Palmisano Studies IBM's Future

  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times
IBM's Sam Palmisano gave a masterful presentation of IBM's services strategy in his keynote speech on the closing morning of PartnerWorld in San Francisco last Wednesday. The president, COO, and CEO-elect gave a 50-minute speech that outlined the progress that IBM and its Business Partners had achieved in gaining a 30 percent market share in the server market. At the same time, he charted out the path and the rationale by which IBM will continue to transform its role from technology purveyor to services provider.

A Tough Road Ahead for the Industry

From IBM's perspective, 2001 was a slow year in sales of servers but a year in which IBM nonetheless gained market share against its competitors. Now claiming 29.3 percent of the market, IBM held its ground in the server market, while Sun, Compac, and HP dropped. There is now no question that IBM is firmly ahead in the market leadership position. But that, according to Palmisano, is not the endgame.

In this market, technology purveyors must move into the services arena if they are to survive. Selling hardware or software is no longer enough. That's why Microsoft has moved away from being solely a technology provider by adding services to its offerings. That's why Compac and HP are merging. That's why Dell has been so successful with its customers. The customer market is saturated with technology promises. What's missing for the customer are compelling business solutions that are integrated together into an e-business infrastructure and that actually work.

This is why IBM rebranded all of its servers more than a year ago: It is not the particular hardware technologies that will be important to the customer; it's how those technologies integrate and work together. This is also why IBM is branding its WebSphere products and using open standards to connect them: A standalone solution is no longer possible in an e-business world. This is also why IBM has embraced the Linux initiative: Proprietary solutions--solutions that can't work seamlessly between platforms--can't compete in an interconnected e-business world.

For IBM, the Linux initiative and the WebSphere strategy are paramount. By supporting a common operating system layer and a comprehensive middleware infrastructure, IBM ensures that which eServer a customer purchases will no longer matter. What Business Partners need to sell to customers are solutions, not technologies. How well IBM works with its Business Partners to create and package these business solutions will determine IBM's success in transforming its business model from technology purveyor to services provider.

iSeries: Mainframe for the Middle?

In a separate session, Buell Duncan, GM of iSeries and pSeries platforms, stressed that the iSeries will continue to play an important role in IBM's overall strategy. To a room jam-packed with iSeries Business Partners, Duncan revealed that over 80 percent of last year's iSeries sales came through IBM Business Partners and that IBM is using the success of this iSeries Business Partner structure as a model for the success it hopes to repeat in other sectors as it continues to move toward a services-based business model.

The iSeries is an important asset for IBM in the midmarket precisely because it is an ideal services platform: It can integrate Windows, Unix, and Linux into a single footprint. It is IBM's fastest Java server. It's the perfect machine for midmarket customers, who need the power and the scalability of a mainframe without the complexity and the overhead of personnel. And yet, despite this power, the iSeries is still the most manageable platform of all IBM eServers. For these reasons, Duncan has begun calling the iSeries "the mainframe for the midmarket." In Duncan's estimation, only the mainframe can compete with the iSeries platform in terms of flexibility and power.

Couple that with the most recent iSeries announcements, and IBM believes there is no services-oriented platform that is more competitive--and no platform that can claim better price-performance advantages--than the iSeries. As proof, Duncan pointed to the product-of-the-year award the iSeries received at LinuxWorld less than a month ago.

Mainframe Coattails for the iSeries?

But isn't the mainframe dead? Wasn't that the message that the media was broadcasting more than 10 years ago amid the downsizing frenzy that overtook IT in the late 1980s?

If the mainframe was dead, it's back now in a completely new role.

According to IBM, the zSeries saw double-digit growth at the end of 2001--the first time IBM's mainframe sales broke the 10 percent mark since 1989. This sudden interest in mainframe capabilities was the result, according to Palmisano, of customers seeing the opportunity to remove complexity from their burgeoning network infrastructurse. This dynamic, coupled with IBM's new low-end zSeries mainframes, demonstrated that it is not the particular technology platform that is driving customer demand, but the services that can be delivered with a reduced Total Cost of Ownership (TCO).

Maybe that's why Duncan is trying to depict the iSeries as the mainframe for the midmarket. If there's a demand for mainframe capabilities in an affordable midmarket package--a package that will run "everything" and still scale across the enterprise--isn't it only fair that the iSeries get a piece of the action?

Thomas M. Stockwell is Editor in Chief of MCMagOnline. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..