Out of the Blue: Midrange Perspectives

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A wise man recently told me that enlightenment comes with seeing the paradox. If so, then IBM has an opportunity to become enlightened. As it struggles to remake itself within the soulless reality of commodity marketing, IBM straddles the contradiction of wanting to be viewed as a willing provider of customer service, while distancing itself from direct interaction with customers. But whether IBM sees the layers of business partners, dealers, agents and retailers as a paradox is not yet clear.

When Chairman Louis Gerstner spoke to stockholders (see August Significa), he told them he wanted to return the corporation to the legacy of Thomas Watson Jr., a legacy he characterized with the phrase: IBM means service. But that may be problematic if the experience of customers I've recently interviewed is pervasive. I spoke with several AS/400 users about their businesses, and their relationships with business partners and IBM.

Willamette Beverage (WB) of Oregon is a bottler and distributor for several soft drinks including 7Up, Dr. Pepper and Pepsi. It has 168 employees, gross sales of $30 million and a one-woman data processing department: Laura Cox. Ms. Cox is a former credit manager who got her start in data processing when her company bought a new computer system and needed someone to attend to it. She sits in a newly refurbished, agreeably cluttered office adjacent to a modest computer room that houses an E20.

Although the logo on the beige box is the familiar IBM, the vendor is software provider Informed Beverage Management of North Carolina. It appears to be a happy alliance, with Cox reporting excellent service and superior software. WB runs general ledger, sales, fixed assets, production and payroll; but the company's most important application is route accounting which identifies incoming orders, produces load-sheets for night-loaders who fill trucks with product for the next day's delivery, and then feeds sales information to the appropriate accounting systems.

As with the other AS/400 users with whom I spoke, the decision to buy IBM was fueled by the choice of software. The beverage company's only contacts with IBM were during the system installation phase and six weeks later when they experienced a rare disk crash. "Sudden infant death," the system engineer (SE) called it, but Ms. Cox was highly complimentary of the care and service he provided in recovering the system.

But beyond that gratitude, Cox expressed no IBM product or company loyalty, which may account for the fact that although peripherals were plentiful, they did not carry the IBM logo. Simple inattention to marketing opportunities may also be a factor in other revenue losses. For example, Cox indicated being unaware of the availability of IBM's AS/400 Technical Support Services although she would like to have technical assistance with PTFs.

Chambers Communication Corpo-ration (CCC) is an umbrella company sheltering, among other things, a construction firm, six cable TV companies spread across three states, and a vineyard. But locally it is best known as KEZI, the ABC television affiliate. Between its two office buildings sit four monstrous satellite dishes, tilted skyward like white Jurassic mushrooms.

Blond, bearded and bespectacled Conley Phillips manages a staff of two and the operations of an E45 supporting some 75 users in a heavy data communications environment. For Phillips, the AS/400 was something of a pleasant surprise. He reported having successfully avoided IBM for 20 years after early tilts with an IBM/360. But CCC chose to migrate from an HP3000 supporting in-house development to an AS/400 running packaged software. As in the case of Willamette Beverage, the business partner is remote. But, unlike his counterpart at WB, Phillips was not thrilled with the performance of his business partner, whom he felt was learning on the job at the expense and annoyance of Chambers Communication.

Since this particular business partner provides only software support, Phillips has more of an opportunity to interact with IBM and gives mixed reviews: high marks for initial data communications implementation; no solution for a V.35 interface with non-IBM data communications hardware; "outrageous" channel service unit/data service unit (CSU/DSU) costs; but excellent support upgrading from a D-model to an E-model.

Here, peripherals also abound (Panasonic, HP, Goldstar) but reflect no IBM bias. The AS/400 is seen as a reliable performer, but neither the business partner nor IBM seems to have inspired customer loyalty, except on a "case-by- case, item-by-item basis."

States Industries (SI) is a hardwood plywood manufacturer with its own paradox. Situated in what is perhaps the timber breadbasket of the world, the Pacific Northwest, it imports hardwoods from the Northeast, Canada and Indonesia. SI's purchase of an AS/400 D20, displacing a Unisys system, was also software driven. According to DP Manager Al Schamber, applications software support provided by the business partner of record was, until recently, "atrocious." Schamber reports that during a rocky installation phase, a consultant was literally able to do in three days what the business partner couldn't accomplish in six months!

Like his counterparts, Schamber likes the AS/400. "It needs little support," he says, and it enabled SI to reduce the headcount of its DP department from six to one. IBM service? It once took IBM four days to hook up an ASCII controller and two modems, but the SEs eventually solved whatever problems hindered the installation; and if Schamber isn't wildly enthusiastic, neither is he particularly displeased.

Even the local IBM business unit, trying its best to provide the service that customers require, is itself affected by the paradox of service and marketing once-removed: its staff is now only about one-fourth of pre-downsizing levels.

The enlightenment here is that embracing this paradox is not without cost.

o Once-removed marketing deprives IBM of revenues, particularly from peripherals and service opportunities.

o Customers have mixed experience with business partners and that, to some degree, reflects on IBM.

o Business partners are devoted to IBM because they need a vehicle to showcase their software, which makes IBM vulnerable to competing, less-expensive platforms which may make the software package more attractive.

o Business partners are often remote. The customer is increasingly isolated from service providers.

And most important:

o There is no longer a central focus for customer loyalty.

Undeniably, having more than 20,000 business partners and software packages to choose from is a bonanza. Paradoxically, however, you can see the lights of customer loyalty flicking off as computers become as interchangeable as tires.

If Chairman Gerstner is to reclaim IBM's service roots, he will have to redefine service so that it is both acceptable to his customers and affordable to his corporation. The great danger to IBM is simply this: that customers will begin to feel about commodity providers what they feel about commodities: nothing.

Victor Rozek has 17 years of experience in the data processing industry, including seven years with IBM in Operations Management and Systems Engineering.

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