IBM gets a green streak

IBM is wooing long-time AS/400 server customers with deals that will let them upgrade to two specific new iSeries Server models at 50 per cent off the list price.

The offers, being made on IBM's low-end model 270-2433 and high-end model 820-2436 iSeries Servers, will cut the cost of the machines from $US47,000 to $23,000 and $110,000 to $55,000, respectively.

The discount applies to the interactive features of those iSeries models, an IBM Australia spokesperson said.

The iSeries machines replaced the AS/400 line in October 2000.

David Bruce, IBM's worldwide iSeries product marketing manager, said the program will let customers upgrade their machines to gain better performance with their existing Unix applications. The machines run IBM's OS/400 operating system on Power III processors and use dynamic logical partitioning so users can run native iSeries applications, Linux, Windows 2000, Windows NT and Unix applications simultaneously in their own partitions.

IBM is also offering discounts of up to 38 per cent on additional software such as IBM's WebSphere or software subscription packages, according to Bruce.

Bruce said the move arose from customer requests and is aimed at driving additional sales. It shouldn't be seen as an indication that IBM will make drastic changes to its continuing AS/400 support, he said.

"Certainly we're in business to do whatever we need to do to spark sales," he said. "It is not something that is any sort of response to earnings activity or the economy."

The program, called "Green Streak" inside IBM because of the push to replace old green-screen AS/400 systems, covers purchases installed by December 31. IBM has conducted similar upgrade programs in the past, Bruce said, but this is the largest effort to date for the iSeries line. IBM has sold about 750,000 AS/400 and iSeries machines; about 475,000 are still in use by about 210,000 active customers, he said.

In Australia, 50 per cent of IBM's server customers are IBM business partners. The remainder are end user organisations that buy from IBM resellers and distributors, a company spokesperson said. Details on the number of AS/400 customers in Australia were not available at press time.

IBM said more than 100,000 AS/400 systems in the US and another 250,000 around the world qualify for the upgrade program.

Analysts say the move makes sense for IBM in terms of potential sales as well as for customer goodwill.

Giga Information Group analyst Brad Day said the program could also help IBM minimise its support costs for older, out-of-production AS/400 machines if it can get users to migrate to the newest servers. And the increased server sales certainly wouldn't hurt the company's bottom line.

"ISeries revenues have been pretty flat over the last year," he said.

According to Gartner, last year IBM's Asia Pacific revenue for the iSeries line was around $US274 million. Australian sales represented $US71 million of total regional revenue for the iSeries, Gartner analysts said.

Meanwhile, Day said the servers do offer good consolidation platforms and top-notch dynamic partitioning capabilities, which are benefits to users who want to reduce their IT infrastructure and costs. "To the extent that you can sweeten the pot . . . that's going to be very important" to user companies considering the upgrades in today's tight IT market, he said.

IBM has done similar migration programs before, successfully, Day said.

Charles King, an analyst at Sageza Group, said the program comes at a time that's traditionally the slowest in the IT industry in the US. "It's a good way for IBM to perk up interest" while offering existing AS/400 customers an economical way to stay with the proprietary platform over cheaper Intel and Windows-based machines.

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