i5 Innovation Effort Shifts from Getting Modern to Making Money

It has been a year since IBM launched its iSeries Initiative for Innovation, a broad development and marketing program–funded with hundred of millions of dollars–that was designed to breathe some life into the OS/400 ecosystem. And, if software vendor count and enthusiasm are any measure, then it looks like that investment has paid off for Big Blue.

According to Joyce Bordash, director of worldwide ISV and business partner sales for the System i division at IBM, the co-marketing and co-development efforts by the company in conjunction with iSeries partners–which is now called the System i Initiative for Innovation–has significantly ramped up the ISV count on the box. And now, IBM is shifting gears from getting applications modernized to helping ISVs get out there and make money. IBM wants ISVs to sell new solutions into existing OS/400 accounts, obviously, but is more keen on ISVs selling System i5 machines and software stacks into accounts that have never heard of OS/400 or i5/OS and have no knowledge about the AS/400, iSeries, or System i5 brand names, and therefore have nothing to be perplexed or annoyed about.

“A year ago, it was clear that we had taken our eye off the ball with ISVs,” recalls Bordash. “Our mantra since then has been ‘No ISV Left Behind,’ and we have reached out to a large number of companies.” And, now, there are more people pushing iSeries solutions, which should mean the iSeries platform returns to the revenue growth it exhibited in the middle of last year, before companies caught wind of the Power5+ server announcements that came out in January.

IBM has rarely provided quantification for the OS/400 ecosystem. A year ago, when I did the OS/400 Ecosystem series of stories in this newsletter, I reminded everyone how far the OS/400 base had fallen, and it bears repeating again since the whole point of the System i Initiative for Innovation is to get more ISVs peddling more iSeries-specific solutions to new and existing customers. Back in the mid-1990s, when the AS/400 base was still pretty strong, IBM had approximately 8,000 total ISVs worldwide who were peddling about 20,000 different applications. This constituted the largest application installed base in the world, and it is one of the reasons why the AS/400, now named the System i5, is still around today. While those were large numbers, total ISVs is not the same thing as active ISVs, and total applications is not the same thing as modern applications. And even back then, in the heyday of the AS/400 before Windows ascended to take on Unix as a dominant platform and before AS/400 sales would drop by two-thirds, there were a huge number of AS/400 ISVs who were still peddling old System/36 code and who were not actively selling, but rather maintaining their customer base.

Over time, a large number of those ISVs have disappeared, been eaten, or have moved their applications to other platforms (using Java or C++). Some ISVs have been acquired after they tried to make a run at the Unix and Windows markets to expand their coverage and move beyond the OS/400 base. And because of this, the number of ISVs has dwindled, and with it, so has the ability to sell iSeries solutions.

But, the System i ecosystem, which now includes OS/400, Linux, and AIX applications, is on the rebound because of the efforts of IBM and its partners, and more importantly, now IBM is beginning to keep score and to tell customers and partners what the score is. To that end, Bordash says that in a few weeks, IBM will launch a new solutions catalog for the System i5 platform, and the database behind it has 1,866 ISVs in it who are “active,” which means they support i5/OS V5R3 or V5R4. Those ISVs are peddling 6,141 applications in over 19 different countries. (Two years ago, IBM was estimating that there were 2,500 to 3,000 iSeries ISVs with maybe 8,000 applications, but these numbers included anyone and everyone, regardless of the operating system level the ISVs supported.) With somewhere between 60 to 70 percent of annual System i5 sales being driven by solutions–as opposed to upgrades–the ability to attract new ISVs to the platform and to get existing ones peddling modernized applications with pretty GUIs and integrated with other modern applications is vital to the long-term health of the OS/400 platform. This is why IBM spent so much money, and continues to do so.

So, here is the report card so for on the System i/iSeries Initiative for Innovation. In the past year, IBM has added 1,700 new or enhanced applications to the iSeries portfolio, including applications that run on OS/400-i5/OS, Linux, and AIX. While the OS/400 count is not high, with only 20 to 30 net new ISVs, in the past year, more than 600 applications have been added to the installed base or modernized. Most of those applications were enhanced, and Bordash says that there are another 500 OS/400 applications in the pipeline right now, in various stages of being updated so they have modern interfaces and functions. IBM also added 600 new AIX applications to the iSeries platform, from 248 ISVs, and 528 Linux applications from 237 ISVs. Most of the AIX applications are line-of-business applications, like the ERP software than runs on OS/400 and i5/OS, and most of the Linux applications are infrastructure workloads or other niche products.

An interesting aside: IBM approached a dozen venture capitalists last year, and made a pitch for the iSeries to them, and found 18 applications at companies they owned or invested in that might fit with the iSeries platform; nine of those applications have actually been ported to the box. It is this kind of out-of-the-box thinking that will help the OS/400 ecosystem grow. “We are pretty proud that we were able to leverage a different set of influencers,” says Bordash.

Even though Linux is still an infrastructure platform, there are some neat new applications that came over from Linux. A financial services software company called Provenir, based in Parsippany, New Jersey, went to an IBM porting center outside of Boston and moved its loan origination and customer lifecycle management software, which was written in C++, from Linux to i5/OS in 10 days. Provenir was motivated by a lot of things to do the port to i5/OS, but the big motivator was the fact that OS/400 servers are installed and running the key applications at 16,000 community banks worldwide. These banks like their OS/400 servers, and now that they can get the Provenir package natively, Provenir can rapidly grow its business.

Incidentally, IBM now has 126 iSeries application development tools available from over 100 tools partners, an increase of 71 tool vendors, and the breadth and depth of tools has helped the OS/400 cause, as well.

Having broadened the ISV and tool base in 2005, now Bordash, who has added the job of managing ISV sales as well as business partner sales (her job from last year), says it is time to start making money. “This year is all about sales engagement,” she explains. “We have put an ISV sales force into our 18 System i5 sales regions, and we are going to help them sell. We’re focused on going global and helping ISVs enter new markets.” To that end, Bordash is mulling the possibility of setting up incubators to help ISVs localize and globalize their solutions for emerging and fast-growing markets like Eastern Europe, China, India, and Asia/Pacific. “There are so many things ISVs need to do in terms of currency, taxes, and other features to mesh with local economies,” she says, and IBM wants to help. “The bottom line is this: if we won’t drive the top line revenue at ISVs, all of our effort has been a big waste of time.”

Such clarity and frankness in speech from an IBM executive is refreshing. And so is the sense that IBM actually understands a lot of what it needs to do to get System i5 sales pumped up. I don’t think I will ever get IBM to agree with me about platform packaging and pricing, but what IBM has done on the ISV and tools front is exactly what it should have done.

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