IBM finally has one up on Gateway 2000. Starting this month, corporate buyers can page through IBM’s new direct mail catalog and pick out the mainframe computer of their dreams. No, they can’t buy a $1 million item over the phone. Not yet, anyway. But this shows IBM’s often-maligned mainframe division has abandoned its traditional plain-vanilla marketing approach for an in-your-face style aimed at transforming its dinosaur image.
And here’s the surprise: It’s working–at least to some extent. “Two years ago, it was politically incorrect for an IS guy to recommend buying mainframes to his boss,” says IDC Research analyst Steve Josselyn. “Now it doesn’t have the same smell to it.”
In fact, the scent is getting downright sweet. IBM’s numbers show a 60 percent increase in mainframe MIPS sold last year, allowing its System 390 revenues to remain steady at $5.9 billion despite sharply falling prices, according to analysts. More promising yet, preliminary results of an IDC survey among IS sites using mainframes and Unix servers show that a full 40 percent of new programming projects are planned for the mainframe. “This shows that customers recognize the 390 plays a role in the new paradigms–client/server and the Internet,” says Linda Sanford, the division general manager.
How did Big Blue breathe new life into old T. Rex? It started quietly three years ago, after declining mainframe revenues and the emergence of client/server computing set off alarm bells in Armonk. In keeping with CEO Lou Gerstner’s focus on solutions, IBM set up a customer advisory council to review proposed strategies and products. “If they gave us a thumbs down, it was back to the drawing boards,” says Sanford. The goals that emerged were straightforward: One, bring down the total cost of mainframe hardware, software and administration to be competitive with Unix systems; two, open up the architecture to operate better in a heterogeneous environment.
The IBM mainframe has made measurable progress in both directions. The switch from bipolar to CMOS CPUs helped lower the price per MIPS by 35 percent last year, according to IDC. And, just last month, IBM started shipping OS/390–which runs both MVS and Unix applications and integrates 29 products that were previously sold separately. In the meantime, through all these changes, mainframes retain their advantages in reliability, availability, security and data integrity.
In tandem with these moves, IBM set about spiffing up the mainframe’s tarnished image. For starters, it tried changing the name. Henceforth, mainframes were to be called “enterprise servers,” reflecting what IBM sees as their new role as a super server in distributed computing environments. To make the message stick, Sanford (who was promoted to GM 18 months ago) set out on road trips to lobby customers and ISVs. IBM had the moxie to set up a mainframe booth at that bastion of PCs–Comdex. And it extended sales beyond the blue-suited field sales force. The company started a telephone sales operation to qualify leads. And, just now, it has begun selling low-end systems through VARs.
Another big change was advertising. Before 1994, there basically wasn’t any. But the world had changed, and so would IBM. With the help of Ogilvy & Mather, which became IBM’s worldwide ad agency two years ago, Sanford delivered a series of pugnacious pitches. For example, last month, the company ran a full-page ad in the Wall Street Journal in which it printed a small, fake “correction” of news stories predicting the demise of the mainframe. This approach is applauded by marketing guru Jack Trout, principal of Trout & Partners in Greenwich, Conn. Confronting a negative directly is a proven tactic among consumer products companies. (Think of Listerine, “The taste you hate twice a day.”) Trout approves of IBM’s new “enterprise server” characterization, too. “It’s the old story,” he says. “If the man wants a blue suit, bring out the blue light–if the man wants a server, bring out the blue light.”
Another way IBM shines its blue light is through partners. A little over a year ago, Sanford set up the System 390 Association–initially 100 ISVs. Now membership tops 750, and many of the new additions are Unix-oriented developers such as SAP, Oracle and PeopleSoft. REAL Enterprise Systems Products, a midrange consultant in Woodland Hills, Calif., moved upstream to the mainframe. EVP Dave Wolff is so gung-ho that he’s even having T-shirts made for his sales force and customers with the “correction” ad printed on them.
The mainframe’s return to respectability has some loyal customers cheering, too. Take Dennis Erskine, vice president of software development at Holiday Inn Worldwide, based in Atlanta. The company still runs its reservations system and financials on mainframes. An attempt to off-load data to Unix servers ended up being too costly, says Erskine. Now, Holiday Inn is housing its intranet applications on one of the mainframes. That will qualify it to post IBM’s new “Powered by 390” logos on its Web pages. Erskine clearly appreciates symbolism. A poster in his shop shows T. Rex tearing the guts out of a Unix server. The headline: “We’re back and we’re pissed.”
But for all the new bravado surrounding the mainframe, there’s plenty of momentum going in the other direction. Hewlett-Packard CEO Lew Platt two weeks ago made a major production of personally unplugging HP’s last mainframe. And Microsoft Executive Vice President Steve Ballmer scoffs at the enterprise server label. “That’s sleight of hand,” he says. Mike Nash, Microsoft’s server products manager, says he doesn’t see the mainframe fading fast. But he says it’s an awkward fit on client/server networks. “It’s not designed to be open,” he says. “It works well with monolithic, vertical apps.”
Analysts tend to agree that the mainframe’s role will be limited–mostly to transaction-oriented applications. Dataquest predicts revenues for mainframes will drop off at a compound rate of 5.9 percent per year from 1994 to 1999. Because of price/performance improvements, IBM has to sell 65 percent more mainframe MIPS a year just to stay even on the revenue side. IDC has a slightly brighter picture–forecasting flat revenues for the rest of the decade. But growing sales “is going to be tough,” says IDC analyst Steve Josselyn.
Sanford is counting on her marketing efforts to prove them wrong. And she’s getting help from some unlikely places. For example, her Net-surfing son, Billy, a high-school senior, critiques her speeches and the monthly letters she posts on the Web site. “He helps me through this as we shed the stodgy stuff,” says Sanford. IBM getting hip? Well, that’s one way to get rid of the dinosaur image.