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September 27, 2004

Author: IBM sells AS/400 short

World’s ‘finest computer system’ created in Rochester

By Bob Freund

ROCHESTER - Former IBMer and technical author Brian W. Kelly speaks in superlatives about the core line of computers made at IBM Rochester during the past 16 years.

Kelly is such a zealot that he spent four years writing a 480-page book about the AS/400 family of servers ‹ now known as the "i5 eServer" ‹ and then printed it himself when other publishers wouldn’t.

"The finest computer system ever built," he writes in the preface.

"Clearly the most architecturally elegant and capable machine in the industry," he says in the opening chapter.

But while praising the Rochester-created and still locally made product, Kelly’s book is no puff piece for IBM Corp.

"Can the AS/400 Survive IBM?" is Kelly’s view of how IBM stifled the sales potential for the AS/400-iSeries-i5. It’s "The Story of IBM’s Long Standing Marketing Troubles With its Finest System," the subtitle says.

Those troubles aren’t just a matter of botching an ad campaign or two. Kelly repeatedly criticizes IBM for what he considers neglect of its best business computer.

IBM itself long has said its target for its AS/400 servers and their iSeries successors is small and medium-sized businesses, as well as small units of corporations, such as individual stores or departments.

Nonetheless, with few exceptions, Big Blue’s marketers have refused to give the business-oriented server any priority in its promotional campaigns, says Kelly, who worked for 23 years in IBM’s sales force. He now runs a consulting business focused on the AS/400 family and related software.

No one knows AS/400

Kelly views the computer’s image from the vantage point of his neighbors, who should fall squarely into IBM’s target market for small business. They are a real-estate business owner, furniture store operator, another store owner, a former municipal official and two doctors. "They are fine neighbors who have no idea what an AS/400 is," Kelly writes. "They would only know an AS/400 if they owned one or heard IBM making a big fuss about one on TV."

That’s not going to happen, Kelly says. The author depicts even officials as highly placed as Al Zollar, former AS/400 division chief, as powerless to convince corporate marketers to advertise on TV.

IBM’s advertising approach has minimized the AS/400 family of servers to placate other IBM divisions, particularly the mainframe unit, Kelly says. Although it’s described as a "midrange server," the largest AS/400 models could compete directly with IBM’s big iron.

"There are countless anecdotes depicting how, for many years, BM’s mainframe-biased management did its best to undermine the System/38 (a preceding machine), the AS/400 and now again the iSeries," Kelly says.

Recently, the business machine has been homogenized by Big Blue’s marketing strategy. In 2000, IBM rebranded all its machines ‹ from the largest mainframes to comparatively small Intel-based servers ‹ as "eServers." The AS/400 became the eServer iSeries 400; next the "400" was dropped; now, it is the eServer i5, a reference to its Power5 processing chip.

"The AS/400 name never meant anything by itself," he says. (IBM’s official explanation for AS/400 is "Application System/400.") "I always thought the AS/400 should just be renamed "The IBM Business System," he continues.

The move to eServer stripped away any distinguishing identities among IBM servers, except for one letter in each name: "i" for the midrange AS/400 heritage; "p" for the UNIX-operated machines; "z" for the mainframes; and "x" for the servers with Intel processing chips.

No premium IBM brand

"IBM has internally taken its product lines and thrown them into a big soup, and the individual flavors are becoming indiscernible," says Kelly. "With homogenization, the cream does not rise to the top."

But, "Why shouldn’t IBM have a premium brand?" Kelly writes. "Why shouldn’t the AS/400 be the premium brand?" Technologically, it already is the company’s premier machine for businesses, Kelly maintains.

IBM couldn’t find anyone knowledgeable enough about the book to comment, a spokeswoman said last week.

Nonetheless, in an e-mailed comment, IBM touted the success of the iSeries and denies any neglect in promoting the product.

"IBM has always and will continue to aggressively market the server and add new technology to the platform," the statement said, "and we believe it will continue to have strong appeal with customers, particularly those in the small and medium sized business market."

Rochester tidbits

The book also offers his inside views of some broader IBM issues, with a focus on how they were handled. Along the way, readers discover some Rochester tidbits.

Kelly claims, for example, that in the far past, IBM’s mainframe executives "had designs to eliminate the Rochester Laboratory and all its (then) systems, the System/36 and the System/38."

At the same time, IBM Rochester indulged in internal trickery to convince IBM management to produce the System/38, the main forerunner to the AS/400, Kelly alleges.

But the focus of the book is on AS/400’s marketing. (the AS/400 title includes all successors and renamings.)

Industry analysts who watch IBM’s server business agree that the AS/400 and its successor rank among the company’s biggest successes. "Its longevity alone speaks for the success it has enjoyed in the marketplace," says independent analyst Bob Djurdjevic of Annex Research in Arizona. Sales of the iSeries machines, software and services bring billions of dollars into IBM each year, according to one estimate.

At the same time, the server line has foundered in the last half-decade. "It was a proprietary system at a time when the market was asking for open systems and standard offerings," Djurdjevic said in an interview. Now, "It settles for a smaller marketplace, but a very profitable one," he said.

Gartner Group analyst Tom Bittman, who worked at IBM Rochester for 12 years, agrees with Kelly that marketing has been a long-running issue for AS/400 customers.

The current i5 is a good machine, but its marketing appeal has aged. "Ten years ago, maybe 12 years ago, AS/400 had an opportunity to become a highvolume, small-medium business platform," Bittman said. But, high-profile promotion now is coming too late, he said.

Losing to Microsoft

Although the larger iSeries models are selling, the machine’s appeal has been dwindling among small businesses. The real battle in the small-to-medium business market was against machines running Microsoft Inc.’s Windows operating system, "... and they lost that," Bittman said.

But, writes Kelly, "Will the AS/400 Survive IBM?"

For one thing, the AS/400 has a "valuable, installed base" of customers, said Bittman.

Djurdjevic agrees. "As long as they don’t want to always be on the leading edge ... this can probably last for a decade or longer," he says.

Kelly also spoke in an interview about similar writing he sees on the wall from a marketing standpoint. IBM, he said, is "merely interested in continuing to satisfy the need of existing customers ... and use the AS/400 as a cash cow and not go out and do anything to jeopardize any of their other businesses."

But it’s up to IBM whether the AS/400 survives, he said. "I sure hope that there is somebody in IBM that says, ‘Why don’t we highlight our best product?’"

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