Q&A with Elaine Lennox, VP of System i5 Marketing

Q&A with Elaine Lennox, VP of System i5 Marketing

As we all know, IBM has a new vice president of iSeries marketing, Elaine Lennox. She took over two weeks ago from Peter Bingaman, who left Big Blue to take a job at LexusNexus, and she comes to the job with quite a bit of experience in the small and medium business space that used to be the hallmark of the AS/400 line. She took some time to chat with me about her new job and what she sees as the challenges the System i5 line faces.

Lennox was previously vice president of SMB sales for IBM’s servers and storage products, and prior to that, Lennox led marketing and partner programs for IBM’s cross-divisional Small and Medium Business organization. All those Express product offerings IBM sells–that was her doing. She also created the Small and Medium Business Advantage business partner program, which IBM launched to do a better job selling into the SMB space with its resellers. Before joining IBM in 1999, Lennox was marketing director of a little-known startup peddling server appliances called Whistle Communications, which Big Blue bought that year. She was also a manager of servers at Hewlett-Packard, managing that company’s Intel-based servers, and was responsible for creating HP’s first network servers and systems management programs.

Timothy Prickett Morgan: Just out of curiosity, how do you wake up and find yourself the vice president of marketing for the iSeries one day?

Elaine Lennox: Basically, I asked for the job.

TPM: You asked for it? Excellent. I don’t know that anyone ever asked for the job before.

[Laughter]

EL: It is actually a very interesting story. When Peter Bingaman left, I reached out to Mark Shearer and told him that I would really like the opportunity to take on the iSeries, or now, the System i5. It was one of those things where I looked at the opportunity and the combination of the skills I have and where the i5 is trying to go in the marketplace and thought it was a good fit.

One of the things I have done a number of times in my career is built a growth business. We’re trying to build a growth business with the i5, but based on an amazing set of customers. We’re in an interesting situation in that while we have done great in the past year, what we are trying to do is take the iSeries back into the mainstream, into being a core growth platform as part of IBM’s Systems portfolio. We want to get new customers and re-energize it in the marketplace. To me, this is a really fascinating challenge–and, it is actually a challenge we can win at because we really have some compelling things to say and some compelling value propositions.

It’s always great to start with a platform that clients love. It’s one thing when you’re trying to sell them a dead duck. The iSeries is not a dead duck, and you know this because you talk to customers every day. They’re passionate, and they love what this platform can do for them.

TPM: They’re crazy for it. And I am crazy for it, too, because it pays my mortgage, just like it now does yours. So I can understand where they are coming from.

EL: Whenever an executive job opens up at IBM, we go through a process and look across all of the candidates that might be qualified and that might fit with their career plans, and then IBM evaluates you against all of the other candidates. With me having the passion and the skills, and Mark looking at the other candidates, he decided that I had the skills that we need on the iSeries product line right now.

TPM: Energy is really important. If we have learned anything in the past year, that is the main thing.

EL: Absolutely. Peter did some great things, and the good news is that I have taken over a great team here that has done a number of things right in the past year, I think.

TPM: Like many of us, I like to see revenue growth, even if it was small like it was for all of 2005. Revenue growth is tough for any part of the server market these days, and even in the volume X64 server market, companies are only getting revenue growth because they are boosting shipments even more significantly. And the X64 market is only growing because a vast installed base is undergoing a massive upgrade cycle. I would love to see the same thing happen here, with the OS/400 server base.

I have written an awful lot of essays about how IBM might get to a higher volume and get back to the “S” in the SMB space, which is obviously something you have a lot of experience with. What are your thoughts on how to pursue the small business with the System i5? The small business used to be the cornerstone of the AS/400 market. To my eye, the iSeries and System i5 line is engineered and priced like a Unix box, even at the low end. And I still think with some of the changes in the System i5, which I welcome, the low-end entry point is still a little too pricey, and I think this is still a barrier to entry. Or does IBM not have to change it and I don’t know what I am talking about?

EL: Well, you’ve asked some good questions, and I won’t claim to have all the answers after one week on the job. I will tell you that our low-end strategy is something that we are always looking at. One of the things we have to reconcile is that this is an integrated business system, so we are not trying to be an Intel server. We’re trying to be an integrated server that is the right choice as a business machine. If you are looking to install an ERP suite on a system, you are going to pay some sort of premium for the reliability and security that you expect on that platform. It’s not quite the same as trying to buy a file server, for example.

We are never going to try to be at the price point of a typical low-end Intel server, because we have a premium for the integration value, for that “all-in-the-box” approach, that we have with the iSeries. The question is still, what is the balance point for that “all-in-the-box” system. They still need something that is more than just the hardware and costs more than just the hardware price points, and we need to consider the right combination of things we need to put together.

One of the areas that I have been talking to my team about is that we kind of feel like we lost the Intel generation. What I mean by that is the 20-somethings, the 30-somethings in the IT area who grew up thinking that distributed computing and Intel boxes is the de facto way it is, and they don’t necessarily know that there is a better option. One of the things we have been talking about is how to go out to that mainstream market and explain why there are all of these people who are passionate about the iSeries platform and how it does have a unique value. It may not be that everyday you need this, but when you are trying to implement a business application, this is a very special platform with a unique value proposition, and you really should be looking at it. There are just too many people in the market who grew up in that Intel generation who do not realize that the iSeries has value that they really ought to be taking advantage of.

TPM: Let me just be the devil’s advocate here for a second, because I like doing that. For that generation, the integrated software stack is called LAMP–Linux, Apache, MySQL, PHP. And I know that while you do not write an ERP system in PHP–well, some people have done it, if you look on SourceForge. And while no one has written a great ERP system based on a LAMP stack yet, my guess is that sooner or later someone is going to figure out how to take the LAMP stack and some Java applications, tightly couple and integrate all of the pieces, and that’s the game.

Every lesson that we have learned with the iSeries, people are starting to learn. We saw it with system software suites back in the mid-1990s. And I would argue that, at least for business applications, people are not just selling an Intel box and that the Microsoft Windows Server System is a complete, integrated system. And you can buy Microsoft Great Plains software, too, or any of a number of other ERP suites and deploy it on the Windows stack.

I think that the delineation between the current i5 line and its applications and those alternatives in the Windows market is not so large, at least not from the point of view of small customers. Moreover, the smallest customers are very familiar with Windows and totally unfamiliar with i5/OS. And they are going to go with what they know, because that is what real companies do. It is also why the iSeries persists and has been so popular. People have a very long a deep experience with it. People go with what they know when it comes to computers. So the trick is to try to figure out how to be competitive head-on with the Windows platform so when an ISV is peddling a box, you get the ISV who says that he is an i5 partner to put the i5 first–and he can do it because it competes effectively and economically. A new customer might pay a little bit more for an i5, I’ll give you that. But they will not pay a lot more.

EL: I’m learning a lot from all of the people I am talking to, so I will turn this around. What would you do if you were IBM?

TPM: This is very hard, and I have said it before, and I will be happy to say it again.

The thing IBM needs to understand is that the iSeries is the underdog. To speak in colloquial New York, it didn’t used to be that way, the AS/5400 was a great midrange machine and it had dominant market share. Very few servers were sold in the late 1980s compared to 2006. There will be probably in excess of 6 million servers sold this year. Distributed computing is the norm. I don’t know the exact numbers from the late 1980s, but I would be surprised if more than 1 million server units shipped across all architectures when the AS/400 was launched. So there has been a factor of five or six growth in the number of boxes going out. But the number of boxes for the AS/400 and iSeries has gone down by half in recent years, and by two-thirds against the peak shipment year in 1998. So the OS/400 platform’s penetration of the total market has gone down.

I realize you need to make an apples-to-apples comparison and separate out the machines in those millions that are doing ERP-class work. And I realize that a lot of those millions of servers are infrastructure boxes wrapped around the ERP systems.

So here’s what I would do. Get in there at the same price and performance points on the hardware as a configured Windows system. Price it and package it exactly akin to the Windows Server System. Speak their language. And then say, in a head-to-head competition, that you offer better functionality, better integration, better security, a more established ERP customer base, for the same price. You have to talk the Wintel language to these customers–not just reach out to them–because that is how they think about computers. They don’t want to learn about interactive capacity. There’s a whole culture they have to learn to come to the i5. And it is too hard for the new customer. It is easy for the rest of us who understand it.

EL: That’s one of the things that I have been talking about to the team this week. We in the iSeries world–not just IBM, but all of our customers and our partners–we do have our own language here. We used terms like CPW, which are special to us, but that do not help us to align with the mainstream market. These are good terms, but to your points, are we speaking the same language.

We have to do two things. We have to go out and acquire new customers, and that involves talking to that Intel generation. But we also have a huge installed base that we have to cater to, making sure they have upgrade paths, the kind of support they want, and new technologies like SOA.

TPM: I don’t like the idea of splitting the product line, but one of the things you might consider to target the Windows platform is a distinct line just aimed at Windows, with its own features, packaging, and pricing. Just like IBM used to have System/36 variants or server and system variants.

IBM relies too much on vague IDC reports that come out every two years or so to “prove” the ease of use of the iSeries platform. I think IBM really has to put i5/OS against Windows, head-to-head, and show two boxes running benchmarks of real ERP systems and count how many times each one crashes, show how much administration time each takes, and look at the security flaws and patches they have to deal with over time.

EL: I hear you. These are the things that I am going to be focusing on in this job. We need to have an enduring value proposition for the market.

TPM: The customer base is always interested in what the advertising and marketing plans are for the iSeries. What is IBM going to do to further promote the iSeries as a distinct machine from IBM’s other eServer brands? Do you even say “eServer” any more?

EL: We talk about IBM Systems now.

TPM: Well, you’ll have to excuse me, since I didn’t get that particular internal memo.

EL: The question on advertising is a big one, and it is one that I have spent some time on in my first week. I know how important it is in terms of generating awareness for the i5 and our value proposition, but also for showing our customers, our resellers, and our partners that we believe in this platform and that we are still investing in it. So advertising has a symbolic as well as the awareness and lead generation value.

One of the things I want the team to focus on this year is how to use more viral marketing tactics. One of the ways you can do is don’t just think about print and television advertising, which is a fundamentally expensive way to get to a potentially large audience. I want to think about viral tactics. What can we do online? What can we do with the community? What can we do in terms of local events?

So we will do a lot in terms of print and TV, and we are going to have at least as much advertising spending as we did last year, by the way, in the big “A” awareness stuff. But the goal is to supplement that with a more aggressive viral or guerilla plan, where we go with much more local tactics, much more online, more aggressiveness, using the community to help us tell the message. I don’t have all the details on that yet, but hopefully we’ll get that launched in the first half of this year.