Vendor sponsored Analyst conferences are oftentimes long on self-congratulatory hyperbole and short on substance. That wasn’t the case with IBM’s Systems and Technology Group Analyst conference held last week in Rye Brook, NY.
The STG conference, led by Rod Adkins, Senior Vice President of the STG Group, showcased the division’s solid accomplishments over the last several years and detailed the current and future product roadmap and investment strategy. Investments focused around three major areas: Systems, growth markets and strategic acquisitions. Adkins could have easily added a fourth category: patents. The U.S. Patent Office granted IBM’s STG division 2,680 patents in 2010 and it could exceed that number in 2011. One only has to scan the headlines and peruse the ongoing patent purchasing frenzy and the plethora of lawsuits involving all of the major vendors to realize the pivotal role patents play as both and offensive and defensive weapon. IBM, in its Centenary year, holds more patents than any other U.S. technology vendor.
STG 2011 Milestones
Noting that STG is aligned with IBM’s overall growth strategy, Adkins detailed the division’s milestones throughout the first three quarters in 2011. They included:
• Seven consecutive quarters of growth: Much of the increase was directly attributable to the high end systems such as the System z platform, enterprise storage and high end tower servers.
• The Power Systems platform has won over 2,400 competitive displacements since the 2009 first quarter contributing $2.4 billion in revenue to IBM’s bottom line in the last 36 months.
• The Power Systems momentum continued through Q3 2011, when it won 250 competitive displacements in the quarter and 750 displacements year-to-date, Adkins said. Those new customers netted IBM $740 million in revenue so far this year and boosted Power Systems sales by 15 percent.
• System x server revenue is up 9 percent through the first three quarters of 2011 high end revenue growth of 33% YTD and eight consecutive quarters of double digit growth
• Storage up 12% YTD including storage software over 2,100 new storage customers on the XIV platform.
• Analytics 35% quarterly growth through 3Q11 via Watson, optimized Smart Analytics
• Cloud: revenue thru 3Q more than double same period in 2010; introduced Smart Cloud Entry; cross IBM integrated cloud offerings and new business partner enablement
• Overall, STG represented 27 percent of IBM’s growth markets revenue in 2010.

STG Bolstered by Product Performance, Management Stability
STG’s strong performance, helped boost the company’s stock which is now trading at $194.50, very close to a 52-week high. Big Blue’s across-the-board strong performance got a further lift when it was revealed in November that Warren Buffet, invested $10.7 billion, equal to a 5 percent stake in IBM. Buffet’s investment was no doubt sparked at least in part, by the fact that IBM’s Return on Equity to shareholders is 69.84 percent, according to Capital IQ.
While both IBM and STG’s financials tell a compelling tale, they are not the whole story. IBM in general and STG in particular, clearly owe their strong showing to the features and performance of the products. However, IBM’s ability to deliver strong after-market technical service and support, the stability of its business and its’ ability to steer clear of the management tumult that has plagued rivals like Hewlett-Packard also play a large part in its success.
For the past three consecutive years, IBM AIX and Power Systems have recorded the highest uptime and reliability ratings in ITIC’s annual Server Hardware and Server OS Reliability Surveys. In the latest updated ITIC October 2011 poll, IBM’s AIX v7.1 UNIX OS running on the company’s Power System servers scored the highest reliability ratings and recorded the least amount of overall downtime from Tier 1, Tier 2 and Tier 3 outages among 18 different server OS platforms. Reliability is key metric that contributes to lowering or raising total cost of ownership (TCO).
Corporate customers interviewed by ITIC say they are equally impressed with the quality and celerity of IBM service, support and documentation when IT staff lodge technical support calls.
The stability of IBM’s upper management and its ability to provide smooth, orderly leadership transitions resonates well with customers, Wall Street, press and industry analysts. After a decade as Chief Executive Officer Sam Palmisano will step down and will be replaced by Ginni Rometty, IBM’s senior vice president for sales, marketing and strategy, overseeing IBM’s Global Business Services unit, on January 1.
The solid management also extends to STG. Adkins, a 30 year IBM veteran, has successfully headed the group since 2005 and this plays a key role in customer retention. The STG management team has consistently delivered a clear message that includes tactical product launches and long-term strategic direction. This is stark contrast to the upheavals at competitors like HP and Oracle where tumultuous management changes occur with alarming frequency (HP) and large, often hostile mergers and acquisitions and nebulous product roadmaps (Oracle) have left customers scratching their heads regarding future product directions and undermines confidence.
Nowhere is this more evident than in the well documented and highly publicized disaffection of the Oracle (former Sun Microsystems) SPARC server installed base. IBM’s STG group has been able to exploit that dissatisfaction which accounted for a large portion of the Power Systems and System x’ competitive wins during 2010 and 2011.
Adkins and Steve Mills, Senior VP and Group Executive, in STG Software and Systems also outlined the group’s strategy for gaining new business in the ongoing tough economic climate where IT budgets are static. STG continues to invest heavily in research and development (R&D) to drive efficiencies and economies of scale to assist organizations in reducing IT management and labor costs and to cut power and energy consumption. Depending on the size and scope of the individual customer’s infrastructure and workload, Adkins claims that Power Systems servers running IBM’s DB2 are one-third the cost of Oracle DB. Similarly, he says, the System x can lower management costs by up to 50 percent and IBM’s storage platforms can assist businesses in lowering powering and operating cooling costs by as much as 60 percent.
Analysis
In order to maintain and extend STG’s current level of success through 2012 and beyond, IBM is now tasked with topping itself.
STG executives should continue to focus on:
• Differentiating the products: STG is a large group that encompasses servers, storage, cloud computing, software and systems offerings. It’s easy for even stalwart IBM customers to be overwhelmed by the sheer number of products and announcements. The STG Group must strive to highlight the most important product updates and announcements to customers. C-level executives and IT departments are overwhelmed by too much information. IBM’s STG group should emphasize the two or three most crucial products and services per quarter and communicate that via their sales and reseller channels and user groups. IBM has always been good about providing guidance but it must do even better.
• Delivering competitive acquisition, licensing and technical support costs: The biggest singular criticism leveled at IBM is the high cost of its after-market technical service and support. No one expects IBM to offer superior services at Flea Market prices. However, IBM has one of the largest service and support organizations in the world. IT could and should build goodwill in 2012 by offering special promotions, discounts and bundled incentives to loyal STG customers and prospective customers. A sizeable segment of the end user population is currently and will be strapped for capital expenditure funds for the foreseeable future.
• Appeal to Small and midsized businesses: IBM is well entrenched among large enterprises in high profile verticals like financial services, healthcare and government, to name just a few. Small and midsized businesses however account for nearly 60 percent of all businesses. SMBs with fewer than 300 users lack the clout and deep pockets of their enterprise peers. Nonetheless, their numbers and capital and operational expenditure power are enormous – particularly in emerging geographical regions like Africa, which is a big focus for IBM’s STG group. Indeed there are many SMBs in IBM’s vertical bailiwicks. IBM, its current and potential customers would all be well served by the availability of specific purchasing and licensing programs that provide aggressive entry-level price points and value-added licensing deals for SMBs.

For the third year in a row, IBM AIX v7.1 UNIX operating system (OS) running on the company’s Power System servers scored the highest reliability ratings and recorded the least amount of overall downtime from Tier 1, Tier 2 and Tier 3 outages among 18 different server OS platforms.
Over three-quarters or 78% of survey respondents indicated they experienced less than one of the most prevalent, minor Tier 1 incidents per server, per annum on IBM’s AIX v. 5.3 and AIX v 7.1 distributions. An 83% majority of IBM AIX v 7.1 and Novell SUSE Enterprise Linux Server 11 and 82% of Windows Server 2008 R2 survey respondents indicated their organizations experienced less than one unplanned, severe/lengthy Tier 3 outage per server, per annum (See Exhibit 1).
Microsoft’s Windows Server 2008 R2 (which scored the biggest year-over-year reliability gains), and Novell’s SUSE Enterprise Linux Server 11 closely challenged IBM’s AIX v 7.1 server OS reliability and uptime – particularly with respect to the most severe and costly Tier 3 outages. Unplanned Tier 3 outages – whether manmade or as the result of a disaster — typically cause downtime in excess of four hours. There is widespread disruption of applications and network operations; customers and business partners are frequently impacted and Tier 3 incidents will almost always require remediation by a significant portion of the IT staff.
Those are the results of the ITIC 2011 Global Server Hardware and OS Reliability Survey. ITIC partnered with GFI Software (formerly Sunbelt Software) to conduct this independent Web-based survey. It polled C-level executives and IT managers at over 500 corporations from 23 countries worldwide from November 2010 through April 2011. ITIC updated and revised the survey in October 2011. And while the results of this latest survey were very similar, they also reflect the turmoil and controversy surrounding some of the vendors – most notably Hewlett-Packard and Oracle – that have the potential to impact reliability in the future.
On the server hardware side, IBM, Stratus Technologies, Fujitsu and Hewlett-Packard servers (in that order) were the four most reliable platforms, achieving an average 99.99% or 99.999% uptime per server, per annum. That equates to 5.25 minutes (99.999%) to 52 minutes (99.99%) of unplanned per server annual downtime.
The survey data indicated that the inherent reliability and uptime of all the major server OS and server hardware distributions has improved significantly over the past several years. In particular, IBM AIX and Novell SUSE Linux Enterprise Server consistently have maintained the highest reliability scores their platforms recorded in the prior ITIC 2008 and 2009 Global Server Hardware and Server Operating System surveys. IBM AIX and Novell SUSE users also praised the manageability and technical service and support available for those server operating systems.

Microsoft’s Windows Server 2008 and Windows Server 2008 R2 scored impressive reliability gains in the 2011 survey compared to the prior 2008 and 2009 polls. Survey respondents now rank Windows Server 2008 R2 as among the top three most reliable, mainstream server operating systems. Windows Server 2008 R2’s reliability renaissance is especially impressive since Microsoft’s Windows Server OS noticeably lagged behind the majority of the UNIX, Linux and Open Source distributions in the ITIC/Sunbelt Software (now GFI Software) 2008 and 2009 Server Reliability surveys. Among the other survey highlights:

• Security: The biggest surprise of the survey was the strong security showing by Windows Server 2008 R2
• Highest Percentage of Severe Tier 3 Outages: Oracle’s Solaris 10 running on SPARC hardware had the highest percentage of survey respondents — 16% – who said they experienced at least three and more than 12 unplanned per server, per annum prolonged Tier 3 outages lasting more than four hours.
• Lowest Percent of Severe Tier 3 Outages: By contrast just 5% of both IBM AIX v 7.1 and Microsoft Windows Server 2008 R2 survey participants reported experiencing at least three and more than 12 unplanned per server, per annum Tier 3 outages of more than four hours duration.
• Integration and interoperability issues: (e.g., incompatible drivers) and problems applying patches are the most common culprits of protracted, unplanned downtime. These problems are exacerbated when IT managers are forced to spend valuable time searching for fixes, or if the vendor has not yet recognized the issue and there is no fix.
• Server Age: A 57% majority of respondents said their servers – particularly the critical main line of business servers — are between one and three years old. Keeping the server hardware updated has a major impact on reliability. One-in-five survey respondents – 20% – said their servers were three-to-four years old.
• Server Refresh Rates: One-quarter – 25% — of businesses refresh their main line of business server hardware “as needed” and 10% said they upgrade a portion of their servers annually. However, 17% of survey participants said their organizations refreshed their main line of business server hardware every five-to-six years and another 15% indicated they had no specific timetable.

Thanks to the 300 of you who took time out of your busy schedules to respond to the joint ITIC/GFI survey on customer relationship management and for OSF-Global in assisting us in composing the questions.
The survey results showed that nearly three-quarters – 74% — of companies are currently using a CRM solution and 57% of survey participants revealed that interest in CRM is increasing significantly. And perhaps most surprising, a 52% majority of survey respondents said they use more than 51% of their CRM solution’s functionality; of that number 18% utilize over 75% of CRM features.
CRM Usage Soars Among SMBs and SMEs
Customer relationship management (CRM) solutions long a staple in large enterprises are now also being widely embraced and deployed by small and mid-sized businesses to more efficiently track and manage businesses’ interactions with customers and partners.
The survey addressed broad ranging issues including CRM deployment trends, timetables and specific vendor products; the issues that propel and/or impede CRM deployment and usage; the types of CRM deployed: On-premise, SaaS, cloud or a combination and the benefits derived from a CRM solution by the company as well as the company’s customers
Overall, the survey results indicate that there is continued widespread support for and adoption of, CRM solutions. Half of the survey respondents – 50% — said they are analyzing or evaluating CRM solutions with an eye towards adoption while another 20% indicated they plan to install a CRM solution within the next six to 12 months. Interestingly, 26% of the survey participants indicated they’ve used a CRM solution for over 10 years. Ironically, an equal 26% of respondents revealed they do not currently use CRM.
Nearly three-quarters or 73% of the 74% of businesses that currently utilize a CRM solution reported that deployment and maintenance generally been smooth and free of any major deployment and maintenance problems. Some 26% of survey participants said they encountered “no problems” while another 47% of participants said they encountered only the “usual migration issues associated with new deployments.”
Survey Highlights
Among the other survey highlights:
• Among the 26% of respondents who are not currently using a CRM solution, the main impediments are:
• Cost – 57%
• No compelling business reason – 50%
• Unsure of what value it would provide – 50%
• Complexity – 43%
• Salesforce.com; Sage, Microsoft Dynamics, Sugar CRM and Oracle/Siebel were the most popular CRMs
• A 57% majority of participants said they are using or plan to deploy an on-premise CRM. This was followed by 18% of firms that indicated they are or will deploy a cloud-based CRM solution; 10% who say they are using or will implement a SaaS CRM and 15% who will use a combination of on-premises, cloud or SaaS CRM solution.
• An 86% majority of respondents cited Features/performance as the factor that most influenced their CRM purchasing decision. This was followed by 74% of respondents who checked off cost; while 71% said Ease of Use influenced their purchasing decision.
• Six out of 10 companies – 60% use only internal IT resources to deploy their CRMs; 31% use a combination of internal resources and external consultants or Systems Integrators
• A 52% majority of survey participants said they use >51% of their CRM solution’s functionality; of that number 18% utilize >75% of CRM features
• Nearly two-thirds of respondents – 62% — say that “upper management leads by example, using CRM, touting its benefits” in order to encourage employee usage
• On-premise CRM is the most popular choice among 57% of respondents

As with any poll, the survey did elicit some surprises. Foremost among these was the fact that organizations utilize a higher percentage of the inherent CRM solution’s functionality than previously thought. There is a long held perception that a significant portion of corporate end users find CRM packages too complex and fail to take full advantage of their features or avoid using them altogether. Failure to use a CRM solution not only squanders the corporation’s investment in the technology but it can also result in less efficiencies in tracking and managing customer relationships, with the unhappy consequence of making the end users less productive and their companies less competitive.
The survey findings contradicted those perceptions. A 52% majority of participants said that their businesses used 50% or more of their CRM’s functionality. However none of the respondents said they utilized “all” of the CRM’s functions. And nearly two-thirds or 60% of survey respondents indicated that in order to maximize CRM usage within the organization, senior executives lead by example and use it themselves.
As with any technology, CRM does present some challenges for would-be adopters. Foremost among these are: cost, complexity, ease of use and ease of manageability. Over half of the respondents revealed that they were using the “CRM-like” capabilities within Microsoft Office to achieve baseline CRM functions.