Readers Pipe Up on Service with a Smile Strategy
February 27, 2006 Timothy Prickett Morgan
Every now and then, an idea pops into my head and I mentally run at it hard and fast, trying to knock it down. The ideas behind Service with a Smile–and a Wink and a Nod, which was the lead essay in last week’s issue, have been on my mind for a few months, and I will be the first to admit that I wrote that late on a Friday after a long week with a bit too much coffee running in my veins. No doubt about it. But, nonetheless, the ideas seemed to resonate with readers of The Four Hundred.
Great article! But you’ve got to give up your Starbucks card. Waaayyyyy too much caffeine.
HA! Like I can afford freaking Starbucks. . . .
I drink El Pico, cafe con brio from the Dominican Republic. When in Little Dominicana (as I am in Upstate Manhattan), do as the Dominicans do. $3.49 a can, and better than Starbucks. No kidding. Other coffee tastes like mud to me.
You know me–I am all about bang for the buck, Jimmy.
I just finished reading your piece titled “Service with a Smile–and a Wink and a Nod.” I could not agree with you more that IBM for many years now has been a services company. I also agree that the i5/iSeries/AS400 is the black sheep of the eServer family, because it generates no real revenue in IBM’s services sector. Once again I am astounded by the depth of statistical information you gathered to support the article. I do believe, however, that you missed one small idea, an idea that would preclude IBM from ever taking your ideas and changing the pricing/services offered for the i5.
I believe IBM is well aware of the lack of long-term service revenue the i5 potentially may generate. This is why its pricing is set in the manner it is. If you are trying to generate new business, sell more i5 servers to a new customer base, or make it the server of choice for businesses worldwide, then by all means IBM needs to read and heed your suggestions. But if your intent is to use the i5 system as a cash cow to allow you to undercut your Windows and Unix competitors, then IBM is doing exactly what it needs to do. Wait, I’ll explain.
As AS/400 sales and therefore revenue started to decline in the late 1990s, the ability to push that revenue to fund AIX and Netfinity systems became threatened. Since those systems (Netfinity and Unix) were at the base of the long-term goal to move to a services-based business, something had to be done to shore up AS/400 revenues. Along came the interactive tax to the rescue. Let’s take our loyal AS/400 customer base and figure out a method for continuing to generate revenue from them in order to fund undercutting competition in other operating system venues.
From IBM’s perspective, this is not just logical, it is a good business model. Migrate the software (middleware) that runs on the iSeries to a Unix code base, slowly bringing the loyal customer base into the AIX services-based business. At the same time, maintaining the revenue stream required to keep investors happy while being competitive with other hardware platforms. Take that one step further, if you go too far, the loyal customers will speed up their migration to another platform and if they are upset, that won’t be an IBM platform. So offer some free stuff in Web development or WebFacing. But raise the pricing on the interactive tax to offset those R&D costs.
Anyone who has worked on the iSeries for many years can tell you that we are a shrinking family. There are fewer AS/400 shops today, less opportunities, and all of it is more expensive to run.
IBM has the perfect model, if the AS/400 was designated as a cash cow and that role is still being filled. Knowing this hasn’t stopped me from loving the i5, and the integration it offers.
So maybe your article could have been titled “Moo”?
I like cows. They give milk, which I particularly like on these cold New York City days just before I go to bed warmed up in the microwave with a splash of Disaranno almond liquor mixed in it. A truly delicious thing that costs next to nothing. Think of it as a kind of chocolate milk for adults.
The trick with a cow is to not over-milk it. It also helps to have warm hands before you start, and to not pull too hard. There’s a knack to it, like just about everything else in life.
I never once believed that IBM should treat the AS/400 and then the iSeries as a cash cow, and I do think IBM has been over-milking that cow since about 1997. How about treating the AS/400 cow as a loyal customer base that also deserves a good deal? Well, that would obviously never work, right? Or IBM would have long since done it. Why, that runs counter to everything any computer company has ever done, right?
Of course it does. But IBM’s way is not the only way to milk this cow. I am not saying that your interpretation of events is wrong. I am kinda annoyed that you are right. I am, however, saying that IBM doesn’t have to behave this way, that it chose to behave this way and it will get poorer long-term results because of it–even if, as I have contended since 1997, the converged Power platform was about being able to undercut competitive Unix products and letting the AS/400 customer pay for that on their backs.
In the long run, the Unix business is ephemeral, too. IBM has yet to learn that, but mark my words. IBM has built very little other than fast hardware that distinguishes its Unix from others. And the loyalty that customers have to AIX is precisely as long as IBM’s next upgrade deal. There is no love there, as there is for OS/400 and RPG.
Let’s switch the analogy from cows to crops. From an ecosystem viewpoint, IBM’s attitude is fundamentally flawed. You don’t poison 80 acres of good land suitable for corn so you can turn 20 acres of tough land into 100 acres of tough land to grow squash and pumpkins. What you can do is do what any decent farmer figures out: You take your 100 total acres and you mix these species together and–holy cow!–they actually complement each other. But you never kill the corn. I know, I know. You say–but that is what the iSeries and i5 does!!! Well, technically, it does. But economically, you can’t afford to grow the corn. You can grow all the squash and pumpkins you want, but the seed corn is way too expensive, and so you are being encouraged to switch to an unbalanced diet of squash and pumpkins.
Maybe that analogy didn’t work, either. HA!
I sometimes wonder how bean counters and marketing people don’t realize that they have to think longer term if they want to do more than just keep their jobs, but actually make jobs for their children or someone else’s children. I guess their kids will all be doctors, lawyers, and politicians, so they will be OK, right?
I am training my kids to be computer designers in their spare time, and I hope that they run straight at IBM some day. We’ll all build our own computers. We’ll see who is smiling then, eh?
I once asked if you were on the board for IBM and I shout that you should be.
I believe Mark Shearer should give you Peter Bingaman’s old job and allow you to throw your ideas on the wall and make them stick.
This is the kind of excitement we are looking for not AS/400 to iSeries to System i5. Changing the name sounds like you’re trying to hide something. The platform is reducing in numbers every year, so what is there to lose by offering an entirely new and exciting concept of packaging hardware, software and services? I think you are too smart to take the job, and maybe Peter is also.
I have just finished reading your article and I am truly amazed at the knowledge and suggestions you have.
I am curious, however, about how your articles are received at IBM. Do they even read them or comment to you about them?
Keep up the good work. Hopefully, someone at IBM will listen to what you are saying and have the authority to do something.
No reply is necessary. I know you are quite busy.
I will make you a deal. I will keep writing and thinking up crazy ideas to try to grow this OS/400 platform as long as you keep reading. I know you are busy, too. So we will both find time for each other, ok?
Wow! I’m afraid one of these days IBM will either disconnect you from the Web or hire you as super-consultant! Nice article.
Good article and great suggestions!
IBM keeps saying it is going to market the AS/400 (iSeries) better, but I don’t see it. I see a few ads in trade journals, but not many, and I see no ads in general publications. Keep pressure on IBM to restart the growth of the AS/400!