The switch to CMOS changes all the rules on residuals – at the customer’s expense
There is no longer any reason to doubt how much IBM has changed. It is making money for the first time in years. And it is renovating its mainframe product line from end to end. The first of these items is giving IBM’s customers (as well as its shareholders) renewed confidence. The second may be pleasing mainframe shops that feel progress in large systems is long overdue. But at the same time, the new IBM is going to cost them a wad of money. IBM’s progress has come at a high price, and users are just now getting their part of the bill. The multi-million dollar mainframe complexes that sit at the heart of large enterprises are rapidly losing their economic value. IBM’s last generation of equipment is quickly being replaced by much less costly and substantially more advanced technology. If IBM didn’t get its CMOS computers, disk arrays and sundry other gadgets into the market, it would probably be at the brink of bankruptcy. And if IBM didn’t become a price leader or at least a company seen as providing good value for money, all the clever technology in the world wouldn’t bring it enough business to survive. But mainframe shops aren’t used to rapid progress, not when it means that installed equipment depreciates at a frightening rate. Moreover, until the introduction of its CMOS processors, IBM offered mainframe users upgrade paths that for the most part masked the depreciation of older hardware. The mainframe disk business has had more volatility than the processor segment, but the transition to disk arrays is nevertheless an unusually big jump. Additionally, IBM’s bundling of hardware, software, maintenance, financing and an upgrade as it sells 9672-R machines is a radical departure from the company’s recent practices. It is forcing equipment owners to look not only at current pricing, which is aggressive in itself, but also at the prices that 9672s and their software will have later this year when the IBM’s second generation of S/390 chips becomes available. The look ahead is mand atory, as is the purchase of the upgrade by every user who signs up for the 9672 deal. With the upgrade, the resultant system and its software will be twice as capable; without it, the machine’s value will be cut nearly in half as others upgrade. This new, rapid pace of change may not be much fun for mainframe users, and it probably isn’t for IBM either. But it is, apparently, the only option IBM believes it has. And just as IBM has had to change its ways, so must its customers.
Allen Schwartz, 61, Judge Edelstein’s successor on IBM’s case, is a tyro
The battle over the 1956 consent decree will soon resume. A new judge, Allen G Schwartz, is on the job. On January 17, IBM succeeded in its effort to have the case taken away from Judge David Edelstein. In mid-February, the Federal Court for the Southern District of New York assigned the matter to Judge Schwartz who, though 61 years old, is a newcomer to the bench. Schwartz was appointed on January 12 1994, having previously been in both private practice and public office. During the first term of New York’s former mayor Ed Koch, Schwartz was Corporation Counsel. Schwartz is a native New Yorker, born in Brooklyn, although he now resides in the suburban village of Rye. He is a graduate of City College (class of 1955) of New York and the University of Pennsylvania’s Law School (1958), where he was the research editor for the Law Review. During his career in private practice, he was most recently a partner in the New York law firm Proskauer Rose Goetz & Mendelsohn. In short, he brings to the bench a solid academic background and a distinguished career. It is very possible that he was assigned the case because of the recency of his appointment. During their tenure, federal judges build up a backlog of cases that just never seem to end – cases like the 1952 government antitrust case against IBM that still lingers on in the form of the 1956 consent decree. Schwartz could not have acquired a h
uge legacy of persistent cases during his one year on the bench, and he therefore may have more time and energy to devote to the complex of issues surrounding the 1956 consent decree. So, ironically, his lack of experience as a judge may actually be of benefit to all the parties (and to the interested public) because Judge Schwartz should be able to infuse the matter with both a fresh point of view and the energy and devotion the issues demand. It is very difficult to say how long it will take the judge to study the matter now before him, sort through the relevant aspects of the record and read the materials that IBM and various parties in opposition will present. It’s a difficult job and one that casts the jurist in an important but unenviable historic role. – by Hesh Wiener. From the March 1995 edition of Infoperspectives International, published by Technology News Ltd, 110 Gloucester Avenue, NW1 8JA. (C) 1995 Technology News Ltd.
