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As many IBM BPs, Independent Resellers, and Third Party Maintainers are aware, the IBM Mid-Range market is not what it once was.
The reasons are many, including increased use of cloud services, more powerful X86 servers replacing 'Mid-Range', OEM/ODM competition, and to some extent, IBM's own actions.
We have also seen a sharp decline in the number of independent resellers and Third Party Maintainers (TPMs) who specialize in the IBM Power platform.
Despite the changing market, we believe it may be premature for resellers and TPMs to give up on IBM Power Systems, including AIX and IBM i.
IBM rolled out Power9 at the very end of 2017 (with the Linux based AC922). Mainstream
servers followed a few months later. For IBM, Power9 has been well received and server
sales have seen growth compared to Power8.
Although IBM suggested Power8 as a valid alternative to intel x86 based servers, it seems
they are a little more serious about it with Power9, especially for Linux optimized workloads.
Add to this Google's embracing of P9 for google-Zaius, and IBM's acquisition of Red-Hat, the Power market appears to be improving.
IBM have also lowered many system and component prices across the board and reduced
some maintenance charges. In part, this was to increase price/performance ratios compared
with x86 systems and other competing OEMs. Obviously, this also puts pressure on the
reseller and TPM markets (whom IBM believe to be significant competition).
IBM themselves expect the long term future for Power Systems to be Linux based, rather than
AIX or IBM i. Although they have no plans to discontinue these two Operating Systems, they
do not expect to see much growth.
So, why stay in the business of IBM Mid-Range?
To begin with, this is still a specialized industry.
Unlike the broader general computer market, resellers and TPMs with expert knowledge of
these platforms have always been limited in number.
As the market contracts, those who maintain a presence will likely see increased business
in the long term.
Many of the initial P9 systems will be coming off of IBM's standard warranty/maintenance
in the next 12 months or so. Although IBM do not publish figures for extended maintenance
retention, experience suggests that many end users will elect to self-maintain or seek the
services of a TPM.
Let us also not forget that there are still a number of IBM users running older systems -
everything from p5 and i5, and above. Some of these end users of older systems have been
largely abandoned by IBM but still require on-going service and support.
IBM tend to imply that resellers and TPMs operate in some kind of questionable gray domain.
But, the truth is that many have been around for years. Most are incredibly professional,
have state of the art facilities, and employ highly experienced tech support.
The industry also has professional associations which help to define ethical standards.
Far from considering the secondary market as a thorn in their side, IBM should recognize
that a healthy reseller market is beneficial to both IBM and IBM's customers.
Asset Liquidation and Residual Values.
Many professional resellers will buy equipment from end-users (anything from surplus
hardware components to entire computer rooms).
Professional resellers do not just throw these items in a bin for later resale.
Every reseller that we deal with conducts a professional audit and tests everything.
They have to because they offer warranties - and they stand by them.
Although, IBM offer a trade-in scheme for customers looking to upgrade, the simple fact
is that values offered by a thriving independent reseller market are always going to be
higher than an OEM trade in allowance.
For customers looking to upgrade, this provides additional revenue for new hardware. Consequently, this is both a benefit to IBM and the customer.
For customers just looking to liquidate assets, IBM should recognize that it is prudent
for customers consider future residual values prior to any hardware investment.
If IBM are really saying that the secondary market should not exist, they are essentially
saying to their customers that there is zero residual value in IBM equipment. I believe
many end-users would find this unacceptable.
Self Maintainers and TPMs
After IBM's standard maintenance period has expired, customers have a choice of
picking up IBM's extended maintenance, or using a TPM, or self maintaining.
Whether an IBM customer chooses to self maintain or use a TPM, they are still IBM
customers - something which IBM tends to overlook.
There are many reasons a customer may choose to self maintain. They may have in-house
technicians, an established relationship with a reseller, or prefer to not be tied to
a long term contract (some TPMs offer ad-hoc services such as hardware install).
For self-maintainers, a thriving and reliable secondary market is essential.
In this regard, both the reseller and the customer are still supporting the IBM brand
and the reseller is still facilitating the sale of IBM product (whether new or used).
(yes, many resellers offer new 'unopened box' hardware).
In terms of questioning the reliability of used equipment, one should bear in mind
that even when purchasing maintenance parts as FRUs from IBM's Maintenance Services
Division, they come with the advisory 'parts may be new or re-certified used'.
The IBM Brand
IBM were one of the original iconic brands, along with Coca-Cola, 3M, Pan-Am, etc.
These companies defined the notion of 'Brand Awareness' - which means that even if
you have never owned or used the product, you know what it is and what it stands for.
For IBM this was reliability, technical expertise, and solid customer support.
This in turn led to brand loyalty, with customers proud to own or use the brand, often strongly defending it.
These days, IBM seem to think that brand loyalty is only if a customer is using IBM Maintenance.
Compare this to say, Ferrari. This iconic marque derives benefit not just from owners of
new cars (servicing them at official dealerships) but also from brand loyalty among associations
and owners clubs - which are mostly populated with owners of used cars - either self maintaining
or using specialist secondary market sources who are equally proud of the brand.
For Ferrari, 'Brand Presence' has its own intrinsic value - which is why the owners of used
cars and the car clubs are embraced by Ferrari, regardless of where they get their cars serviced
or where they buy branded parts.
As this applies to the IBM Power Systems reseller market, some vendors are specialists and work
only with Power Systems. Others cater to multiple OEMs but employ platform specific people.
They are proud to support the platform and the brand, and they have in interest in seeing both
IBM and the Power Systems brand be successful. As such, they are stakeholders in IBM's future.
IBM, like almost all tech firms, do not seem to grasp the notion of exactly who a stakeholder is.
Stakeholders are not just the shareholders.
Stakeholders are those with a vested interest in the continued success of the entity, and those
who are directly impacted by management decisions.
This includes employees, it includes customers using the brand - regardless of the age of
the product or maintenance status. It includes those who support the brand and those who
rely upon the continued success of the brand or product.
A long time ago, IBM's customer retention and employee retention levels were second to none.
This in turn translated into customer and employee loyalty.
In other words, long before we had to define 'stakeholder', it was encapsulated in the general
notion of being a decent company. Customers and employees tend to respond positively to this notion.
Back then, a customer was not defined by their current maintenance contract. If they owned the
product, they were considered customers.
If IBM are serious about positioning the Power platform as an alternative to x86 systems in the
web server and enterprise server markets, they really need to start putting more emphasis on
rebuilding the brand as it once was.
That means respecting customers and listening to their needs and wants.
It also requires re-motivating employees - morale at IBM is reportedly not very high.
It also means common sense decisions that don't marginalize customers or their investments in IBM.
As a case in point, when IBM sold off BladeCenter to Lenovo, they took down all of the IBM
salesmanual pages for any non Power Systems Blades (something they had never done before).
Consequently, a customer looking for compatible FCs for a specific blade was just met with a no results page.
We pointed out to IBM that this would likely piss off a lot of IBM customers if they just needed
reference info, but we were told to mind our own business. IBM simply couldn't care about the
negative impact on customers. We have many more examples.
So where does this leave us all with IBM?
Personally, I still think IBM is a good company with excellent technicians and
innovative people. IBM's commitment to R&D and future development is unquestioned.
What I do question is the competence of IBM's senior management, not only for their lack of
customer consideration, but also for their lack of understanding of exactly what IBM represents
historically as a brand.
Many, many years ago, I came across a poster. It said:
"Customers are not an interruption to our work. They are the reason for our work."
If IBM are serious about a resurgence, they could do a lot worse than to bear that in mind.
The comments expressed here are the personal opinions of Gary Rockley.
Gary has been involved with IBM's Mid-Range platforms for over 27 years.
Comments and feedback are welcome. use info@ to send an email.