Analysis: Behind Big Blue’s System i Reshuffle

The reorganization could revitalize a System i business that is in need of a jumpstart, analysts say.

Last week, IBM tinkered with its stalwart System i (formerly iSeries and AS/400) midrange platform, announcing the formation of two new business units designed to focus on the needs of small- and medium-sized business (SMB) as well as enterprise customers. The reorganization could help revitalize a System i business that—at the very least—is in need of a jumpstart, analysts say.

First, IBM says, its new System I Business Systems Unit will be responsible for SMB-focused solutions, a category that includes System i products such as the i515, i520, i525, and i550 servers. Big Blue’s enterprise division—dubbed the Power Systems unit—will feature the entire System p line, along with IBM’s high-end i570 and i595 offerings. That group is slated to launch IBM’s first POWER6-based System i offering later this quarter.

Veteran industry-watcher Charles King, a principal with consultancy Pund-IT, says he’s encouraged by Big Blue’s System i reshuffle. For one thing, he says, the industry status quo that characterized the AS/400’s launch in 1988—when that platform was developed wholly internally and incorporated features that made it one of the industry’s most advanced business computers—no longer holds true.

“[T]he server business is considerably different today than it was nearly two decades ago. This is particularly the case among the smaller organizations that were IBM’s original AS/400 target audience—where SMB owners tend to follow a line of least resistance, focusing more on short-term pricing concerns than long-term performance features,” he points out.

Elsewhere, King continues, enterprise customers tend to grapple with a different set of issues: “Larger businesses also have a much wider range of computing choices and decisions than ever before. With these changes and competitive pressures in mind, where, exactly, does the System i fit?” One strategy, he points out, is for a vendor to following either a product-focused or a client-focused path. “In the former, a platform’s key features can be paired with complementary applications and workloads. IBM’s System i IP Telephony Express offering is a good example of this approach,” he observes.

A Customer-Focused Approach

“The System i’s notable stability and virtualization capabilities make it a great choice for supporting a highly flexible and reliable business-critical communications solution.” Big Blue’s System i reconfiguration takes a different tack, however.

“Taking a broader, customer-focused approach to server solutions, as IBM is doing in its new Business Systems and Power Systems organizations, offers potentially greater and deeper benefits to vendors, their partners, and, most importantly, their clients,” he argues.

For this reason, King says, IBM’s System I reshuffle is long overdue. “Given this reality, IBM’s new Power Systems and Business Systems organizations make great … sense. For larger companies, access to a single organization focused exclusively on Power-based enterprise-class systems could notably simplify and ease purchasing, service, and support processes,” he notes. “For SMBs, an organization that focuses on their specific needs should enhance their IT options and also heighten IBM’s standing as a small business vendor.”

The burning question, King ponders, is how the System i faithful will perceive the move. “For larger companies, the benefits of the Power Systems organization [are] clearly apparent: increased options, decreased complexity, and streamlined relations with channel partners and ISVs. Overall, the potential for improvement and IBM’s history of successfully executing such efforts seem clear. The picture is a bit murkier for System i SMB clients, whose IT conservatism tends to make them regard any sort of change with suspicion.”

For such customers, King counsels “patience and caution”—or forbearance, at the very least. “Over time, we expect that IBM’s Business Systems solutions, particularly those leveraging i5/OS, will expand significantly, thus offering expanded opportunities to System i users. More importantly, IBM’s decision to drive its new business units with System i indicates the depth of the company’s commitment to the platform and its user community.”