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  1. Technology
February 26, 1989


By CBR Staff Writer

In England live two veterans of the international computer financing scene, still young and vigorous despite the wear and tear caused by tons of money passing through their able hands. Having left the arduous but profitable leasing business, these hale fellows have embarked on new, appropriate paths. Their directions are no longer identical, even though they are brothers and well suited to work together if the spirit so moves them. The younger of these gentlemen reports that he has yet to find a metier as absorbing as his former career founding and building a multinational computer broking and leasing concern. As secretive as a silent flatulent in an elevator full of midgets, he nevertheless confesses one business interest that has begun to get his attention. A proven expert at a vocation in which one must run just to stay in one place, he has taken a small role in a company making exercise treadmills. We are completely confident he will achieve greatness in this new calling. The elder statesman of this distinguished family has gone in a direction that at first may seem quite distinct from his erstwhile profession. He has formed a partnership with a brilliant and charming entrepreneuse. Glamorous Soho Their venture – sited in the now glamorous Soho district that was once the scourge of Central London and a major vector for diseases of the indiscreet – is a New York-style delicatessen made world-famous by pluck, luck and a soupcon of flack. Having recently had the exquisite pleasure of visiting this splendiferous hash house and its proud restaurateurs, we can safely report that the philosophical thread running through our friend’s life remains unbroken. For as we consumed the exotic specialities proffered by the pasha of pastrami, the queen of quenelles and their victualer vassals, we found ourselves contemplating another feast: the scrumptious systems cooked up and served fresh by IBM… and the leftovers so artfully presented by third parties. Some of the refried bean-counting devices are so tempting that the computer epicure might reasonably prefer them to IBM’s nouvelle cuisine; it is one of those rare tastes for which there is accounting. Sadly, the five-star chefs in Armonk – whose oeuvre is the main course offered by purveyors of both new and recycled computers – cannot always enjoy the lasting qualities of their products. So driven are the IBMers to give their latest creations more flavour that they have now resorted to using a high technology equivalent of monosodium glutamate – Enterprise Systems Architecture. Every bit of architectural flavour provided by ESA could as well been offered in conjunction with XA. Instead, IBM has decided to butter up its customers even as it churns their installations. This is now a more difficult process because the vendor has already skimmed off a great deal of the cream at wealthy shops; the remainder of the base is wary of being milked. Knowing that its user base is less than perfectly trusting, on February 7, IBM began offering big concessions to its ESA prospects. Because the new operating environment takes advantage of – and is in fact terribly dependent upon – expanded memory, IBM dropped the price tags on the bushels of chips ESA sites will need. Expanded memory costs for 3090s were cut across the board. For example, a 64Mb block went to $330,000 from $370,000; a 256Mb block to $885,000 from $1,045,000. In addition, any 3090 shop adding expanded storage will get a discount of $50,000 per frame if the user orders by June 30 and installs the circuitry by July 24. Models 1X0, 200 or 300 have a single frame; all the rest have dual frames and a $100,000 discount. A similar discount (of $20,000 per processor on top of some across-the-board price reductions) applies to expanded memory purchases made by 4381 users, who are also being herded toward ESA. IBM also eased its pricing on the memory used in 3990-3 disk controllers. This is ESA-related, too, because the model 3 controllers provide more assistance to transaction processing applications when they have larger cache storage.

Not content with merely tugging users towards ESA, IBM has also decided to push them away from non-ESA equipment. The company said it was dropping all pre-ESA 3090s and just about all pre-ESA 4381s from its list of prime products. Shops with a lot at stake in old iron can see that IBM is trying to slaughter used 308X and non-E 3090 machines. While 308X users can’t do much about being left behind, 3090 shops sure can… if they have the money to buy upgrades to E or S models. IBM’s strategy may give firms with recently-installed non-E 3090s and lean budgets a lot to beef about. But their discomfort is unlikely to last very long. IBM’s latest ESA push does not appear to have a lot of durability. Before too long, this sales campaign will run out of steam. IBM will then have to put the squeeze on 3090-E systems in order to make the S models more attractive. This could include another round of 3090 kickers. But don’t panic: there’s good news in this, too. The used equipment market’s initial reaction to the news may make for some bargains. No more able to digest all the news than a jet-lagged tourist is a pound of cold cuts on rye, fearful dealers holding 308X and non-E 3090s are slashing prices. Shops that can comfortably stay with XA software on a portion of their installed equipment will be able to take advantage of the market’s tailspin. Some of the very same companies that added 3084s last year will undoubtedly install cheap used 3090-400s during 1989… and put them on the floor alongside brand new 3090-S boxes. Memory sales and ESA flavour enhancers notwithstanding, we do not believe IBM’s 3090 business will be ebullient this year unless the company makes more concessions to its customers. Nor will a couple of engineering gimmicks do the trick. The only way the user base will regain its appetite is if IBM makes some clear statements about its plans for the near future… however risky that may be for the company. Plunking down megabucks By mid-year, if not sooner, users will be speculating about a truly new generation of mainframes. The more they think, the less they will be happy plunking down megabucks for systems that look like they will soon be stale. And that leaves IBM with two active choices: it can unequivocally state that the 3090 (including another round or two of kickers) will be its top mainframe until whenever… or it can announce the next generation and point out just how long it will be before it can make volume deliveries of a full range of machines. We believe the latter choice – a fourth quarter announcement of the next generation’s first computers – makes most sense. But if IBM promises that the 3090 will endure, that would at least help it sell more current iron to uncertain users. Silence at this late date will carry users from hesitancy to paralysis… and the fear, uncertainty and doubt could allow competitors to eat IBM’s lunch.

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