Bye Bye System p and i, Hello Power Systems

March 17, 2008 Timothy Prickett Morgan

It’s been a little more than a decade in the making, but I have a hunch that IBM is getting closer to doing with brands what it has already done with technology when it comes to its System i and System p Power-based machinery: consolidate. Server consolidation is one of the driving forces–if not the driving force–in the server racket these days, so there is logic here, and once IBM merged the System i and System p development and manufacturing operations into Power Systems last July, it has always been just a matter of time before Big Blue would do away with the System i and System p brands.

Just in case you missed the last 12 months of IBM kremlinology in the Systems and Technology Group, in January 2006 IBM consecrated the Business Systems division, which was dedicated to peddling hardware, software, and services to the small and medium businesses of the world. This was an important move, since the SMB space is growing its IT spending at a rate that is two to three times that of the growth among the larger enterprises where IBM is the king of the revenue hill. Then in July 2007, IBM broke the System i division in two, pushing entry products into the Business Systems division and rolling high-end products into a new Power Systems division, which also included the entire System p product line. The operating systems and related systems software for AIX, i5/OS, and Linux went over to Power Systems, too, but development tools were put into Software Group’s Rational tools division. In January of this year, IBM made a cleaner break between systems marketing and sales and systems development and manufacturing, rejiggering the STG unit one more time. Enterprise Systems and Business Systems were given the mandate to be customer-facing organizations that respectively peddled big boxes or midrange and entry boxes to their respective enterprise or SMB customer bases. On the development side, Enterprise Systems (mainframes), Power Systems (Power-based servers), and Modular Systems (X64 rack, tower, and blade servers) were created to steer development and manufacturing of products. At this time, product development for entry and midrange System i boxes was moved from Business Systems over to Power Systems, where it belonged in the first place.

Various executives in the STG organization played musical chairs after the restructuring, but the net effect is that there is no longer a general manager in charge of a system platform from development through manufacturing to marketing and sales. That goes for all the System i, System p, System x, System z, BladeCenter, and TotalStorage product lines. There are customer-facing sales and marketing experts on one side of STG and technology-centric experts on the other side. They all report to Bill Zeitler, the senior vice president and group executive in charge of STG.

IBM has not divulged what its plans are for any new branding, and indeed, it has said nothing officially about any potential or actual impending rebranding for its server lines. But given the changes in the STG organization, this is the next shoe that needs to fall and hit the floor. And there is some chatter out there that this is indeed what IBM is working on for announcement in April. As I explained last week, IBM is expected to revamp its high-end Power6 server line some time in April, and it is also preparing to launch some entry X64 servers that were designed and possibly manufactured in China in an effort to boost the margins on this product. And as I explained two weeks ago, Mark Shearer, vice president of marketing and offerings for the Business Systems division, and Ross Mauri, general manager of the Power Systems division, will jointly host a special town hall meeting on the morning of April 2 at the COMMON midrange user group and expo in Nashville, Tennessee; their joint talk is being billed as a “special announcement of an important initiative,” and it is called the New Power Equation.

A rebranding of the merged System i and System p product lines, perhaps to a single Power Systems brand, would seem to make sense. And given how attached those of us in the midrange can be about exploiting and pushing brands like AS/400, iSeries, and System i, what better place to take on the issue than at a town hall meeting with the OS/400 and i5/OS faithful? It gets easier once that meeting is over, for sure.

If IBM does create a converged brand, it will of course only mirror the merging of technologies that has been under way since 1995. If you remember, 1995 was when it became clear that the neither IBM’s Austin, Texas, RS/6000 development labs nor its PowerPC chip partner, Motorola, were going to get their PowerPC 620 and 630 processors out the door and IBM hung its future on the “Star” family of 64-bit PowerPC AS chips designed by IBM’s AS/400 Rochester labs. Since 1997, IBM has been shipping AS/400 and RS/6000–and then iSeries and pSeries, and System i and System p servers–that have been essentially the same boxes with some minor I/O differences, which have been gradually changed over time as the special IOP architecture of the AS/400 is being removed and synched up with the peripheral style of the RS/6000 and other kinds of servers that did not employ asymmetric I/O processing.

IBM is not the only system vendor that is converging products and converging brands, and it is not the only one to have done it in a stop-and-go, sometimes jarring fashion that annoys customers. Mainframe and high-end Windows server maker Unisys was on a path to converge its ClearPath mainframe line (which is itself the result of the merger of the Burroughs and Sperry mainframes from the dawn of time) with its ES7000 symmetric multiprocessing servers. Unisys has ported one of its mainframe environments, MCP, to run in emulation mode on Windows, and mixes mainframe engines, Itanium engines, and Xeon engines in the ClearPath line to allow customers to put Windows, Linux, OS2200, and MCP workloads inside a single frame. Two years ago, Unisys looked at the cost of that convergence and its own research and development costs to fully converge its products and then suddenly decided that the better idea was to create a joint Itanium-Xeon server product line with Japanese server maker NEC. Those servers are due later this year, Unisys has pledged to keep its ClearPath line available for 15 more years, and it is unclear how the future NEC servers and ClearPath servers will be merged, much less how Unisys will brand them.

Hewlett-Packard has also wrestled with server convergence and branding issues, after having inherited DEC AlphaServer, Compaq ProLiant, and Tandem NonStop product lines through its acquisition of Compaq in 2001. HP’s plan followed that already underway at Compaq, which was to converge its operating systems–OpenVMS, NonStop, and Tru64 Unix–onto a single Itanium-based platform. HP was itself moving its HP-UX Unix to Itanium at the time of the merger, and set about to rationalize its many product lines after taking over Compaq. Tru64 Unix was killed off and so was HP’s own MPE proprietary operating system, both of which were probably bad decisions considering that an MPE port to Itanium could not have been that big of a deal and that Compaq had already done a lot of work on the Tru64 port to Itanium. Anyway, today HP has a single midrange high-end Integrity Itanium server line, and it supports HP-UX, OpenVMS, NonStop, Windows, and Linux–side by side and virtualized.

IBM has had the same goal with its Power-based machines for more than a decade, of course. But by keeping the product lines separate, Big Blue could price them differently and thereby charge more for processor, memory, and storage capacity on one line–the AS/400-iSeries-System i, of course–than it did on the other RS/6000-pSeries-System p side. IBM needed to be able to price the Unix product line aggressively to steal Unix market share from HP and Sun Microsystems, which it has done brilliantly. The strategy of charging a lot for 5250 processing capacity and calling it hardware (when it really isn’t) or bundling on OS/400 and i5/OS and calling it hardware (or, more precisely, not calling it software), allowed the OS/400 and i5/OS product line to show good hardware profits even as hardware sales were actually declining. I have argued that these pricing practices over the past decade have alienated the existing customer base and made it harder to attract new customers to the product line. But I am guessing that IBM optimized its Power product strategy to create the maximum overall Power Systems sales (lots of AIX sales more than offsetting OS/400 sales) and the maximum overall Power Systems profits (probably half from AIX platforms and half from OS/400 platforms over the past decade). My assumption in criticizing IBM is not that it has been stupid, but rather that it has been short-sighted in not seeing that there is always another way to solve a set of min-max equations. As Bill Gates surely knows, it is better to have lots of customers all paying a little and being relatively happy than having few customers all paying a lot and being grumpy about it.

So, from my perspective, a new Power Systems rebranding for IBM’s Power-based server line presents a once-in-a-decade opportunity for Big Blue to get it right. IBM needs to call hardware “hardware” and software “software,” and it needs to unbundle them on all products, including the machines formerly known as the System i. Each and every component in the merged Power Systems line should have the same product and feature numbers (regardless of operating system), the same prices (regardless of operating system), and the same direct and indirect reseller channels (regardless of operating system). No more gouging the System i shops to pay for the market share gains in the System p space.

Incidentally, if IBM does a rebranding for the systems, I think it is highly unlikely that IBM will change the names for its operating systems. OS/400 just went through a name change to i5/OS, and IBM probably doesn’t want to go through that again, much less pay lawyers lots of money to come up with a new name for AIX and trademark it. My guess is that no matter what IBM calls the servers, they will run i5/OS V6R1, AIX 6.1, and Linux.

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