IBM to ship enhanced mainframe, storage systems

What do a freeway and a shark have in common? IBM.

Big Blue is scheduled Thursday to start shipping its first G7 mainframe, code-named Freeway, as well as an enhanced version of the Shark storage system.

The timing is crucial as IBM looks to reinvigorate mainframe sales, stalled in anticipation of the new model, and to position storage more competitively against EMC products, analysts say. The company also hopes to ignite consumer and investor confidence by shipping both products on time, as promised.

IBM unveiled the Freeway, or "="" www-1.ibm.com="" servers="" eserver="" zseries="" 900.html"="" rel="">z900, system when it re-branded its server line eServer in early October.

But anticipation of z900, which replaces the S/390, had an unexpected effect on sales of the older mainframes during the third quarter: Revenue from S/390 sales declined 24 percent. Financial analysts also sharply criticized IBM for a number of logistical problems that choked sales of RS/6000 and AS/400 systems.

For these reasons, IBM has been "under some pressure" to ship z900 on time, said Technology Business Research analyst Bob Sutherland.

During its third-quarter earnings announcement, the company set a general target of mid-December for delivering the z900. The enhanced Shark was scheduled to ship Friday.

"The good news is, we're delivering the z900 on schedule, as opposed to five weeks late like the presidential election," said Rich Lechner, IBM's vice president of e-business servers.

For now, IBM will push Linux hard with z900, in part because its proprietary 64-bit z/OS is not expected to ship until the end of March.

Riding the Freeway
IBM led the worldwide server market in the third quarter, with $3.2 billion in revenue, according to market researcher IDC. Sun Microsystems, which jumped from fourth to second place, followed with $2.8 billion in server revenue.

Gartner analyst Tom Bittman views the shipping of the first eServer as a good thing for IBM, even though there will be minimal effect on the fourth quarter.

Gartner analyst John Phelps says with the z900 now out of the garage and on the road, IBM is motoring toward two major market segments in its race against Sun Microsystems and Hewlett-Packard. see commentary

"It's not going to have a big effect on 2000, but IBM is positioned well for 2001, not only in the z series 390 space but also in the Unix and Intel server space," he said.

IBM will tout the merits of Linux with the z900, as the company more aggressively positions the Unix variant for use in e-business activities. Big Blue expects to sell the server to customers doing Web hosting, e-commerce, supply chain and customer relationship management, and similar activities.

"I would say based on customer surveys, 40 percent of the Fortune 1,000 (companies) are actively evaluating Linux or have Linux in their shops," Lechner said.

But Bittman questioned such an aggressive Linux push.

"I think IBM is banking too much on Linux coming through," he said. "I think Linux will prove to be a very effective role player as an appliance operating system, as a wristwatch operating system--IBM has shown that already--and for Web servers."

IBM is betting Linux will emerge from being a role player to a general-purpose operating system, but Bittman said, "I don't see that happening."

Sutherland, however, sees Linux as a smart strategy.

"By utilizing Linux as a common platform that runs native on the xSeries and in partitions in the z, p or i series (eServers), customers will be able to port applications across the enterprise," he said. "For example, data residing on mainframes in a heterogeneous system could now be accessed from the Internet."

Sutherland took a bullish approach to z900 because of its partitioning of virtual servers "at a cost of $500 per image," he said. "This is a compelling cost savings argument, particularly for research organizations and educational institutions currently running mainframes."

Consulting firm Cap Gemini Ernst & Young is one of the early z900 adopters, and Linux is part of the appeal. A company representative said the mainframe will be used in one of the company's advanced development centers.

The company plans to use the zServer "as part of a professional services offering" including Linux migration, the representative said.

Bittman noted that while Freeway is a competitive system and a "shot in the arm for S/390," revenue from mainframes is declining. "This is not about the renaissance of the 390," he said.

IBM may benefit more from timing than from anything else with z900, as archrival Sun begins to lose momentum in Unix systems, analysts say.

"I think Sun enjoyed the year 2000 with Windows 2000 coming late and with HP and IBM being very, very weak and behind the ball in the Unix market," Bittman explained. "It's been like an open field for them. Sun doesn't have that anymore."

He predicted that Sun will lose traction in 2001, particularly as the company's software and services strategies fall far behind rivals.

Swimming with the Shark
IBM isn't just looking to z900 to boost sales and customer confidence. The original Shark storage systems went on the market more than a year ago. Big Blue this week started shipping the enhanced Shark Enterprise Storage Server to about 50 of its largest customers.

Though IBM narrowly beat its Dec. 15 delivery date, that was a delay from March on high-end features that would have helped the product take a bite out of EMC. These functions, such as quickly copying data from one Shark to another or adding full support for Fibre Channel connections, would have helped IBM. Banks in particular require the copying feature, said Linda Sanford, senior vice president and group executive of IBM's Shark Storage Group.

"From a functionality point of view, we are at par with EMC," she said. "We've got all the functionalities they have, whether that be PPRC (Peer to Peer Remote Copy), FlashCopy or direct Fibre Channel across all kinds of environments."

Sanford emphasized IBM's advantage over EMC in taking a "very open, industry-standard approach to this whole market," as opposed to EMC's "very proprietary approach."

IBM could get an additional boost next week when Compaq Computer starts shipping Shark storage products under its own brand, said sources familiar with the situation. In July, Compaq and EMC agreed to team up on storage in a technology and marketing exchange.

Sutherland said delivering enhanced features to Shark is crucial to IBM's remaining competitive with market-leader EMC.

"IBM can consider itself on par with EMC and offer these capabilities backed by a much larger services organization, a potential Achilles' heel for EMC," he said. "We expect that 2001 will prove to be highly competitive in the storage marketplace, with IBM finally competing head to head with EMC to recapture market share previously lost to EMC."

News.com's Stephen Shankland contributed to this report.