Two shoe salesmen arrived at a South American airport on the same flight. Each was charged with scouting out what looked to be an important new market for their respective companies. Coincidentally, both were formerly computer reps, hired by merchandisers impressed with the high tech world’s reputation for smart peddlers. But there the similarity ended. One fellow had sold mainframes for IBM, while the other had hawked workstations for Sun. On their first full day in uncharted territory, each hired a car and driver and headed for the countryside. That evening, each sent a telegram back to his boss. The former IBMer was, as usual, the quintessence of efficiency. His cable was brief and to the point. BACK ON NEXT FLIGHT, it said. NOBODY HERE WEARS SHOES. But the Sunster’s message was even shorter: SHIP QUICKLY. NONE HAVE SHOES YET.

Caricature

IBM’s mainframe business appears to be in a state of decay. This is nothing new. The company’s problems with its most expensive systems have been getting worse for a few years. Whether by accident or design, IBM has acted as though the user community is essentially the same as it was a decade ago. But this is clearly not the case, at least according to users. Just about every VPDP, CIO, top jock, you-name-it we have spoken to says pretty much the opposite of what the caricature of a top information systems executive is supposed to say. These folks and whether they’re representative of their profession or not is anyone’s guess – are not nearly as concerned with the size of their empires as one might think. More to the point, they have long since figured out that they won’t keep their departments or their own skins, for that matter – intact unless they can deliver a lot more for the money. They can stick with what they’re used to only so much longer. They are, understandably, unhappy about having to change the way they run their shops. But the alternative that they would prefer seems implausible. They wish that IBM would change the way it prices mainframe capacity. Our ongoing straw poll further reveals that the way users think IBM’s prices should go is down. If the fruits of our research seem unsurprising, it is entirely possible we are all jumping to a false conclusion. For as much as we trust the validity of our own conversations with users, we cannot readily bring ourselves to doubt the thoroughness and accuracy of IBM’s market research. Nor can we sleep well at night if for even a minute we doubt IBM’s sincere willingness to accommodate the customer in every way possible. That is why IBM’s recent activity is spurring us anew to look at what the customer wants. A case in point is IBM’s discovery that mainframe users want to pay more, not less, for tape transports – the new 3490 B02 is more expensive than the 3480 B22 it replaces (CI No 1,436). But the truly important information – just how IBM learned of its customers’ uncontrollable profligacy – remains shrouded in IBM’s most consistent offering, mystery.

By Hesh Wiener

Were this an isolated event, we would happily write that our own limited studies of the market were correct and that IBM’s typing pool must have plunked the wrong numbers into an ivory letter. But higher tape prices are only one sign that IBM’s research and our own are hard to square. IBM Credit Corp proudly points out that it is a great competitor willing to put its parent’s splendiferous credit rating to work on behalf of lessees. The cheap dough IBM can suck out of the bond market enabled IBM Credit to quote rates that gave third-party leasing salesmen the willies, but not the commissions. Yet somehow, after starting out on the very foot we would have said was right, IBM Credit has apparently gotten the same message from its devoted clients that its parent’s tape marketeers received from theirs. IBM Credit has determined that lessees really want to pay top dollar for upgrades. They want IBM memory at list price and will settle for nothing less. Arguments made by the independent rascals who only want to turn lessees into cheapskates by offering lower-cost de

als are falling on deaf ears. We have been late to realise that users that have gone to IBM Credit and gotten not just memory boards but whole processors second-hand and at a discount are inconsolably ashamed of themselves. IBM Credit’s enlightenment is so profound that it has even helped some customers avoid the awkward moment of truth that comes when a low-down discount-seeker must face an IBM sales rep eye-to-eye, scruffy sneaker-to-shiny wingtip. This has been accomplished by selling used processors to third parties that then cut the cheap deals with users, probably in dimly-lit rooms. IBM’s greatest insights used to be reserved for its mainframe division. But that was a long time and several reorganisations ago. The secrets of the old Data Processing Division cadre have long since gotten out, particularly the proven observation that one should never give a sucker an even break because he really doesn’t want one. This is why IBM’s AS/400 line is priced so that the more power one buys, the more it costs for the next unit of muscle. IBM’s price-performance boosts for the smaller AS/400s weren’t implemented to attract System/36 users but to make the old, loyal System/38 shops that want to pay more for each transaction they process even more delighted with the new generation. A similar distinction makes the AS/400 user buying 600Mb 9332s so much happier paying $18,580 a box and wearing a suit than an RS/6000 customer in torn jeans who is unable to come up with any more than $8,650 for a 670Mb disk. A most striking contrast between IBM’s wisdom and rivals’ foolishness is now apparent in the personal computer game.

Discourage

IBM’s PCs have, by every measure, been gaining market share. One reason, says IBM, is the Micro Channel. Every red-blooded user, the company has discovered, hankers for a workstation that not only costs the most, but which also contains dozens of circuits that do absolutely nothing one can detect. This prestige product is even more attractive, we suspect, when it runs OS/2, an $832 operating system distinguished by its nearly total lack of cheap applications – or any popular applications at all. Less clever companies making cheap PCs have consistently misunderstood the business. They now give away MS-DOS, Microsoft Windows and sometimes the Excel spreadsheet with each box. Nothing could discourage the serious customer more. How Bill Gates got to be a billionaire while IBM’s top executives have to be content with mere millions would defy analysis if it weren’t for Big Blue’s own revealing ways. Gates has consistently been uncharitable to his employees, making them work hard and long hours and forcing many actually to explain what they are doing. IBM’s kind attitude toward workers, on the other hand, has produced nothing but grief for altruistic vice-presidents that have slaved for years to make less in a year than Gates spends on a car. Only last year, for example, IBM’s very chairman demonstrated nobility bordering on self-sacrifice when he proclaimed the strength of demand and further helped thousands of IBM employees better their fortunes by leaving the company and seeking it.(C) 1990 Technology News of America Co