Q&A with Marc Dupaquier, Former GM of IBM Business Systems

Q&A with Marc Dupaquier, Former GM of IBM Business Systems

Just about a year ago, in an effort to more purposefully and efficiently provide hardware, software, and services for small and medium businesses around the globe, IBM created a new division called Business Systems. Marc Dupaquier, a long-time executive in Big Blue’s Software Group and a one-time AS/400 sales rep from the days of the AS/400 launch two decades ago, was tapped to be general manager of this new division. And last week, IBM reshuffled the GM chairs in the Systems and Technology Group, moving Dupaquier out of that role, just after he did an interview with us.

Most of us missed the news about the creation of Business Systems a year ago, since IBM did not make a big deal about it at the time, and that reorganization did not register on most people’s radar until late July 2007, when IBM split the System i division in two, moving the entry and midrange servers into Business Systems and merging the high-end of the System i product line and the i5/OS operating system with the AIX-based System p business to create another new unit called Power Systems.

Marc Dupaquier, former general manager, IBM Business Systems

In many ways, Ross Mauri, general manager of the Power Systems division, has an easier job than the Business Systems responsibility that Dupaquier had taken on. While the volumes of server shipments are not high for 570-class and larger servers running i5/OS, customers who love OS/400 and i5/OS and who have workloads that require such powerful boxes know IBM is committed to both the Power platform and the i5/OS operating system. They know RPG and DB2/400 and they know it is far smarter to make their i5 boxes sit up and bark than try to teach a Windows or Unix box a new trick, too. So they therefore have very little hesitation about investing in big i5/OS boxes to run their mission-critical and often homegrown applications. Power Systems is also in a three-way tie with Sun Microsystems and Hewlett-Packard for the $16 billion in annual Unix server sales, and having invested heavily in hardware and software technology for the past decade, IBM’s System p and AIX platform is without a doubt competitive with any HP-UX or Solaris platform–period. Power Systems has to compete, to be sure, but against other relatively expensive, high-margin, and rugged Unix boxes. Business Systems has to get into the street fight with Windows and X64 iron where margins are razor thin.

Dupaquier also had the much more difficult challenge of creating a set of products aimed specifically at the SMB market, which is growing at roughly twice the pace of the large enterprise market these days. The initial building block of the Business Systems division is the entry System i product line, its i5/OS operating system, and the thousands of business applications that are still available for that platform. Dupaquier was not just the GM of Business Systems–a part of IBM’s Systems and Technology Group—he is also a member of IBM’s senior leadership team and its performance team. Outside of IBM, these titles don’t mean much, but inside IBM, being intimately involved with Big Blue’s software business and being on the teams that decide what IBM should do and how well it is doing it matter a great deal. And most importantly, Dupaquier’s position within IBM and his experience since he joined the company in Marseilles, France, as a software sales specialist in 1983, made it more likely that he would get the resources and backing to make the Business Systems division a success.

Just before the holiday season got under way and just as Dupaquier was beginning to brief resellers, independent software vendors, and business partners on his plans for the Business Systems division in 2008 and beyond, he took some time to chat with IT Jungle. He may not be in charge of Business Systems any more, as we detail in the lead story in this issue, but the issues that the System i product line faces and the choices any general manager of Business Systems has to wrestle with remain relevant, which is why we decided to run this interview.

Timothy Prickett Morgan: You hail from Software Group, and many people assume that you are new to the System i business, as many past general managers of the division have been. Tell us a little bit about your background and then what experience you have with the AS/400, iSeries, and System i platform.

Marc Dupaquier: Actually, that is a very interesting question, since it is mostly back to the future for me. I started out at IBM in France, first selling software and then selling AS/400s to mostly mid-market customers. I remember very well the AS/400 launch and the excitement about it and all of the business that it brought us at that time. So in many ways, I think I grew up professionally in this AS/400 environment. I have been dealing with it a long time and working with a very large number of independent software vendors, which is also very close to my AS/400 background as well.

I have been in the software business for most of my professional life, and I eventually returned to IBM’s software business, which eventually became Software Group. I actually created Software Group in France in 1996, right after which we acquired both Lotus in 1995 and Tivoli in 1996 and we merged it with other software operations we had at that time; I led this in France for a couple of years, and then moved to IBM Europe to drive the sales operations for the European software business.

Then I moved to the United States in 1999 to drive the worldwide DB2 sales force. This was very interesting at the time because this business was very, very small and the goal was to truly grow market share in the distributed market. At the time we had a single-digit market share, and we moved the business up to a double-digit market share.

TPM: Were you on the AS/400 sales team, literally selling AS/400s way back when?

MD: When we launched the AS/400 in France, yes, I was a sales rep selling AS/400s and that is what I was doing at the time. And I did it for a couple of years before becoming a sales manager and so on.

TPM: Very good. You may have more experience with the platform than some of the other people who have had the general manager job in the past, which is good.

MD: Well, you know, some of the customers who bought their first AS/400s from me basically two decades ago are still running System i now. I will say that, unfortunately, many of the ISVs disappeared, which is a problem that we faced in the past 20 years. This is something that I understand really well, that this is really about applications and I have always been really convinced that for our customers, this has always been about applications.

Coming back to my history, after DB2, I took over Software Group’s strategy and marketing for four years until I joined the Business Systems team at the beginning of this year, which for me is a return to what I was doing in the past.

TPM: Tell me about the decision to break the System i division into two pieces. When did IBM start thinking about this, and what was the reasoning behind that decision?

MD: Well actually, it is one event in a sequence of events. And you have to look at it from an overall strategy standpoint. What we are trying to do is to build an organization from an offering, sales, and marketing that will be aligned to the SMB market. This is not where we are, frankly, since today every brand in IBM’s hardware lineup is serving every customer set. The goal that we have is that, over time, we have an organization just serving the SMB market.

This is the mission I was given when I joined the Business Systems team in January as a general manager, with Mark Shearer working for me as the general manager of the System i division, the idea there was to build this overall vision for the long-term SMB strategy for IBM.

The reason we brought the System i into Business Systems is that the System i truly belongs to the SMB market, has a value proposition aimed SMB customers, and so on. During the first six months of 2007, we did a lot of work defining the SMB market and understanding customer needs, building really refined market segmentation and market needs, and as part of this process, it became very evident that our System i customer set was really made of two distinct types of customers. On one side, you have customers looking for ease of use, integration, and a lot of other things that are part of the value proposition of the System i, and on the other side is a relatively small number of customers who are looking for high-end platforms with the high availability that the System i can provide as well. And when we were looking at how we should drive our product strategy, based on customer needs, we realized that the top end of this business does not belong with what we want to do with the SMB space in the long term, and it would fit better into the Power Systems organization. And that is when we made the move in July.

Obviously, there will be many capabilities that we will keep sharing, notably i5/OS, which is a strong asset. We need to make sure we keep investing in the i5 technology, both for the high end and for the low end, so that is clearly a shared capability. The hardware technology is all obviously based on Power processors, and we have announced Power6 for the 570 and we will have Power6 technology coming on the rest of the product line this year. And we have already started working on Power7, which will become available a few years from now. So it’s basically a set of core assets that we will be sharing across the two organizations.

TPM: As general manager of Business Systems, what IBM resources do you have in terms of people, research and development, marketing, sales, and so forth? Are you a cross-divisional business unit that has access to all different kinds of hardware and software made by IBM and its partners, as well as access to various IBM channels? I assume that you can pick and choose different hardware and software technologies from around IBM. What things can you grab from around IBM to make your SMB product line, and what things can’t you have?

MD: This is still a work in progress. I obviously do not want to and cannot announce new products or organizations before IBM announces them, but my goal is to build the offerings we need for the future for SMB. And I will be doing this using possibly any kind of technology that will be available to me coming from the IBM hardware organization. So there is no limit.

One of the things that it is very interesting to look at is that the low-end of the System i line fit into my Business Systems organization. But think of the rest of the organization as a library of components that we will be using. If I am building a new car and I need a new engine coming from somewhere else, I will do this.

TPM: I assume, though, that you have a mandate to create and sell i5/OS-based machines, which is my main concern. One of the problems that the System i base has had with the product line coming from IBM is that–really starting with the eServer campaign in 2000–IBM did not really lead with one brand. IBM led each sales effort with a black box that had different stuff on the inside and those of us in the OS/400 community thought that IBM should really be leading with OS/400. This was a box designed for a specific set of customers and in those cases, IBM should have been saying, “You really need an OS/400 platform,” or more currently, “You really need to have an i5/OS platform.” I am wondering if you have a mandate to always include i5/OS in what you do, or does it eventually mean that Unix, Linux, Windows, or whatever gets pulled over into Business Systems? So what must you sell and what can you sell?

MD: Business Systems will always sell an i5/OS product line. That doesn’t mean I will only sell an i5/OS product line. Here, what is very important is that when we are looking at the SMB marketplace–especially the mid-market business–you realize that we have a different kind of market here.

Some of these customers are really looking for commoditized hardware and I will have to serve them as well. And I will serve them with very commoditized configurations. It is not very interesting to discuss this as part of this interview, quite frankly. That is really a supply chain statement and a marketing statement.

Some other customers–and there happen to be a lot of them–are looking for integrated solutions, and that is where we will be articulating most of our offerings in the future. So obviously the System i is a core component of providing integrated solutions, but I will provide integrated solutions on other platforms other than i5/OS.

TPM: This is what I expect, by the way. You would have to do this. We have had hybrid computing in the AS/400 business since the early 1990s. And I don’t know what the latest figures are, but probably somewhere around 85 percent to 90 percent of OS/400 and i5/OS shops have Windows servers, too. You can’t ignore that. You can embrace it and improve upon it. So that is what I would expect IBM’s Business Systems division to do. That hybrid platform does not have to be Windows these days–it could be Linux, it could be Unix. There is not much that Windows does these days that Linux cannot do. And the same is true for Solaris or AIX, too.

MD: I believe that the real differentiation line is about the application. And the customers, particularly in the mid-market, are most interested in finding the application that is right for their needs. I am always fascinated when I see other IT vendors pushing for a full, homogeneous environment–all Windows, all Linux, all i5/OS, whatever. This assumes that the customer will only limit themselves to one choice in their environments. When I speak to customers, this is not what they want. They have hybrid workloads, and we believe that hybrid workloads will be made of different operating systems as well as a mix of on-premise computing and software as a service.

TPM: I think customers don’t have a choice but to go hybrid. I run my own shop, and I know my data closet is not complicated, but I started out saying “all Red Hat Linux, top to bottom.” I got political about it. And then I started picking my applications and looking at what was available in my price range. I am an infrastructure publishing application, not an ERP system, so it is not all that complex. But the same rules apply. It was not possible for me to be all Linux–much less all Red Hat Linux–and still have the applications I wanted. Some applications ran better or were more tightly integrated with SUSE Linux, and SUSE Linux was less expensive, too. I needed Windows servers for certain things in my application stack because these were the low-cost yet feature-rich applications that had commercial-grade support that I trusted. I wanted to have just one thing, and make it simple. It could not be done in a way that would make me happy.

MD: I agree. This is why I said that I am fascinated by some vendors who say customers will be solely on one operating system or middleware platform. This is so unrealistic compared to what real customers are telling us. We believe that there will be hybrid workloads, and we want to use some of the unique capabilities of the System i that we have in terms of ease of use, ease of management, and integration–integration of the database, operating system, and applications–to bring it to other environments as much as we can. We will also be pushing a lot the existing System i applications into this mix, and we will be working with the ISVs about i5/OS applications being modernized and more appealing to new, Web-based environments.

TPM: How has the new Business Systems division been received by the customers and software vendors that you have spoken to? The division was announced in July, and we have all had some time to chew on the idea for a while. Spiritually, I do not like the idea that there is not a System i division, and I understand why IBM has done what it has done. But what are customers and ISVs telling you?

MD: We met with an extraordinarily large number of System i ISVs in the last three months, and I personally met face to face with several hundred of them. I keep a business card from everyone I meet, and the stack of cards I have from ISVs is about 4 inches high. We decided to communicate with the System i ISVs in an open way and take them through the long-term strategy for Business Systems. We shared with them strategy and directions under non-disclosure, and gave them a solid one-year roadmap on everything. Between myself and my colleagues, we probably met with over 600 ISVs through the middle of December.

The feedback was just very, very positive. I was in Chicago this week, and in Dallas and New York this week, and in Europe before. My team was in Asia last week. Everywhere we are going, the System i ISVs are leaving the meeting energized and they truly believe that IBM “got it.” In fact, I got an email today from an ISV in a huge, red font that said “You Got It!” They believe that we are doing the right thing, that the strategy is the right one. They see how the fit in the strategy, which is very good, and they are anxious to get to work with us. So I think what we are feeling from the ISVs is very positive. The strategy is also bolstered by results, and the Vertical Industry Program announced early in 2007 has produced good results, and we are committed to attacking the market in this way.

The customers are very satisfied as well, because when we are explaining to them the strategy, there are two things that are really important to them. One, they made an investment on the System i and with IBM, and we are coming back to them and telling them that whatever i5 investments that you have made, it is very safe in the long range. And two, at the same time, we are telling them that we will be providing more capabilities, so they will be able to do many more things either in the traditional System i environment or on a mixed blade environment where they can have System i and other technologies, all virtualized with the Virtualization Engine because this is exactly the requirement that they have.

We had several customers who were debating whether they should reinvest in the System i platform or not, and instead of making the traditional sales call that a general manager would make, I took them through the strategy in detail and showed them how the System i platform would fit, and so far I am glad to say that every customer that I called on with this kind of explanation has decided to order a new System i. This is probably a statement that they like the new strategy.

TPM: Speaking of which, can you update us on how those user-priced System i5 515 and 525 machines are doing out there in the market? I have obviously been advocating for this kind of change for a long time. These machines really do price out akin to the way a Windows box is sold, and in a way that people pay for what they use–and I am all for that. So how have they been received?

MD: We have gotten a lot of learning from these products. What I found is the following: First, when we announced, our traditional resellers needed some time to really understand it. My observation is that traditional hardware resellers did not buy into this approach initially. They needed more time to get into it. Meanwhile, the ISVs got it immediately at launch, because the machines reflected how they actually charge for their own software and gave them the flexibility they needed on the hardware side. So here we had an interesting situation where the ISVs got it, but the resellers did not initially. But now we are at the point where everyone understands what we are doing, and traditional resellers are very comfortable with the pricing now.

Obviously, I cannot comment on fourth quarter results before the earnings announcement, but I think we are very pleased with the traction we have seen on these configurations.

TPM: We have seen shipment growth at the lower end of the System i line for the past couple of quarters, and I am assuming that you got shipment growth up through the third quarter and expect it in the fourth quarter as well?

MD: Up through the third quarter, we had significant volume increase, year over year in these “Ignite” low-end 515 and 525 configurations. Very large volume increases. I would be happy to share with you more details after the fourth quarter earnings are announced.

TPM: That was my next question: Will you call back? Because I would really like to get some color on how the machines are moving.

MD: Absolutely. It will be another milestone in the story that we are building, and it will be interesting to see how we have fared.

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