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April 22, 1987

CULT OF FEAR, UNCERTAINTY & DOUBT COMES BACK TO HAUNT IBM IN MAINFRAME BUSINESS

By CBR Staff Writer

One would think that the computer business, always rife with rumours, would learn to ride them out. But these days, with IBM expected to unleash a blizzard of new products, the rumours have not only caught the interest of the trade, but they have also affected the buying and selling of products, too. The most influential bits of gossip surround the large disk business. IBM is due, say wags, to announce a new top-end disk drive any minute, perhaps next week. Depending on which story one follows, the drives will have 7.5 or 10Gb of storage and will move data at 4.5 or 6Mb each second. Currently, IBM’s largest disks, the 3380-E models, store 5Gb and move data at a peak of 3Mb per second. The disks will come with new or upgraded controllers and will be linked to 3090 mainframes by fibre optic cables. Existing disks use 3880 controllers that have been around for several years and pump data through thick cables. For the record, reliable sources in the leasing business say that some new, large, fast disks and controllers are currently in beta test at selected user sites. Further, IBM’s software-compatible rivals already offer faster channels and disk subsystems than IBM. So the rumours may well pan out. The question for users seeking to manage data processing centres is when, not if, IBM will announce new storage. Uncertain about the value of IBM’s 3380-Es, the users have belatedly realised that IBM’s oldest 3380s, the models AA4 and B4, are bargains indeed. While these drives were available in the used market for $14,000 a unit only a couple of months ago, they now go for something like $18,000 apiece. Users who take the drives today may soon discover that they bought in a price bubble, but at present they have been mesmerised by the rumours. A similar situation prevails among IBM’s 3081 shops, which believe, as do many third party lessors, that new machines will cap IBM’s ageing mid-range mainframe group before very long. If IBM in fact makes its move, transforming gossips into gurus, some users are likely to line up for the systems. But the most sophisticated shops in the IBM market are taking another tack. They’re installing used 3081s, ignoring the 4381s and postponing consideration of the smallest 3090s. Evidence of this comes from the used 3081 market, which is essentially at the same point it was last December. Usually, used mainframes fall in price during the first quarter of a year, reflecting diminished demand. In the case of the 3081 purchases, users seem to be wiser than IBM or the rumour-mongers. It is hard to imagine any members of the 4381 family surviving more than two years before succumbing to the superior technology evident in the 9370 line.

New technology in Summit

While IBM has not promised any faster 9370s, competition from DEC makes their debut inevitable. The problem for IBM is that it might have to ditch the Thermal Conduction Module type of packaging used on 4381s in order to make a faster 9370, and this would lead to a certain amount of excess capacity in the plants that make components for the 3090 and 4381 lines. Further, if IBM showed superior component packaging in a high-end 9370, it might start more rumours. These speculative tales would have IBM using new technology at the top of its line, the so-called Summit range, that will succeed today’s 3090 family. In a market that takes rumours so seriously, IBM runs the risk that a display of new technology would make its customers sceptical about the long-term future of the 3090, eating into sales. So IBM, helped many times in the past by rumours and the atmosphere of fear, uncertainty, and doubt that they create, may now be forced to negotiate some of the very reefs and shoals that in the past sunk competitors. – Hesh Wiener

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