AS/400 - Mean machine

The AS/400 has been reconditioned and has opened up the race to control the server market at both the high and low end.

IBM has boosted the performance of its AS/400 system, bringing itontrol the server market at both the high and low end. into the Formula One class competing against its own and other mainframes at the top end, while at the bottom end, it retains its Go-Kart type ability to compete with the PC.

The AS/400 box comes equipped with a PowerPC chip that offers a 90 per cent improvement in performance, according to the manufacturer. The models have 40Gb of main memory and 2Tb of storage capacity.

Big Blue has briefed customers, resellers and consultants on the development of the AS/400, which seems to indicate that it will compete at the top end with its mainframe and at the bottom with the PC-based servers.

IBM has always existed as a company that relied - some would say thrived - on a degree of internal competition: low-end mainframe machines versus high-end mid-range systems, low-end mid-range against high-end PCs, Risc-based Unix boxes against proprietary offerings. What has changed the pattern is the growing convergence and increased power and performance of the smaller machines.

Officially, the contentious wars between the different divisions of IBM - mainframe, mid-range, AS/400 proprietary and RS/6000 Open Systems, and PCs - is over. Earlier this year, Big Blue decided there should be a single server unit - IBM Systems Marketing - comprising the System/390 mainframe, AS/400 and RS/6000 and Netfinity PC-based systems. In addition, all networking hardware and storage products were brought into the server division.

In theory, all the products were being sold as one big happy family.

'We no longer have one sales force selling the RS/6000 and another the AS/400,' says Nick Davies, server strategist at IBM. 'The sales staff go in and sell whatever system is appropriate. It would be illogical to sell someone a farm of PC servers to run an application that's better suited to a larger system.

'I'd like to say all the old internal rivalries have been eliminated but that would not be true,' he adds. 'People still have their preferences - Unix, for example - and it will be some time before the divisions have been totally ironed out.'

IBM has also made changes to the channel structure in an effort to broaden the server base. Currently, 60 per cent of server products - mainly PCs and RS/6000s - go through the channel. In the past, an AS/400 Agent added value to a box without ever formally having bought one and made its money from taking a percentage of the IBM sale.

An RS/6000 or PC reseller was essentially a dealer, purchasing the hardware from IBM, adding software communications and whatever other features they deemed profitable and selling the system. The S/390 was traditionally sold by IBM's direct sales force until two years ago. In 1996, IBM introduced the Multiprise 2000, a low-end to mid-range mainframe, which was to be sold by resellers. PCs, whether servers or clients, were sold by dealers.

But IBM's broadening of its channel strategy to encompass all the server packages has not met with universal channel approval. As Kevin Drew, managing director of the Triangle Group - which sells both the AS/400 and IBM PCs - says: 'I am against IBM's channel strategy. It is throwing too many boxes at the resellers and all that does is make people lose focus.'

Triangle has decided not to broaden its base by becoming an RS/6000 reseller: 'Just putting in more platforms can upset the apple cart,' Drew says, although he does not rule out moving over to the RS/6000 in the future.

But Drew believes that the latest IBM announcements mark the culmination of a long-term plan to boost the AS/400 as a server product for both its traditional market and the SME market.

'The AS/400 is the best kept secret in the industry,' he says. 'These latest announcements are the culmination of a five-year development cycle.

IBM has woken up to the way the industry is going. It tried to turn the AS/400 into a PC, but we said we did not need to go into the PC space.

We have to head it off at the pass.'

But the AS/400 not only represents a threat to IBM's other divisions, it also presents a challenge to outside competitors such as Hewlett Packard and Compaq. Since the incorporation of Digital into Compaq, HP has been the standard bearer of the mid-range system. Even before Digital fell victim to Compaq's takeover, HP had superseded it as the number two player in the hardware stakes second only to IBM.

One of its target markets was the AS/400 user base. HP had adopted an Open Systems strategy much earlier than most of its competitors. Digital was still pushing its proprietary VMS operating system, while IBM was pushing MVS on the mainframe and OS/400 on the AS/400, both proprietary environments. HP offered an Open Systems package to IBM's customer base, many of whom were shifting applications off their mainframes and might otherwise have gone for an AS/400.

HP faced the AS/400 head on in the mid-range midriff and Compaq began snapping at its ankles. The growing power of Compaq servers meant it was able to offer systems of comparable performance to the low end of the AS/400 with a huge base of available PC software.

Last year, Compaq began a campaign to win over IBM's AS/400 business partners to strengthen its presence as an enterprise server supplier.

For HP and Compaq, the AS/400 market stood waiting for the plucking. With an estimated 500,000 systems installed worldwide, the pickings looked good.

According to Davies, IBM sees Compaq as its main competitor in the lower-end server space. HP has recently run into the sort of problems that IBM itself encountered in the early 1990s with declining sales and profits.

'Compaq is our main competitor now HP is all over the floor and we have to start pricing against Intel-based systems,' he says. 'But the real question is what the actual cost of a system is and how quick and easy it is to get your users up and running.'

Davies believes that Compaq's purchase of Tandem was to enable it to get its hands on that company's high-availability, fault-tolerant technology to better attack the server market.

He adds that the AS/400 has a number of clear advantages over Compaq and other PC packages. It already has systems management tools and high availability which still have to be adopted in the PC world.

The AS/400 also has the DB2 database embedded into the operating system, obviating the need to purchase a database from a third party which sends up the cost of a PC-based server system. 'The AS/400 has always been easy to use and easy to set up, whereas the PC and RS/6000-based systems need customisation,' Davies points out.

But HP, Compaq and similar competitors are not the only targets of the AS/400. IBM's mainframe and PC divisions are also in the line of fire.

Phil Payne, director of UK consultants Isham Research, goes so far as to believe that IBM is positioning the AS/400 as its next mainframe product, virtually a replacement for the System/390. 'I think IBM's large system of the future is the AS/400,' he says.

Payne believes IBM is positioning the AS/400 close to the very top of the System/390 tree: 'For many years the AS/400 was constrained. You couldn't buy a really big machine. If you wanted something large you had to buy more AS/400s or move to S/390.

'Now IBM is adding mainframe-style features to the AS/400 to improve reliability and security,' he adds. 'The single biggest image of the AS/400 has grown by a factor of 28. You can now have a 12-way machine and I've been told by IBM that when they put 12 engines in a single box, there is only a two per cent degradation in performance. If you do that with a S/390, you lose between a quarter and a third.'

There is further evidence that IBM sees the AS/400 being a significant strategic box in the space now occupied by the mainframe, Payne says.

CICS, IBM's teleprocessing monitor, which is used by many mainframe users involved in online transaction processing, has gradually become more important on the AS/400.

'There isn't really a good CICS benchmark but to have one, you need to simulate 36,000 users. The AS/400 carried out a benchmark which simulated 35,200 users very close to the top of the mainframe,' he adds.

Payne identifies other reasons why the AS/400 may eat into mainframe sales. One of the main ones is IBM's software licensing policy. Unlike PC software which is purchased outright, mainframe software, such as IBM's DB2 database or software from third parties such as Computer Associates, is licensed on a monthly basis.

Until recently, the licences were based on the size of the processor - the bigger the box, the higher the licence fee. This could mean the customer paying a hefty monthly licence for a piece of software that's only used by a handful of users out of several thousand.

The AS/400 licence is on a per seat basis, a distinct advantage, Payne believes. 'IBM has lost control of the software pricing algorithm and failed to bring the ISVs into line,' he claims. 'Most large sites have software from about 30 ISVs with roughly 90 products. You only need one of them to consider the site to be a cash cow and you have a problem.'

In contrast, Big Blue has almost total control of the AS/400 market.

The third-party database suppliers have little or no chance of penetrating the market because of the system's internal database. The box is relatively easy to use compared to a mainframe, does not need an army of system support staff and IBM remains in control of storage.

Drew believes IBM is planning a European-wide marketing and promotion campaign. It is already targeting the SME market with its e-commerce products, of which the AS/400 plays a key part.

Triangle's average AS/400 sales are for systems between £50,000 and £100,000 but occasionally, they move into the million category. But it also offers the system as an alternative to the PC-based Lan where it is comparable on price performance with the desktop box.

Without doubt, the AS/400 opens up opportunities for resellers of all shapes and sizes - if they are willing to grasp the nettle.

AS/400: BETTER LATE THAN NEVER

IBM came late to what used to be the world of minicomputers, just as it was a late entrant in the PC world. Companies such as Digital, Hewlett Packard and others were already active in that market.

Big Blue saw no need for minicomputers because of its dominance of the mainframe market, which provided huge profits. Almost as an afterthought it produced a number of small business systems in the 1970s more as a sop to its mainframe customer base than as a serious attempt to penetrate the mid-range market.

But its System/34 minicomputer proved to be extremely popular and IBM woke up to the fact that this could be a profitable sector.

In the late 1970s, the vendor introduced a technologically advanced minicomputer - the System/38, one of the two parents of the AS/400.

The machine incorporated object orientation features, although the term was not used in 1978.

Big Blue did a poor job of marketing the system. It was well over a year after its launch before Cobol, the standard language of business computing, was available for the machine.

But it was the System/36, the AS/400's other parent, that opened IBM's eyes to the potential of mid-range computing.

The System/36 was the replacement for the System/34 and billed as Big Blue's departmental machine for mainframe clients.

However, they greeted the machine with a resounding shrug of total indifference. Not so the SME sector that was gradually becoming aware of computerisation - it welcomed the box with open arms.

Like the AS/400, it was relatively inexpensive, easy to use and did not require a massive IT staff.

Ten years ago, the System/38 and the System/36 were replaced by the AS/400 and although a decade is a long time in IT terms, the machine remains a money-spinner for IBM and its resellers.