Power Systems Fuel IBM Channel Growth, Says Avnet Exec

February 29, 2016 Dan Burger

In the past year, the IBM channel has experienced 25 percent growth on Power, according to an executive at Avnet, one of IBM’s dominant sales channel partners. Workloads attributed to business analytics, high performance business computing, and management of big data–all the areas that IBM predicted would make a difference–are driving the gains. Managed service providers are getting some of the credit, but on-premise upgrades for customers are in on this, too.

Richard Martinez’s business card identifies him as supplier business executive for IBM Power at Avnet, which along with Arrow Electronics, is one of IBM’s biggest business distributors of servers and storage. Martinez is originally an IBMer with a resume that begins in the System/3X business, which evolved into the AS/400 and eventually to the modern IBM i that runs on Power Systems. He has, like many of you, witnessed the changes over the decades.

“This is the longest running growth period that the channel has seen in decades on this platform,” Martinez says.

That equates to a trend.

Martinez says much of the sales channel revenue growth can be tracked to managed service providers (MSPs) buying the upper end of the scale out systems–the Power S824 machines–servers that support a lot of workloads without the heavy investment of several hundreds of thousands of dollars. He says they are being used for shared environments as well as dedicated machines for single customers wanting co-lo services.

IBM and Avnet having been looking at this over the past four quarters. The channel has sold a lot of the upper-end Power S824 machines to make up the revenue loss of fewer machines being purchased, Martinez says. In the MSP arena, the heaviest concentration is on the high-end Power S824 model, which has also proved to be popular for on-premise upgrades.

He says the reseller channel is simply catering to the needs of the customers.

“Our partners were buying systems for their MSP offerings and refreshing a lot of customers that were replacing older systems. It shows the customers are still maintaining their investments in the product line. They trust their trusted advisors and are committed to their workloads that run on the Power platform,” he says.

Touching all the bases, Martinez makes sure to note the software vendors are noted for their contributions to the channel’s success story.

“The other influencer in this are the ISVs. The application creators and vendors. There is a significant impact vendors such as SAP, IBI, and EnterpriseDB are making. If you go back in our heritage, the AS/400 existed and grew because of the ISVs.”

The ISVs are going to drive the changes, Martinez predicts. Aggressive ISVs see Power as an alternative to Intel that can gain them access to customers. Power allows ISV products to run at higher densities than Intel, which is an advantage. And open source allows lower licenses fees to result. Combine more workloads with lighter licensing charges and you have a recipe for taking market share away from incumbent Intel-based databases and workloads.

Look for more partnerships between ISVs and resellers.

His view of the IBM i installed base, at least those shops that continue with workloads predominantly on that platform, is characteristically optimistic. Just as you would expect from someone whose job depends on finding new ways to develop business relationships with the IBM i community, the words “trusted partner” are often spoken.

Trust couldn’t be more important as IBM and Avnet combine efforts to develop the MSP business as a critical component in the IBM i market.

There are a lot of IBM i community members who remember the service bureaus, which were the MSPs by another name. Few customers ran workloads in the service bureau model, and lack of trust was a big obstacle. It remains an obstacle, but circumstances have changed and maybe resistance has softened. IT complexity and a shrinking workforce with a combination of legacy and modern skills can relax some of the tension brought on by what many shops still fear–a loss of control.

“When you look at what we call instances of deployment–how many boxes were out there–there were so many that more resources were required to support them,” Martinez says. “Consolidation and the economics of technology reduced the number of footprints. The workload heritage [in IBM i shops] spans four decades and is into the fifth. Technology evolution, compression–consolidation, density, whatever you want to call it–have led to less resources. The bulk of the IBM i installed base are running customized applications. They are looking for partners that understand their background and can give them better support more economically. We see the transition happening–from owning systems located with an MSP to having the systems provided by an MSP.”

It seems a little premature to be claiming trends that follow exactly what IBM had outlined from the beginning and finding that all the puzzle pieces fit precisely. It looks more like picking the low hanging fruit and declaring it a trend. It also seems the channel needed to sell two or three times as many footprints to make up the revenue lost to consolidation. Where are those footprints? It remains a mystery to me.

It’s a fact, however, that Avnet has encouraged its partners to set up MSP businesses as a hedge against less frequent server sales that used to be a bread and butter business for Avnet and its downstream channel partners.

“We have an ample supply of partners in the MSP space,” Martinez says. He says 14 Avnet partners are operating MSP business and estimates Arrow (Avnet’s competitor selling IBM Power Systems, software and services) has about the same. There are others not affiliated with Avnet or Arrow in this business as well, but Martinez claims there is enough managed services business for everyone. That, however, does not equate to more MSP startups as he sees it.

“We are still uncovering IBM i customers who are concerned about their ongoing support. It’s not from an operating system side,” he says. “This is from an application perspective because of the heavy customization. These companies need help supporting established workloads whether they are green screen, GUI, WebSphere, or whatever. They are looking for consulting services. Their trusted advisors that were in-house staff are gone–retired or took a different job.”

The percentage of all IBM i shops that fit this description is in the single digits, he says, but they are the next evolution of the IBM i customer base.

“We are seeing this trend establish itself,” Martinez says.

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