Some Things Get Better with Age

1998 has been a heady year in AS/400 land. The platform is marking its 10th anniversary by posting its best performance numbers ever. During IBM’s Q3/98, the AS/400 again posted solid double-digit revenue gains making it four strong quarters in a row.

Key IBM executives like Tom Jarosh, general manager of AS/400 Brand, have good reason to expect this trend to continue through the first half of next year.

In October, I met with Jarosh during the Common seminar and expo in Anaheim, Calif. to get a “state of the union” on the AS/400 market.

According to Jarosh, the number of AS/400 shipments during 1998 could reach beyond 75,000. The 80,000-shipment range is within striking distance. I believe the last time the product line did this well was in 1995 with the 64-bit RISC announcement when IBM shipped an estimated 70,000 AS/400s – net new and upgrades – from its factory in Rochester, Minn.

Using IDC’s 1997 estimates for IBM’s AS/400 server revenue as a guide, a $5 billion year for the e-Series is a real possibility. This $5 billion is only in AS/400 hardware sales and does not take into account peripherals, software, services and support revenues generated as the result of those sales.

“We are not milking this business,” Jarosh pointed out. “We are investing tens of millions over and above what we planned for research and development.”

So, is that R&D paying off? Judging by the performance of the AS/400 in six targeted areas that it deemed important to conquer in 1998, I would say “Yes.” And while IBM is at it, the company should throw another $10 million into the R&D pot. Didn’t someone once say, “$10 million here, $10 million there and sooner or later it adds up to real money.”

Looking at the six targeted areas, Jarosh noted that business intelligence revenues had doubled year to year for the AS/400. “It’s hot,” he said.

Jarosh said he was also pleased with where the server consolidation effort is going. With more customer education on how and why to do migrations and forthcoming technologies like logical partitioning coming with V4R4, this area can only improve.

While the AS/400 is having some success as a Web server (just ask some ISPs who are using it), e-commerce is moving much slower than IBM wanted. “E-commerce is getting put on the back burner,” Jarosh conceded.

The AS/400 represents about 10 percent of all Lotus Domino servers sold. According to Jarosh, Domino sales on the AS/400 have already eclipsed that of the total number of sales on Unix. However, of significant note, 25 percent of Domino sales on the AS/400 are to new AS/400 customers.

New customers are also flocking to the AS/400 Custom Servers to solve their ERP needs. Jarosh estimated that 40 percent of all Custom Servers are going to new AS/400 accounts.

So where does the AS/400 go from here? With a double-digit increase in its marketing budget, the AS/400 is on a tear that will be hard to stop. Like Jarosh says, “If you need to do serious business, do it on the AS/400.” Some things never change.