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November 30, 1987

IBM LEASING COMPANIES RAIL AT NEW IBM MAINTENANCE POLICY: ONE MISTAKE TOO MANY?

By CBR Staff Writer

IBM’s new maintenance policies, which take effect in the US today, and are expected to be extended to Europe in the early part of next year, have been greeted with a storm of protest by leasing companies that quickly spotted their negative implications for themselves and for users in general – and when users wake up to the implications of some of the changes, IBM is not likely to find the changes greeted very warmly either. CertifiedOn November 3, IBM decided to send countless millions of dollars of its old equipment, hard at work in users’ offices, to the glue factory. Effective December 1, most IBM equipment must be certified for future maintenance when it is deinstalled. IBM reserves the right to seal its products so they will not be touched by the unclean hands of non-IBM technicians. This slightly complicated policy will not affect all machinery. Only processors that have to be reconfigured, peripherals that have to be refurbished and terminals that need an overhaul will be affected. IBM is making a charge of one month’s maintenance to inspect and certify equipment slated for removal so that it can qualify for IBM service at its next home. Moreover, IBM has printed its maintenance acceptability letters on bio-degradable paper: the letter loses all value in six months, after which another month’s maintenance charge has to be paid, affecting any machines that are still in the warehouse and have not found a new home after six months. And users will have to pay for this new policy. Every lease requires the lessee to do what it takes to ensure that leased equipment is eligible for IBM service when the deal ends. This means that the lessee will have to obtain (or pay the lessor to obtain) the appropriate health certificate from IBM. Owners of IBM equipment have the same obligation, but it will be enforced by the market, not a contract. Old machinery, some of it not worth a lot more than a month’s maintenance, will simply drop out of the market. Any investment vehicles based on this gear will cease to generate income. Financing techniques that depend on the possibility that gear will have a long useful life will no longer function. At the same time imposed this new policy on users, it also announced what amounts to a 30% cut in maintenance charges. Most IBM equipment will henceforth get seven-day, 24-hour service for the fee that formerly provided coverage only during normal business hours. This change will cut costs at the big shops that run their machines evenings, nights and weekends. IBM also said it will not generally provide per-call service during off hours. For icing on the cake, IBM decided that it would install, for free, certain equipment users remove when they buy new IBM iron, provided the reinstallation occurs within six months and if certain other conditions are satisfied. Combined with the Maintenance Acceptability Amendment policy, IBM’s policy shift will put the squeeze on third-party service organisations. The ruckus caused by the November 3 announcement has not yet died down, and a second wave of complaints may be building as users get the message that was immediately apparent to third party lessors and dealers. IBM sprung its service policy plans on a convention of lessors. Shortly afterward, the company got a pile of letters from disgruntled third parties who just happen to be the company’s largest customers. IBM then backed off on some of the implications of its initial, ambiguously-worded announcement. For instance, at first it looked as if IBM wasn’t going to let its service people show up on weekends to help install mainframes put in by third parties, because it provides such service on a per-call basis. That stance seems to have gone by the wayside. IBM may also backpedal on a couple of other disputed points; it has already sent a long and somewhat apologetic letter to lessors. As far as we can tell, however, the company hasn’t sent a similar explanatory letter to users. This change in service policies is just another of the questionable moves IBM has made over the past couple of years.Indeed, it

could be argued that IBM has been positively helpful to its competitors of late. In the mainframe arena, Amdahl and NAS have come back to life after years of near dormancy. Tandem’s prospects have never been brighter, nor have those of other makers of transaction processing machines. There’s been a boom in scientific computers unprecedented in history. Similar joy can be found in the mid-range market, where DEC has succeeded in selling $10 billion of goods and services while IBM was looking the other way. IBM’s strategy was to allow the S/3X a siesta and boldly push forward with the 9370, which increasingly looks as if in its role of VAXkiller, it has hit the market like a led balloon. In the personal computer business, prior IBM regimes invented both the mass market and a standard architecture – and successfully shook the likes of Columbia Computer Products off its back – the picture is very altogether different. While Microsoft fiddles to get the hard parts of OS/2 right, Compaq is burning up the market with top-end machines that adhere to the old standard, and an army of clonemakers give a grateful vote of thanks that IBM has abandoned the volume end of the market to their offerings, while Apple has leaped through the window of opportunity presented by the gap between PS/2 promise and performance to establish the Macintosh in the minds of users as a serious business machine – a feat that, two years ago, most pundits were earnestly swearing was impossible. Full confidenceNo company can avoid making mistakes, and IBM has made its full and fair share of them over the years. But until 1985, it was able to cover them up by growing profits and turnover 20% to 25% a year. Few were prepared to question the company’s policies in the face of that kind of performance. But the company slammed into the buffers in 1985, and it is by no means clear that the train is back on the rails even now. On November 23, as noted (CI No 817) the monumental and influential Wall Street Journal ran a lengthy article shot through with a deeply pessimistic undertone. It is wildly unfair to blame all IBM’s problems on the current helmsman – the failure to keep DEC at bay for example can be traced right back to the failure to get the 8100 right. But alongside the main feature, the Journal ran a profile reviewing with great admiration IBM chairman John Akers’ career. In combination with the downbeat discussion of the IBM outlook, the profile looked like nothing so much as one of those assurances from the football club chairman who after a string of defeats declares the manager has the full confidence of the board.

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