It has been 16 years since IBM broke with corporate tradition and appointed third-party resellers to market its PCs. In its latest move, the company has startled the IT world once again by declaring that it will start selling mainframes through distribution and dealer channels. If the 1981 decision to sell PCs through the channel caused a ripple of shock to run through the IBM world, then the decision to sell System 390 mainframes is of earthquake proportions.
In reality, IBM has been steadily moving towards third-party distribution for the past decade. The Unix-based RS/ 6000 and the mid-range AS/ 400 boxes are already being sold through the channel. The top end of these products is more powerful than the lower models of the S/390.
The entry-level price of the smallest S/390 is around u40,000, but at the high end a customer can pay as much as a few million for the processor and storage devices attached to it. Although mainframe prices have fallen in recent years - in the late 1980s the IBM list price of a mainframe disk controller was around u125,000 - the price of these devices still far exceeds most reseller budgets.
IBM is cautious about its plans for selling mainframe systems through the channel, but concedes that some of the smaller systems may well be marketed by third parties.
The company has always considered large blue-chip companies as the mainframe's natural client base. Banks, insurance firms, airlines and other institutions that have a need for large transaction throughput and terabytes of storage were thought to be the natural constituency for the IBM salesperson.
But in April, Big Blue signalled a change of direction when it announced a package of hardware and software products designed to attract smaller businesses.
The IBM statement claims: 'With its total solution concept, affordable cost of computing and open client/server and network-ready attributes, the S/390 is an attractive platform for all types of businesses, not just Fortune 1000 companies.'
A NICE TRY
The key product announcement was a release of IBM's virtual storage extended/enterprise systems architecture (VSE/ESA), the operating system for mid-range S/390 machines. IBM would have preferred its customer base to migrate to its principal mainframe operating system, the MVS, but many users were reluctant to comply with the company's wishes and as a result IBM has been forced to breathe some life into VSE/ESA.
Xephon, a UK consultancy, accurately sums up IBM's positioning on VSE in The Handbook of IBM Terminology. The guide states that IBM has spent a large amount of time and effort trying to coerce VSE users on to the more resource-hungry MVS family of operating systems. But thanks to user pressure and the apparent impracticality of an entry-level MVS, the company has repositioned VSE as a strategic transaction processing environment for the mid-range 370.
Nick Drabble, IBM marketing manager for the S/390 product family, confirms that the company is looking at distributing the mainframe systems through the channel. But according to Drabble, it is unlikely that the larger machines will be sold through resellers. 'We would not think of asking Lloyds Bank, for instance, to buy its mainframe from a PC dealer,' he says.
There are a limited number of resellers that have the expertise to support a system as complex as the S/390. Distributor P&P, for example, sells HP 9000, high-end Digital Alpha and Vax machines as well as IBM RS/6000 and AS/400 systems, some of which are priced much higher than the low-end S/390 systems.
GOOD THINGS COME IN SMALL PACKAGES
Robin Bloor, chairman of UK consultancy Bloor Research, believes that IBM will opt for larger outsourcing companies as its partners rather than traditional distributors such as P&P, CST and Bytech which currently handle the RS/6000 range, AS/400 and other high-end systems.
'It makes perfect sense from a business perspective. EDS and the other major outsourcing companies have the expertise to provide the support that is required on a mainframe system,' Bloor says.
Mark Lillycrop, a director of Xephon, believes that only the smaller S/390 systems will be sold through the channel. In a bid to win new customers, IBM has repackaged the OS/ 390 and MVS so as to make them more attractive to mid-range users.
One of the key changes that has come about in the mainframe world is that the systems have become more environmentally friendly. In the days of the original IBM main-frames - the 360 and 370 architectures - the machines generated a great deal of heat. They were equipped with water cooling systems and had to be housed in specially constructed computer rooms. In effect, any customer investing in a new machine not only had to hire systems engineers and programmers but had to hire builders and plumbers to re-equip an installation.
COOL AS A CUCUMBER
Today's machines are air cooled and much smaller than their predecessors.
'You have to look at the original objections to the mainframe environment.
We are now running air-cooled boxes so the environmental problems are gone. The only remaining problem is the perception of the mainframe as a massively expensive box,' Lillycrop says.
In March, IBM announced that in 1995 it had shipped more large systems processing power than ever before. IBM based its measurements on the number of Mips, a scale of measurement judged by some industry observers to be a less than accurate way of assessing the raw processing power of a machine.
Some industry wags insist that Mips stands for meaningless indicator of processor speed. Even IBM rarely uses Mips to indicate performance measurement. It usually prefers to measure performance by using internal/instruction execution rate (IER) which is also viewed by some as an inaccurate method of measuring performance.
But IBM attributes the growth of mainframe sales to the introduction of the complementary metal oxide semiconductor (CMOS) technology, which essentially obviated the need for water-cooled systems and led to a reduction in the size of the systems.
According to IBM, its parallel enterprise server contains 80 per cent fewer parts, requires 90 per cent less energy, needs 96 per cent less system cooling, and takes up 75 per cent less floor space than the previous bipolar-based systems.
Thirty-two CMOS processors can be coupled together to form what IBM terms a parallel sysplex environment presenting them to the user as a single image. IBM claims the new high-end CMOS machines have delivered some customers a 65 per cent improvement in price performance.
The fact that the machines have become smaller, less expensive and no longer require water cooling may seem an attractive proposition to resellers wishing to branch into new markets. But there are still some hurdles to overcome.
NO WAY JOSE
The major problem for any reseller which decides to sell the mainframe systems will be in providing the skills and support to maintain the hardware and software. Those companies that already sell systems such as the RS/6000, HP 9000 and Digital Vax and Alpha boxes are usually marketing Unix-based systems.
In essence, they already have the pre-sales and post-sales support staff to handle technical queries from customers. But selling a mainframe system based around MVS or VSE/ ESA is a different matter.
Even some of the company's traditional suppliers of RS/ 6000 and AS/400 systems are daunted by the prospect of selling mainframes. CST, which is a distributor of Unix-based RS/ 6000 systems that sometimes cost up to u250,000, will not even considering the prospect of selling S/390.
Nick Leach, CST sales manager, regards the prospect of selling mainframes through the channel as logical, but said that the company had no plans to enter that market. 'It would not fit in with our business plans and we would not have the skill set to handle it.'
Other mainframe suppliers regard the prospect of selling mainframes through the channel as more than slightly bizarre. For example, ICL, which has its own family of mainframes and is owned by Fujitsu, has no plans to follow IBM down the reseller road.
TAKING A RISC WITH MAINFRAMES
'Our approach is to build long-term relationships with customers for systems of this complexity. The key is to keep a good relationship with the customer and I do not think you can do that with systems that have to be customised by selling through a third party,' says an ICL representative.
There is no doubt that the mainframe has got smaller and that some models are now only the size of a desk. IBM even has an S/390 on a chip which is slotted into a PC so that software developers can build mainframe applications based around MVS or VSE/ ESA. But that's a far cry from actually running mainframe applications on the desktop.
The company has also promised to deliver a hybrid Risc, the R/390, in the future. It plans to enable Windows NT users to run applications on the mainframe through a deal with Bristol Technology.
There has been a massive change in the world of mainframe systems.
IBM, like so many other suppliers, regards the machines as giant servers and is hoping that the growth of the Internet and intranet will breath a new lease of life into the mainframe.
IBM's spectacular losses of the early 1990s were due, in no small part, to the fact that many major corporations - those considered the natural constituency of the S/390 - blocked expenditure on hardware because of the recession.
At the same time IBM Enterprise Systems group, which is responsible for the S/390, was facing both external and internal competition from increasingly powerful Unix boxes.
Internally, the Unix-based RS/ 6000 was challenging low-end mainframes and the proprietary-based AS/400 was also a threat to the mainframe.
Both were being sold by third parties and outweighed the lower-end mainframes in terms of power and performance.
There is no reason why companies selling the AS/400 and RS/6000 should not also start to supply the mainframe systems. But there is a twofold drawback for resellers. First, they would need the logistics and skills to support the mainframe environment, and that could become very expensive.
Second, major corporate customers from, for example, the retail, banking and finance communities will probably still prefer to deal directly with IBM rather than a reseller.
If, as IBM is hoping, mainframes do eventually pass through the channel, then it is likely that only a few specialised resellers will be granted the approval to sell them, and even so, they will only be given permission to sell the low-end machines.
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