System i Division Split into Two Business Units

According to a much-publicized internal memorandum, IBM Systems and Technology Group (STG) has now divided the System i Division into two separate, new business units. These segments of the product will be  
aimed at two distinct industry markets: the Enterprise Systems market and Small and Medium Business (SMB) market.

Uppercase/Lowercase Split
One analyst has termed this split as a division between the uppercase i (composed of the 570 and 595 models), and the lowercase i systems (composed of the 515, 520, 525, and 550 models).

The management of the so-called uppercase i systems will be directed by IBM's new Power Systems unit under the leadership of Ross Mauri. This unit will lead IBM's attempt to consolidate further its dominance of the enterprise. It will inherit those high-end System i models as well as the System p models, and it will manage the i5/OS, AIX, and Linux operating systems on the POWER processors.

The management of the so-called lowercase i systems will be the responsibility of IBM's Marc Dupaquier, under a newly created Business Systems unit. This unit is aimed at the SMB, inheriting the 515, 520, 525 and 550 System i models, but it will also include all IBM SMB server, storage, and blade offerings.

Overall sales of the System i will be handled by Bill Donohue, the newly named Vice President, Worldwide System i Sales and Business Transformation Executive. He will also be charged with the responsibility for transitioning System i product sales to the two new business units.

Beyond Bare Facts: Questions
These are the bare facts of IBM's STG reorganization. And though, at face value, the reorganization appears to offer little change for the current System i customer, the internal IBM changes are significant for Business Partners and for the viability of the System i itself. The reorg is a topic of much debate amongst analysts and System i champions, and a lot of questions are being asked.

Is this merely a reshuffling of responsibilities within IBM? Is there value in the new IBM organizational charts? Is it the rebirth of opportunities for the System i? Or is it, as some analysts have claimed, the channeling of the System i architecture onto the road to obsolescence?

Why has this happened? Who cares? Should you care? How will it impact your organization?

IBM's Perspective on the Opportunities for System i
First of all, it's important to recognize that the IBM organization does not have—and has never had—a single, homogenous view of the System i or it predecessor products, the iSeries and the AS/400. Instead, the platform has always had its contentious supporters and detractors within the halls and towers of IBM/Somers, where STG is housed. In recent years, however, with Bill Zeitler as Senior VP and Group Executive for STG, the System i had retained a loyal and potent ally.

Zeitler was once the general manager of the AS/400 during its midrange heyday as the HP/DEC/Wang killer, and he rose in IBM's executive ranks partially as a result of his success in that position. Indeed, Zeitler had a long and productive exposure to the midrange customers and Business Partners that were using the AS/400, and it seems that he moved to the IBM Somers organization with a firm understanding of the overall needs of the AS/400 business community.

By the time he began moving rapidly within the upper echelons of the IBM organization, however, the AS/400 had fallen on hard times. Yet Zeitler remained one of IBM's staunchest internal IBM champions of the AS/400, understanding it to be a truly unique architecture with a strategic value to companies that utilized it. Consequently, in his position as Senior VP and Group Executive for STG, Zeitler provided the Rochester, Minnesota, AS/400 plant with general managers who—with few exceptions—were sincerely committed and devoted to promoting the architecture. Mark Shearer can certainly be represented in that group of Rochester boosters.

Signs of the Time
But as the computing environments for businesses changed, IBM's understanding of how the AS/400 should be successfully marketed did not. It was a time when "server" was a more important buzzword than "integrated systems." Thus the "Application System/400" became the iSeries eServer after years of languishing sales. But it was already too late, because the market had begun shifting out of the client-server model. So two years ago, the iSeries became the System i, much to the confusion and consternation of traditional midrange customers. Overall, the strategy of rebranding the platform to overcome the stigma of "legacy system" continued to fail to gain market mindshare.

Meanwhile, under the leadership of consecutive GMs, the platform began a series of technology upgrades to the system's architecture—all technically successful—that further solidified the loyalty of the customer base.

Therein lies the conundrum for IBM: a fanatical customer base, but no larger mindshare in the industry as a whole.

Bite the Bullet
Now it appears that Zeitler has finally bitten the bullet and accepted the realization that the System i cannot perform as a vehicle for sales in the realm of what was once called "the midrange." Unfortunately for the System i—and partially as a result of its success in killing off competitors in that market—that midrange realm no longer exists.

In its place, a newer marketplace has been steadily growing for the last 10 years. Called the SMB, it's composed of Windows and Linux servers and a flotilla of newer software offerings. With sales of the System i continuing an erratic decline—despite the most recent valiant efforts of Mark Shearer and his dedicated staff—it seems to be time to make a historic transition for the System i platform.

The question is this: What does this transition mean for customers, both new and old?

The Role of Solomon
By creating the two new IBM organizational groups and acting in the role of the biblical Solomon, Zeitler and his team have split the System i platform to address the realities of the new marketplace. From IBM's perspective, it is strategically more important to address both the SMB and the Enterprise Systems marketplaces than to continue to flog the dead midrange with the traditional value propositions.

It's a savvy move for IBM STG, enabling the organization to better focus on the SMB and enterprise markets while protecting its large System i user base. At the same time, IBM is keeping its perennial promise to System i customers to maintain the sanctity of their past investments in software: Customers don't have to convert anything, and the operating system will continue to be supported.

Meanwhile, Business Partners will continue to be able to sell the various system packages, even though their sales performances will be based on larger overall portfolios of products designed by the new business units.

Software vendors too will continue to have the opportunity to ply their wares, albeit to two separate market segments, with perhaps fewer IBM marketing resources at their disposal.

All this, on surface, is a wonderful compromise in the face of real System i declines.

Solomon and His Wisdom
But the wisdom of the biblical Solomon was in threatening to divide a baby in order to reunite it with its true mother. By comparison, some analysts believe the true mother of the System i—the Rochester development crew—has been living in a kind of welfare state within IBM for some time while it waited for the market to shift back to recognizing the value of the platform. For these analysts, the Solomon analogy falls far short. They say, "Solomon was concerned about the baby. Instead, the STG reorganization seems designed to divide the spoils of an entrenched customer base."

Moreover, what is unclear is whether that customer base—a customer base that has proven fanatically loyal to IBM and the System i—can remain intact as a cohesive community.

"It's a business decision," IBM is saying. "It is designed for the benefit of all." But will it be received by the customers?

Architecture vs. Product
In the old days, when you bought an AS/400 or even an iSeries, your company could expect a delivery of boxes of hardware, complete with manuals containing instructions on how to unpack, lift, and connect the various components. Most of these components were unique to the platform itself, which made it seem something of an engineering marvel.

Often an IBM SE and CE would be present to help with the assembly and custom configuration, to act as midwives to the birth of your system. Assembling the pieces, one had the feeling that it was a kind of erector set, building a true architecture.

And then there was that unique, truly geeky thrill when, during IPL, the monitor flickered to life and you were faced with seemingly unlimited possibilities for your business—an architecture of single-level store, expandable resources, and endless memory.

Those days are obviously long gone, though in hindsight today they may seem nostalgic and unrealistic.

Instead, in the days ahead when IBM delivers a System i to your door, what was once an erector set of unique hardware components has become a common hardware platform "box" shared between the product lines of the System i and the System p. And in the future, when the POWER blade for the System i is finally available, an SMB customer will receive a small carton containing a single component that is designed to be inserted into the blade rack.

Gone are the special disk drives with all their proprietary error-logging routines and APIs, the unique memory chips, and the strangely clunky-feeling busses that connected one rack to another. What you will get is truly a "black box" or a simple-seeming processor card.

System i or i5/OS
The unique heart of the System i itself seems to have been reduced to CD-ROMs containing the i5/OS operating system. In a sense, all the knowledge and investment from IBM's midrange experience has been distilled into something you can hold in the palm of your hand: a mere product versus what was once a complete architecture. Will it be shrink-wrapped, like Windows Vista or Red Hat Linux? Something that can be shoved onto the shelf of a bookcase, to be used or forgotten?

For some customers, the division and the reallocation of the System i product line into two new STG units will heighten the eerie feeling that the platform's unique nature has become irrelevant.

Some customers will quietly confess that, in their large shops, the System i has been irrelevant for years.

Others will say that the hearts of their businesses still run, miraculously, without interruption on the incredible boxes, and they have no intention of ever changing.

For them, the question is this: Will IBM force us to change?

The Lost Strategic Asset
But along with the loss of a concept of a "System i architecture," will customers have lost the value proposition that the System i is a strategic asset for the organization?

Today, the wonders of the System i are no longer defined by what it can do but by the mere fact that it has survived.

In such an environment, what is the real value of the System i? Is it its incredible reliability? Is it the famed "ease of use"? Is it the consolidation potential of the platform? All of these value statements will be inherited by the parent business units, of which the System i is merely one offering. And these value statements may now be eroded into their own irrelevancy in a modern computing site.

Application Development and the Future of Porting Applications
Another result of the split may be the impact on the architecture's future as a development platform and as a destination platform for application porting.

Several of Mark Shearer's accomplishments in his role as general manager for the System i was the fostering of the Business Partner relationships by which PHP, MySQL, and VOIP are being ported to the System i. Without a dedicated general manager boosting the System i platform, it's unclear how future opportunities will be made manifest for the platform.

At present, IBM hasn't directly addressed this question, and the fear of many analysts is that without this dedicated focus by a dedicated GM, the platform will begin to slow in the adoption of new technologies and fade further from relevance.

Yet IBM, in the shadow of the reorganization, has just announced V6R1 of the i5/OS operating system. These same analysts, who question IBM's long-range commitment, now want to know if this will be the last major release.

Education?
Likewise, it is still unclear how academic programs fostered by the System i Division—and much heralded by industry analysts and academics alike—will be continued in the divided state of the platform. Where will the next generation of System i programmers come from if RPG slips again into the lexicon of "legacy application systems?" How will IBM Systems i skills be fostered?

Indeed, the future of the System i's status as a cohesive, comprehensive computing platform may indeed be challenged by this most critical question: Education! According to some analysts, there is already a skills shortage for affordable, knowledgeable System i professionals. Will IBM continue to develop and support educational programs that will build the System i skills of the future?

And while we have all learned to trust IBM's best intentions to expand the opportunities and preserve the historic choices that customers have made, the practical implications of the new STG reorganization does not, in many analysts' opinions, bode well.

They repeat the often quoted phrase "A house divided against itself cannot stand!"

IBM's Biggest System i Challenge
Finally, IBM's greatest challenge after this internal reorganization will be recreating the self-image that loyal System i customers have acquired for themselves over the long years of the platform's history.

For these customers, the System i was never merely another server box and was much more than "just another operating system." For these customers, the System i was a rallying point for prodding IBM to achieve excellence in customer support and technical superiority.

These customers saw themselves as being in the vanguard of promoting true strategic automation within their organizations, using the System i as an integral tool for business development.

In many respects, the System i was an opportunity for these customers to feel they were members of IBM's product development and marketing teams, offering improvements and suggestions. They were, they believed, IBM's secret weapon throughout the years of the platform's long development.

But most importantly for these customers is the fact that the System i was—and continues to be—the measure by which all other IBM products and services are measured. And, quite frankly, for many of these loyal customers, the rest of IBM's offerings often pale by comparison.

There is no question that IBM is "right on" in reorganizing STG into the appropriate business units. There is no better way to propel IBM to grow its market share.

But while analysts see the reorganization of STG as the Wisdom of Solomon for the future of the System i, customers may see it as "throwing the baby out with the bathwater."