Bill Zeitler, IBM's senior vice-president and group executive for
the server group, talks about the company's new Regatta hardware,
the Linux operating system, pricing issues and IBM's future
hardware plans.
IBM, like its rivals, has posted less than sparkling financial
results this year. The company's chairman and CEO, Louis Gerstner,
attributed the shortfall to declining PC sales and slow hardware
sales. Even so, officials said IBM completely sold out of its
Regatta p690 servers, which were launched in October and saw the
first increase in revenue on mainframes in 11 years.
IBM, as well as Hewlett-Packard, recently lowered its Unix
server prices to compete more aggressively against Sun
Microsystems. Do you see a price war coming?
From my point of view, the price dynamics in Unix servers changed a
couple years ago with IBM's S80 Unix Servers which brought a new
set of cost advantages to the market. The costs are lower because
they share processors across a variety of products, and they do two
to three times the work per processor than [HP] could give at a
better price/performance.
We've released our third generation since then, the Regatta p690.
We shipped it in volume in the fourth quarter. We have had very
strong market demand for this product and strong shipments in the
fourth quarter. We shipped in volume considerably above plan, and
we continue to see strong acceptance.
What accounts for the strong acceptance that you're
seeing?
It's faster and more reliable, and it gives customers the advantage
of running their work with half as many processors, which gives an
enormous benefit when the customer is buying software where they
charge based on the number of processors in the systems. It is
truly a price/performance breakthrough and a technology
breakthrough that's one-to-two times ahead of market.
The Regatta is also heralded for its energy conservation
features. We talked to one customer who shaved $100,000 (£70,077)
off their electricity bill after shifting to the Regatta. Is that
the technology breakthrough you're talking about?
The energy conservation comes from the chips and packaging. What we
set out to do was to set a new standard for the Unix space. Five
years ago, we started with Power4 chips, and that in itself was a
breakthrough. It was the first and only Unix system to use that
packaging. And as a by-product, when we package things like this,
it takes considerably less power and environmentally it's a lot
better.
Hardware vendors, and Sun in particular, saw extraordinary sales
during the dotcom boom but ran into problems when those companies
went out of business and their servers flooded the market. When do
you expect to see a recovery?
Sun suffered a little more from the dotcom explosion because they
benefited more when it was going up. We didn't benefit as much when
it went up, and we didn't suffer as much when it went down. There
is a strong possibility that when we come out of the current
slowdown, maybe in the second half of this year, the dynamic will
likely be considerably different. The open movement, and
particularly technology like Linux, will have a profound effect on
the whole dynamic of how the industry operates. We're already
seeing a strong substitution on clusters, things like RISC Unix
being substituted for Linux on Intel.
By open movement you mean Linux, since IBM sees Linux as one of
its favourite operating environments?
We are a Linux advocate. But we're mostly an open-movement
advocate. We think customers are advantaged when they have an
opportunity to make a choice on the basis of what performs better,
is more reliable and is the easiest to manage. The business model
that's based on capturing customers to your operating system is one
without strategic sustainability.
IBM has a number of proprietary operating systems. Are those
going away?
This is a very important point. The reason the z900 is doing so
well is because we accommodated the Z-OS to do new Linux work or
Apache work on the same system. And that gives the customer a
deployment choice. There's a long life to the operating
environment. But when new ones come in, we allow the customer to
integrate with that one, so that they are critically advantaged.
And what about IBM's mainframes?
The z900 series mainframe was greeted with strong market acceptance
one year ago. The most important thing about that is the idea that
going forward, we allow Linux or Web applications to work and run
on any of these platforms. That offers an attractive choice as
people consolidate their work onto reliable and industrial-grade
mainframes. The program going forward is to enhance these programs
through time, because I think we're on the right track.
Speaking of the competitiveness of the hardware market, do you
think the merger of HP and Compaq - or these companies as separate
entities if the merger falls through - will have a negative or
positive impact on the market?
I won't comment on the merger. Both of these companies
independently said that they would go to an Intel-based
architecture, and that causes some concern among their customers -
not because it's a bad thing to do, but along the lines of how
their current investment in HP systems is protected. Anytime there
is uncertainty in the customer's situation, and this happens
whether they merge or don't merger, it creates an opportunity.
If you're looking at a Unix-based system, then the most likely
[candidates on the] shortlist are IBM and Sun. If you're looking at
[Windows] NT on Intel, the most likely short list would be Dell or
IBM.