Shearer Talks About System i Sales, Server Reorganization
July 23, 2007 Timothy Prickett Morgan
It has been a long time since the i5/OS and OS/400 platform has been the bright spot in IBM‘s quarterly financial results. Two decades ago, when we were just starting to exit the System/3X era and beginning the development that would result in the AS/400 era in IBM’s midrange systems, it would have been hard to predict with any certainty just how popular the AS/400 would turn out to be. And it would have been equally hard, only a few years later, to predict how tough the entry and midrange server market has become for the venerable OS/400 platform, now the i5/OS platform.
Mark Shearer, formerly the general manager of the now split up System i division and now the senior vice president and business line manager for the Power Systems division, which has responsibility for i5/OS, AIX, and Linux systems development on all Power-based servers from IBM, gave me a briefing about the Systems and Technology Group reorganization that we covered in IT Jungle’s Breaking News section last Thursday and elsewhere in this edition of this newsletter. But Shearer also wanted to talk a little bit about System i sales.
While System i revenues were down 15 percent in the quarter–yet another revenue decline–Shearer wanted me, and therefore you, to know that shipments of System i servers were actually up in the double digits during the quarter. IBM doesn’t count aggregate processing capacity sold, as it does for its mainframes with MIPS shipments each quarter, but now might be a good time to start. It might even be a good idea to backcast the data a decade or so and show some trends. In a virtualized world, as the mainframe so aptly demonstrates, aggregate processing capacity might be a better measure of growth than either revenue or footprints.
I keep track of the sales data for the AS/400, iSeries, and System i line, so I took a few minutes on Friday afternoon and built a chart stretching back into 2000 that showed how this product has fared on each quarter on a year-to-year quarterly comparison. (In plain English, that means comparing the growth from the second quarter of 2001 to the second quarter of 2002, for example.) This was a very interesting exercise. Take a look:
IBM did not give percent change figures for each quarter, so I wrote in what it said in the columns representing the quarterly growth rate in the chart. As you can see from the chart, 2003 was the last year when the i5/OS and OS/400 platform grew for a full year, but that was only after five quarters of sharp decline after the dot-com bubble burst and the economies of the world went into recession in 2002. And the fairly good growth in the middle of 2005 did not counterbalance the declines in 2004. The System i business has declined for the past seven quarters now, but admittedly, the growth in Q2 and Q3 of 2005 made compares in 2006 difficult.
That is a tough set of data to consider every day, as Shearer and his team have been doing for the past two and a half years. So in my mind, if breaking the System i division into two bits, creating a dedicated product for small and medium businesses served by the Business Systems division and a merged high-end Power-based server product for larger enterprises served by the Power Systems division can somehow get IBM more on board and put up more black–or at least a lot less red–on that chart, the change will be justified even if it does violate the tradition of a dedicated IBM midrange business since the General Systems Division was established in 1969 and centered around existing development labs in Rochester, Minnesota, and application development in Atlanta, Georgia.
“I have been to every large user group meeting, most COMMON meetings around the world, and lots of other user group meetings,” explained Shearer. “I talk to customers constantly. And it is really clear to me that the System i business has evolved into two unique customer sets.”
Of course, this change means that Shearer goes from being the general manager of an IBM server division to being in charge of aligning the interests of IBM’s entire Power-based server line and making sure that i5/OS continues to develop and satisfy the needs of more than 200,000 customers worldwide. This may sound like a demotion, but Shearer doesn’t see it that way, even if he does report to Ross Mauri, general manager of the new Power Systems division. “Ross was head of development for IBM systems when I was head of marketing for IBM systems, and we have worked together for a long time. In this new job, I get to do what I wanted to do three years ago, which is to care for all of IBM’s Power-based offerings.”
The change away from a dedicated System i division is probably not going to be an easy one for some IBMers, some customers, and some ISVs. “I am not saying that people will digest this overnight,” explained Shearer. “But once people understand it, they are going to appreciate what we are doing. We have a 30-year history of protecting customers’ applications. In the fourth quarter, we will introduce a Power6 blade that will support i5/OS, and when people see that i5/OS is part of the future and we demonstrate that, when we start delivering products that deliver value and are priced to that value, they will see that we are serious about taking i5/OS forward. This is important. i5/OS is going to show up in all the right places. I am responsible for that, so I better make it happen.”