IBM Pits System I Against Microsoft Windows In Small-Business Market - InformationWeek

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IBM Pits System I Against Microsoft Windows In Small-Business Market

The price of the server includes a five-user license and five-day-a-week support, and it brings fewer security problems than Windows, IBM said.

IBM has declared war on Microsoft in the small-business market, significantly lowering the price of its System i server to do battle against Windows-based servers for companies with as few as five employees.

System i would be tough to find today in small businesses, which have traditionally turned to inexpensive Windows-based servers to run their business applications. IBM is hoping to change that by getting software vendors to pitch its server as lower in overall cost, less vulnerable to viruses, and more reliable.

At a San Francisco news conference on Tuesday, IBM introduced the entry-level System i Express running IBM's i5/OS (which used to be the OS400) that would start at a tad less than $8,000 and include a five-user license. Each additional five users would cost $1,250. Tech support would be part of the package, provided calls are made during work hours. Twenty-four-hour support, seven days a week would have to be bought separately.

"This is probably the boldest move we've made in the small-business space in a decade," Mark Shearer, general manager of System i, told reporters and analysts, pointing out that the new offering is about a third less in price than previous versions of the hardware.

The small and medium-sized market has long been touted as the promised land of tech-hungry businesses ready to buy for the right price, provided what they're getting is low maintenance and reliable. According to IBM, the System i has both those bases covered, as well as being far less vulnerable to viruses, since most are written for the ubiquitous Windows.

Analysts agree that System i has a security advantage by not being the favorite target of hackers. Also, far fewer security patches are issued for the System i, which reduces the maintenance hassle of having to deploy fixes. "Those are certainly valid arguments," said Al Gillen, an IDC analyst.

But the key to IBM's chances of stealing business from Microsoft depends not on the hardware, but lies in the software packages bundled inside. Gordon Haff, analyst for Illuminata, said few small businesses are going to call IBM asking for a System i. "It's really going to be because they need a manufacturing application or a medical application, and their software vendor presents (System i) as the best solution for running those applications," Haff said.

IBM realizes that, and said it's working closely with software partners, which are more likely to be the first point of contact for most potential customers. "Going to market with business solutions first is probably more important than what's inside the covers (of the box)," Shearer said.

IBM currently has System i hardware and software bundles that target more than 130 "sub-segments" of various types of businesses, ranging from small retail and manufacturing operations to sports stadiums and funeral homes. In showing off its partner support, IBM trotted out representatives from New Generation Software, a business-application maker; and Resposive Data Systems, which resells Oracle's J.D. Edwards applications.

To switch to System i from Windows servers, however, SMBs would have to be prepared to not only replace hardware but some software as well. System i runs on IBM's Power5 RISC chip, while Windows is based on the x86 platform. Such a decision won't be made lightly, Haff said. "This isn't something that's going to widely replace Windows, but as a partner software and hardware solution, it could be very attractive."

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