IBM’s newly-announced 3380 disks, 3990 controllers, and related software will put pressure on plug-compatible competitors and some leasing companies. Ironically, only part of the challenge posed by the new products will come from their impact on older products. For some industry participants, the most serious implication of IBM’s announcement last week is that IBM may have to revamp its disk strategy again within two years, causing unprecedented disruption in an industry that has taken for granted a five-to seven-year large disk product cycle. The first effect of the announcements will be an immediate cancellation of nearly all of IBM’s orders for the purchase of 3880 disk controllers. Instead, users will switch to IBM’s rental plan. Additionally, many 3090 shops will add 3880s with cache memory rather than the formerly more popular no-memory version of the controller; the cache memory enables these sites to use 4.5Mbyte-per-second channels on their mainframes. Users who might still want to purchase a 3880 will find that used computer dealers have them at prices far lower than IBM’s list price. This shift will cost IBM some money during the next year, and it will also cost used equipment dealers and lessors that had counted on high prices for their used 3880s a bundle. However, some used computer dealers will come out ahead: these are the companies that controllers that have been long since paid for by users’ rentals, and they will be able to compete aggressively in the short-term rental market for 3880s that will develop.IBM will also be unable to persuade many users to take 3380-Ds and -Es that they have on order; these users will switch to 3380-Js or -Ks. This may cause IBM some problems in the third quarter, but IBM hopes to offset any losses by shipping large numbers of new disks before the year ends. Again, for shops that still want the older disks, used equipment dealers will be far better able to provide them at acceptable prices than IBM. Fixed target Third parties that had banked on high residual values on the 3380s that they have in their portfolios will get clobbered. As users digest the announcement, and as used 3380-Ds and -Es become more abundant (at lower prices), the values of used 3380-AA4s and B4s may well drop. Also, because the 3990 will only work with old 3380-AA4s that have serial numbers higher than 15000, some 3380 disks may be worth more than others. Further erosion of old 3380 prices may result from IBM’s dropping of support for old 3380s on 3880-23 controllers attached to fast 3090 channels. Users, like used equipment dealers, will have to adjust to new prices on old disk subsystems. Some will lose out, while others will gain. It depends on whether they are planning to sell installed gear (they lose) or get additional disks and controllers at bargain rates (they win). Makers of plug-compatible equipment may find that IBM’s moves will put pressure on their prices. Not only will they have to lower their prices to beat those of IBM’s newer, more cost-effective disks, but they may have to offer rental plans to compete with IBM’s 3880 deals. Over the next year or two, however, IBM will present a fixed target to competitors. Because IBM has stayed with 14 3380 technology, more advanced disks in 8, 9 and 10 form factors could give IBM stiff competition. By the end of next year, users are likely to see disk subsystems using physically smaller drives that give much more bang for the buck than IBM’s new disks. IBM will have to respond to this new threat. The result is likely to be a short life for what is almost certainly the last 3380-technology disk family to be offered by IBM. The prospect that the 3380-Js and -Ks may not last long could make for high lease rates, and force IBM to offer financing terms for 3380 disks similar to the ones it has just made available to users of its dying 3880 controller line. – Hesh Wiener
