IBM Re-Emphasizes Software And Services To The Channel

September 9, 2013 Dan Burger

In his keynote address at the Avnet and IBM Executive Directions meeting last month, Steve Mills told a roomful of folks in the sales channel that their greatest opportunities for future success would be in software and services. That’s not a new tune the general manager in charge of the converged Software and Systems Group was singing, but in this business setting where hardware sales is the sentimental favorite, Mills would like to make sure the choir is singing his song.

Mills carefully built a bridge that connected the old reseller sales approach that led with hardware sales by saying up front that “all new things have roots in the past” and “no one thing will solve business problems,” but once he launched into the IBM key initiatives and investments portion of his message, it clearly stated the future is in solving business problems and the best way to do that was with software and services.

To make his point, Mills notes during the past 15 to 20 years there’s been an increasing amount of IT budget devoted to the care and feeding of infrastructure, to the point where it has reached more than 70 percent, leaving little for solving the business problems. Operating costs are a critical issue and when the money is tied up, it can’t be used for improving infrastructure.

For companies in the IT business–in this setting Mills was talking to resellers–to make money, they have to have customers with a budget. And they have to have products and services with a decent profit margin, which is increasingly difficult in the hardware business, where commodity pricing and server consolidation have squeezed much of the juice from that fruit.

Helping end users find more budget is a big part of the equation. The answer to that is reducing the dependency on administrative and management duties. That will cause several things to happen, Mills says. As time goes on, more computing will be done off-premise. In-house IT will not disappear, but some of it will move to a new address. When it does, those companies moving workloads off premise will tap into the expertise of the service providers, so if you are a service provider it’s time to build some specific skills. And if you are an IT professional, in an IBM i shop or otherwise, this is the way the wind is blowing.

It’s inevitable, as Mills points out, that we all become aware of where the marketplace is going and adapt to it.

As an example of how IBM is adapting, Mills says IBM is delivering more incremental MIPS processing capacity on Linux than on z/OS on its mainframes. Sure, that’s in the mainframe world, but similar changes are coming to Power Systems as well. Architectural shifts have made and will continue to make Power more adaptive and customizable with regard to new workloads.

You might recall IBM made a $1 billion investment in Linux about 10 years ago. That’s not the kind of investment that you just forget about.

“We are moving in a direction where people will not know what class of server they are connected to,” Mills said.

Another IBM initiative and investment that Mills wanted to remind the reseller community of is storage, and in particular, flash storage, where IBM has another $1 billion investment.

“There will be a huge transformation around flash technology,” Mills declared. “Today solid state disk flash memory runs at about twice the price per gigabyte compared to traditional Tier 1 magnetics. But when factored into the cost of the operation, flash is about one-third the cost.” He backed that up by saying there are IBM customers spending months tuning applications for better performance in a magnetic storage environment. This, he says, can be done in a matter of hours in a solid state environment and solid state is already affordable for Tier 1 and 2 enterprise companies. It’s all within the parameters of helping companies solve problems and save money.

Selling software as a service is one more IBM initiative that Mills highlighted.

One of the biggest misconceptions about SaaS from a sales perspective is that it cannibalizes existing business, according to Mills, who has been with IBM for 40 years and “hasn’t seen that happen yet.” The guy at the top of IBM’s Software and Systems business says SaaS leads to expanded customer bases. (See the story of NorthgateArinso’s SaaS business elsewhere in this issue of The Four Hundred for a shining example.) And Mills also pointed out to the IBM partners that additional services business can be built around SaaS.

To the list of software solutions that Mills emphasized for their ability to solve business problems, add mobility, data analytics, security, and social/collaboration. Of those, mobility stands out as the one that tops the charts when I talk to IBM i shops and software vendors.

Mills made note of a “huge opportunity for effective implementation services” surrounding the desire for mobile applications. Many businesses (not just IBM i shops) are struggling to quickly deploy mobile apps and it’s not uncommon to find a deploy-fix-adapt progression. The skills gap for most companies is considerable; therefore the door is open for service providers.

Software and services are where IBM sees its best opportunities and there are plenty of indicators to make that look like a good bet.

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