designed to help business partners build and deploy industry-specific solutions that fit the unique technological requirements of SMB customers. These solutions are referred to as “starting points” and are the foundation on which business partners add customized programs and services. Solutions Builder Starting Points are “a cook book that explains how it can be done,” says Deb Cole, worldwide iSeries market manager for the SMB segment at IBM. “IBM comes up with scenarios that are familiar to customers and that require a certain type of solution. The Starting Points are tested configurations and software components that are built to get customers where they want to go.” The recently released Starting Points included the Collaborative Community and Employee Portals for IBM eServer iSeries (which is designed for the implementation of an Intranet application), Collaborative Document Management in Banking, Retail e-commerce Website, Cross-industry B2B e-commerce, and B2C e-commerce Analytics. Since that program’s launch at PartnerWorld 2004, there have been 17 Starting Points created for business partners working with Express middleware. (For more information on the Collaborative Community and Employee Portals for IBM eServer iSeries, see “IBM Delivers New iSeries ‘Starting Point’ “.) According to IBM, 3,000 business partners are building and selling Express middleware solutions. WEBSPHERE EXPRESS The concept for an Express portfolio came from the realization that IBM’s existing products were more than what average SMB organizations needed in order to run their business. The poster child for that notion was WebSphere. It was complex and expensive. It’s also a critical component to IBM’s future plans. So it comes as no surprise that the Express strategy started to come into focus with the WebSphere products. The list of WebSphere products, specifically for the iSeries, now includes the following: WebSphere Application Server Express, WebSphere Business Integration Connect Express, WebSphere Business Integration Express for Item Synchronization, WebSphere Business Integration Server Express, WebSphere Commerce Express, WebSphere MQ and MQ Express, and WebSphere Portal Express. It should also be noted that WebSphere Application Server Express is included with the V5R3 version of OS/400, now known as i5/OS. IBM’s commitment to the Express products made it much more attractive (meaning cheaper and easier) for the independent software vendors to begin integrating their products with WebSphere. That was the first step in a well-designed process. It hasn’t hurt IBM that both Oracle and Microsoft, whose middleware platforms compete with IBM, have big aspirations in the application software business themselves. The very companies that these three vendors are chasing with their middleware end up competing with Oracle and Microsoft and make IBM’s Express software stacks look like a neutral country. That not that many users are implementing the WebSphere Express products is not alarming at this stage of the game. By design, IBM is gearing up to deliver an industry-by-industry game plan to the SMB. That game plan has always been awareness first and adoption will follow–first the ISVs, then the customers. With WAS Express, IBM has made WebSphere affordable for many SMB customers. That’s not to say there aren’t less-expensive routes to Web-enablement for legacy applications, but Express has IBM in the ballpark. Compared with the price and complexity obstacles that WAS once presented, WAS Express is light years ahead. DOMINO EXPRESS On the Lotus front, the Express software products have taken a different approach. “Lotus was solidly in the SMB and there was nothing that needed to be done to its products to simplify them for the SMB enterprise,” notes Cole, who worked in IBM’s Lotus software unit before joining the iSeries SMB team. “Lotus products didn’t need to be simplified to scale them, so there was a core set of applications that met customers’ needs. What Lotus did for Express was to bundle products around price points and functionality.” As with the other Domino Express products, Messaging Express is offered at a discounted per-user price, compared with the regular enterprise user fees. The Domino Express software has a standard per-license fee of $98, but special pricing brings it down to $48 per user. To get the special pricing, clients have to upgrade from a competing e-mail product. Express licensing is limited to 1,000 users per company, a figure IBM uses to distinguish the top end of the SMB market. In the past year, the introduction of Lotus Express products has included the entry-level, Web-based Lotus Express, Lotus Domino Collaboration Express, and Lotus Domino Utility Server Express. Each was created, IBM says, to streamline infrastructure administration and collaboration, and to scale the technology to the requirements of individual companies where simplifying licensing and administration is the goal. (Details on the individual products can be found on the Domino Express FAQs page. EXPRESS HARDWARE Moving over to the iSeries side, Cole describes the i5 Express configurations as perfect for the low-end SMB customers because it’s a low-maintenance business application server, with the application software already loaded on it. She sees the total-cost-of-ownership message, incorporating server consolidation, as a message that will be well received, and sees the opportunity to migrate companies from Microsoft’s Windows NT platform as an opportunity the Express program will take advantage of. The independent software vendors and business partners had a great deal of input into how these machines were configured, Cole says. Decisions were made based on “the needs of older customers, the installed base of the partners.” These customers would need a box on which to run the ISVs’ new software. Much of the i5 Express configuration has to do with what the ISVs needed to satisfy their customers, Cole says. The i5 Express models are available in three main configurations, and two were just added to provide RAID 5 data protection for the two larger configurations. The first is a bare-bones Model 520 with 500 CPWs of raw processing capacity and a base i5/OS and DB2/400 license, and is aimed at iSeries customers that already own software licenses. Model 520 Express configuration numbers 2 and 3 have 500 CPW and 1000 CPWs of raw processing capacity. Each simplifies the bundling of software for WebSphere Development Studio, Query/400, and iSeries Access. “Configuration number 2 is the most appealing bundle for the SMB,” Cole says. “A Model 150 customer that does not have Software Maintenance will see this as the best deal.” Perhaps most significant, the three main Express configurations have a suggested retail price that is 32 to 38 percent lower than the list price of the components that go into these machines. During the early evaluations of these Model 520 Express machines by resellers and customers, it became apparent that the absence of RAID was a problem. So IBM added disk drives and a RAID 5 daughter card– without that discount, however. (For a detailed examination of the i5 Express configurations, see “i5 Express: The Model 520 Could Be Just the Beginning” and “More on the July 13 i5 Announcements.”) EUROPE SHOWS INTEREST IN THE I5 Early indicators show the greatest interest in new boxes is coming from Europe (technically, Europe, the Middle East, and Africa). Cole says this may be due to the market being dominated by smaller businesses, mostly because European countries are small, compared with the United States, and their indigenous businesses have been largely limited in the past by political and cultural boundaries, but that early test marketing was done there and some momentum may have been created. Based on the customer satisfaction results she has seen, Cole estimates that about 70 percent of the Express boxes are going to customers that are replacing old boxes or adding a new box without getting rid of an old server. That leaves approximately 30 percent (again, an estimate based on customer satisfaction reports) that are new to the iSeries. Cole also noted that the customer satisfaction reports indicate new customers are companies that are running businesses on PCs and manual processes–running off a Microsoft Access database, for instance, and faxing data to customers and suppliers. Still, the greatest advantage, Cole says, is when the box is sold with an ISV solution. “Customers are investing in replacement solutions. They are modernizing and updating infrastructure. These are businesses committed to a growth opportunity within their own market.” There’s still no handle on the effectiveness of the Express program and the place of the OS/400 platform in small and midsized businesses. In all fairness, it’s still early in the game and the full power of the business partners, the new Power5 technology, and the marketing machinery that IBM can throw behind its initiatives have yet to applied. Give it a year, with a marginally healthy economic climate, and IBM could significantly improve OS/400 server shipments, something it desperately needs to do. |