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EMERGING MARKETS

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 A Special Annex Research Report:

IBM and the AS/400 in Eastern Europe

“Renaissance II

Botticelli’s Venus

 Eastern Europe, IBM and the AS/400 are

all undergoing a renewal in 1996  

 

IBM and AS/400 in Eastern Europe is a copyrighted report written by Bob Djurdjevi}, president of Annex Research, a Phoenix, Arizona-based market research and consulting firm.  Djurdjevi} traveled throughout Eastern Europe in May 1996.  All rights are reserved.  A

certain number of copies of this report has been produced by Annex

Research for IBM under a special license. 

 

 

For comments and/or questions contact:

Annex Research

5110 North 40th Street

Phoenix, AZ 85018

U.S.A.

 

ABLE OF CONTENTS

1. Eastern Europe Opportunities:

   “A Taiwan Next Door”                      Page  4

2. IBM in Eastern Europe                   Page 18

3. AS/400 in Eastern Europe               Page 23

4. Spotlight On....

      Hungary....................       Page 31

      Czech Republic............   Page 34

               Poland......................       Page 38

5. Some AS/400 Lore                                   Page 41

 

About the Author....

(inside back cover - page 44)

1. Eastern Europe, a New Investment Frontier:

“A Taiwan Next Door!”

  Top economies in this emerging market are growing at almost four times the rates of the biggest developed countries; Eastern Europe’s low cost, yet excellently educated “Western”-style labor force, makes it more attractive than many fast-growing Asian markets; $19 billion pumped in by multinationals during 1990-1994, is only a start; a $5 billion IT market in 1996?

Renaissance II.  Eastern Europe, IBM, and the AS/400 are all undergoing a “Renaissance II.”  It’s an economic revival the likes of which has not been seen in the Western world since the explosive growth of the U.S. economy at the last turn of the century.  The top six Eastern European economies have outpaced the leading six industrial countries’ 1995 GDPs by nearly four times! (see the chart).  

And even a wider average 1996 GDPs of some 20+ countries which comprise this emerging market will be twice as high as those of the leading industrial economies (3.7% vs. 1.7%).  No wonder that Eastern Europe had attracted $19 billion of private multinational companies’ investments between 1990 and 1994, according to the United Nations’ 1995 “World Investment Report.”  But that was only a modest start, especially compared to the $607 billion which Germany has invested in East Germany since 1990[1], or considering what we saw during our May 1996 whirlwind tour of Central and Eastern Europe. 

Money is only now also starting to pour into the other formerly Soviet-dominated countries.  Heavy investments are being made in the building of the infrastructure necessary to support the 21st century-style information-based economies.  These investments won’t show up on the charts until about two years from now, when the U.N. releases its 1996 investment report.  But there is no doubt that a sense of optimism and vibrancy is in the air everywhere.  Long depressed by the Soviet communist boot, Eastern Europe is quickly becoming one of the world’s hottest markets.  Its cheap labor has always been an attraction for industrialists eager to reduce production costs.  Its highly educated work force has always been an allure for high-tech firms.  But now, Eastern European economies are also starting to grow.  After shrinking 5.4% in 1993 and showing only a modest growth in 1994 (up 1.2%), the average growth doubled in 1995 (to 2.4%), according to Deutsche Bank.  And we figure it will increase by 3.7% in 1996.

“The Nordic firms have discovered a Taiwan next door,” said Jorgen Dan Jensen, deputy managing director of Denmark’s Investment Fund for Central and Eastern Europe, according to the Central European Economic Review (Nov. 1995), a Dow Jones publication.  Denmark’s five million people, for example, traded as much with Eastern European countries in 1994 (about $658 million) as did France, a country with 57 million people.

But the “New World” which the “Vikings” discovered without having to cross the Atlantic, is no longer just theirs for the taking.  We’ve seen many British and German firms, as well as some U.S. multinationals moving into this emerging market, trailing the funds made available by the IMF, the World Bank or the European Bank for Reconstruction and Development.  Some of these multinationals are diversifying their investments away from China, whose growth has started to slow (see the chart), not to mention the increased political instability in that part of the world.   

Banks, Telecoms, Governments - Top IT Users.  Where are most of the IT investments being made?  In the banks and telecoms, it seems, which are growing by leaps and bounds.  Also, the various other government-run programs (e.g., pension and insurance funds, medical and social security systems, etc.).

Primed for Servers. In its initial recovery phase, the Eastern European customers bought a lot of PCs - as a “quick fix” to their IT problems.  Even today, the PCs account for more than 50% of customer spending on computer hardware in some countries (e.g., Czech Republic, Poland, Russia...).  These people bought the PCs because they were cheap and because their telecommunications structure was inadequate. 

“Yanks” in Poland A 1995 photo by Tanja Anne Djurdjevic

 

 

 

 

 

 

 

 

 

Now, not only has the latter improved considerably in most countries (massive investments have been made in the telecommunications area during the last five years - the biggest surprise for us during this research trip), but the PC buying frenzy has created a large “client” base for the more powerful “servers.” 

Add to it an explosive growth of Internet hosts, in which Eastern Europe leads the world, according to Network Wizards, and you’ll see why this market is now “primed” for vendors with premier server offerings.

IBM is well positioned to take advantage of this opportunity with its four server platforms - the S/390, the AS/400, the RS/6000 and the PC.  But it must move quickly and aggressively, as its competitors, especially HP and Microsoft NT, have already staked out strong positions in the biggest markets (e.g., Czech Republic, Russia).  Nor are these two vendors the only ones.  We’ve also seen DEC, Compaq and UNISYS, for example, actively pursuing this huge opportunity.

 

 

 

 

 

 

 

 

IT Market. The overall IT market in Eastern Europe is growing by leaps and bounds.  In 1994, IDC estimated the Eastern European annual IT spending to be about $3 billion, and growing at 25% to 30% per year.  This would make it about a $5 billion IT market in 1996. 

Of the above total, we figure that about 66% is being spent on hardware, a much higher total than in the developed countries, where the hardware spending is typically less than 50%.  The customers we’ve talked to spend about 21% of their IT budgets on services, and about 13% on software.  This means that the Eastern Europe 1996 hardware, services and software markets are about $3.3 billion, $1 billion and $650 million respectively.  

Practically Unlimited Opportunities. Given the significant investments being made in the development of the IT infrastructure, and the rapid growth of this IT market, it seems that the degree of a vendor’s success in Eastern Europe is only limited by its investments and its marketing commitment.  Asked what the biggest challenge for IBM in this part of the world is, Horst Breitenstein, the Vienna-based head of IBM Central and Eastern Europe, replied that it is the relative absence of leading Western business partners.  This view was echoed in our discussions with some local business partners.  For the most part, they lamented the low penetration of the “big names” among the independent software vendors (ISVs).

Fragmented Market. One reason for that is, of course, that Eastern Europe is a fragmented market, and Western applications have to be customized for the customers.  Not only does the software have to be translated into more than 20 local languages, but some of them even use a different alphabet (Cyrillic - Russia, Belorus, Ukraine, Bulgaria, Serbia...). 

Furthermore, there are many cultural and regulatory differences even between similar countries (e.g., the Czech Republic and Slovakia, or Slovenia and Croatia, both sets of which, until very recently, were a part of Czechoslovakia and Yugoslavia respectively).  No matter how small their country, the Eastern Europeans thrive on being “special.”  The vendors who are not prepared to treat them as such will face significant roadblocks on the way to success.

All this requires subtlety, understanding, patience and long-term financial commitment by the Western ISVs.  Even more importantly, however, it requires a desire by the “big name” firms to build long-term relationships with the local IT business partners, without whose talents and efforts the success of a foreign company is rather questionable.

Fear of Unknown. One reason for the relative absence of the “big name” firms from one of the world’s hottest markets is fear of the unknown.  Fear of the unknown is understandable and natural to human beings.  For companies whose base may be in Arkansas, Iowa or Oklahoma, to mention some “middle America” states, it can be pretty intimidating to contemplate investing in a foreign market whose languages you don’t understand, and which had been labeled for decades as an off-limits-for-most-Westerners region - the dreaded “behind the Iron Curtain” world.

But such fears can be eased by a simple visit to some the Eastern European countries.  Most American business people would be amazed how “American” these countries have become, while managing to maintain their own cultural uniqueness.  And not just by the presence of the symbols of the American retail culture - Coke, Pepsi, McDonald’s, Pizza Hut...  Or by having Cindy Crawford smile at you from hundreds of billboards.  The U.S. business travelers may be pleasantly surprised by the availability of American telephone jacks and electrical adapters. 

Over the last decade of researching the global IT markets while traveling with a laptop, we have gotten used to having to travel through Western Europe with an accessories kit which grew to be bigger than the laptop itself.  Naturally, we expected to add to our collection of petty national differences on this trip to Easter Europe!  Well, we were wrong.  Hotels, IBM, customer and business partner offices were all equipped with American-style jacks and sockets.  Eastern Europe’s original curse - a lack of a telecommunications infrastructure - has now turned into an advantage over Western Europe, which has to bring forward the legacy of its older systems, any time it contemplates an upgrade.  It’s kind of like being able to start with the PC and Windows software, without having to worry about what to do with your existing mainframe investments. 

Youth at Helm. American business visitors to Eastern Europe may also get energized by seeing so many young people in positions of authority and responsibility.  IT is a young industry globally, but in Eastern Europe it’s a relative infant compared to the developed Western countries.  Nowhere else in our travels around the world have we seen so many “MTV generation” members running their country’s IT centers in banks, governments or insurance companies, or developing solutions for IT vendors, such as IBM or its partners.

These young people are Eastern Europe’s real business treasure.  They guarantee the long-term returns on one’s investment.  If treated right (i.e., if given freedom to experiment and fail), we’ve seen them work their hearts out without regard for “normal” working hours, employment benefits, or negativism which characterizes the expensive, yet spoiled, labor forces in some developed countries.   

Market and Education.  A strong antidote for fear of the unknown is - greed.  Once the leading ISVs realize the tremendous business opportunities which the Eastern European markets offer, exemplified by the explosive revenue growth of an IBM Hungarian business partner (shown above), chances are they will overcome their parochial inhibitions. 

But first they have to get educated.  This is where the hardware vendors can help themselves and the ISVs, too.  The observations, analysis and conclusions such as those in this report, for example, are not necessarily intuitively obvious.  They will possibly come as a revelation to many ISVs.

In addition, the hardware vendors can help themselves by playing the role of matchmakers - between the Western ISVs and the local partners.  Being a good matchmaker in business is no trivial task.  It takes diligence, patience, but above all - investment!

Customize, Don’t Standardize Marketing.  Last but not least, the IT vendors must invest in image building, both for their companies and for their products.  Once again, this takes patience, diligence, but above all - investment!  One must not assume that just because a company or a product is household name in the West, that the same is true in Eastern Europe. 

Western Gaffes. Possibly the worst mistake a foreign vendor can make in Eastern Europe is to simply take its Western marketing and advertising campaigns and translate them into local languages.  Sometimes, comical reactions can result with tragic business consequences.

·When Ralston Purina used the image of a bunny for its Eveready Energizer batteries’ ads in Hungary, the local customers thought the company was selling toy rabbits, not batteries!

·When a U.S. baby care company advertised bath soap, it showed a young woman holding her baby.  But the ad scandalized Hungarians who saw an unwed mother.  The model was wearing a ring on her left hand.  Eastern Europeans wear their wedding rings on their right.  “And then Western marketers wonder why people here won’t buy their products?,” a Hungarian ad executive said to the Wall Street Journal, seemingly reveling in the ignorance of Americans.

·Closer to home (i.e., the IT market), one IBM executive told us that his company insisted on conformity of corporate and products’ image.  Armonk insisted on running the “standard” IBM corporate ads in the Russian market.  The ads were simply translated into Russian.  But the translation was so bad, that the confused Russian customers didn’t know if they should laugh or just ignore the ad.  Fortunately, one of them thought well enough of IBM to point out the ad’s ludicrousness to this non-Russian speaking Western executive. 

Reverse Gaffes. Sometimes, the cultural differences can be comical in reverse, too. 

·A senior diplomat at the U.S. Embassy in Belgrade, Yugoslavia, for example, showed us an ad by a local company which sells mobile telephones and provides Internet access.  “They could use a new PR firm,” the diplomat suggested with a chuckle. 

The name of the firm? 

MOBTEL! 

In the local language, the name is quite innocuous.  But to an English-speaking person, it may connote doing business with the mob.

·“Oh, that’s nothing,” commented the publisher of a leading Belgrade newspaper, with whom we shared the MOBTEL laugh.  “There was once a Macedonian confectionery firm whose name was S.H.I.T.”

And in the Albanian language, the same word, minus the periods between the letters, apparently means “(for) sale,” and thus can be often seen in store windows.

  A few years ago (July 1990), the San Francisco Chronicle reprinted an Air France internal memo/joke as an editorial about the foreigners’ unintended misuse of English.  Here are a few highlights:

·Similar to the IBM gaffe in Russia, Coca-Cola launched a multi-million campaign in China, whose proud slogan was: “Bite the wax tadpole!” - the English translation of what the native Chinese thought the Coca-Cola company was telling them.

·An Italian gynecologist advertised his practice as: “A specialist in women and other diseases.” 

·A Romanian tailor had the following English-language sign posted for his overseas customers: “Drop your trousers here for best results.  Ladies may have a fit upstairs.”

·“Don’t enter a woman if dressed as a man,” an Eastern European hotel restroom sign warned.

  h well...

Whoever said that international marketing was easy... r

 

An East Berlin Sign:

“The border runs not between the peoples, but between top and bottom.” (of social classes)

A 1995 photo by Bob Djurdjevic


 

 

 

2. IBM in Eastern Europe: An Incumbent Facing a New Frontier

  A $600 million-business in 1995, growing to $750 million in 1996?; doing business in 20 countries; 9 support centers in 7 countries; over 500 local dealers (PS, POS); over 200 local agents (AS/400, RS/6000); over 90 VARs

IBM SUBSIDIARIES:

                     Hungary                    Since 1936

                     Poland                       Since 1991

                     Czech Republic         Since 1992

                     Slovakia                     Since 1992

                     Slovenia                     Since 1992

                     Russia                       Since 1993

                     Bulgaria                    Since 1994

                     Romania                   Since 1995

                     Croatia                      Since 1995

Deep Roots.  Even before it was “kosher” to do business in Eastern Europe, IBM was there.  It was in Hungary in 1936, when Tom Watson, Sr., was still the company’s CEO.  It was in the U.S.S.R. in the 1970s, during a brief thaw in the Cold War.  It was in the former Yugoslavia in the early 1960s when Marshall Tito was still the boss.  It was there when the Soviets modeled their own mainframe technology after the IBM S/360s, and when they smuggled IBM PCs behind the “Iron Curtain.”  IBM was the incumbent vendor even before it (re)opened its offices in Eastern Europe.  And IBM was among the first to return when Eastern Europeans’ “Velvet Revolutions,” and the guns of Bucharest, tore down the “Iron Curtain.” 

 

 

 

 

 

 

 

Given its deep roots in this part of the world, you would think that IBM is by far and away the dominant computer company.  Well, think again...

IBM is the No. 2 IT vendor in Russia and Poland (behind HP) - the largest countries in the region with a combined population of about 187 million.  IBM is No. 1 in the Czech Rep. and Hungary - the richest countries in the area[2], with a combined population of only 21 million - nine times smaller than Russia’s and Poland’s.  In addition, Russia and Poland are farther from Vienna and have many regional centers, while business in the Czech Rep. and Hungary is more concentrated in the capitals - both only a 40-minute “puddle hopper” flight away from the headquarters of IBM Eastern Europe.

It may seem perfectly rational, therefore, from the profitability standpoint, that IBM should be focusing on the latter two countries.  But in emerging markets, market share has to rank higher than the bottom line!  Emphasizing the Czech Rep. and Hungary (which received an IBM disk plant investment - in Székesfehérvár), instead of Russia and Poland, is like stressing Vermont and New Hampshire while snubbing Texas and California! 

The Czech Rep. and Hungary, however, is also where the money seems to be (IMF, World Bank, EBRD).  Which means that IBM seems to be picking the low-hanging fruit, instead of developing the bigger, but relatively poorer markets. 

Judged by the Western European results, which ranged from revenue declines to meager growth in the 1990s, IBM Eastern Europe’s 25% growth looks great by comparison.  But that’s a complacency trap which its executives should avoid.  Their challenge is not to be lulled by such comparisons.  In addition to picking the low hanging fruit, they should try to “reach the stars through hardships” - “per ardua ad astra,” as the Latin proverb suggests, i.e., get more aggressive in Poland and Russia.  

Good 1995/1996 Results. We figure that IBM’s Central and Eastern European 1995 revenues were about $600 million.  That’s about 16% of the total market, but less than one percent of the company’s worldwide 1995 revenues.  In 1996, even if this IBM region manages to grow its revenues by 25% to $750 million, as we suspect it will, the “Big Blue” will still fall behind its competitors, as we expect the market to grow by 30% to about $5 billion (based on IDC’s 1994 forecast). 

There is a race for the IT supremacy in Eastern Europe in which “no prisoners are taken.”  Companies with great past track records, such as IBM’s, could still end up as respectable “also rans” in this fast moving market.  Especially if its top executives have their eyes on China and Southeast Asia, while competitors pick their pockets in the potentially more profitable Eastern Europe.  An incumbent vendor’s success in this emerging market is only limited by its own imagination; its understanding of it, or commitment to it.

No Pain, No Gain.  As did the explorers of new Western frontiers a hundred or more years ago - the American pioneers who crossed the Mississippi, or the Rio Grande in their quest for riches - today’s multinational companies must live and die by their swords in “emerging markets.” 

And, as did the pioneers of the American frontier, sometimes the multinationals will also fall on their swords.  Seasoned bureaucrats in the developed industrial countries, who try to play the roles of explorers of the world’s “emerging markets,” are particularly prone to the latter predicament.  For, they have all the “wrong” kinds of experiences, and none of the “right” kinds of intuitions.

IBM will succeed in Eastern Europe if it relinquishes its corporate hold on decisions which its local entrepreneurs can make, and challenges them to deliver the value for the money they invest.  If Armonk fails to realize that, well... stand by for a 16% market share to drop to... pick a lower percentage. r

IBM in Eastern Europe:

Armonk: Tight with Money Bag?

IBM SUPPORT CENTERS:

       Systems Support Center                 Ljubljana, Slovenia

       Language Support Center             Budapest, Hungary

       Industry Support Center                Vienna + Kiev, Ukraine

       Education Center                           Bled, Slovenia

       Banking Competence Center        Ljubljana, Slovenia

       CATIA Center                               Bratislava, Slovakia

       Open Systems Center                    Prague, Czech Rep.

       Application Support Center          Moscow, Russia

 

3. IBM AS/400 in Eastern Europe

  Joined at the heart in a quest for renewal; the IBM AS/400 - a “VW with a Rolls-Royce engine,” and Eastern Europe’s people, share common challenges of trying to maintain unique identities in a global market    

      AS/400                        Eastern Europe

        - Born in 1988                        - Reborn in 1989

        - Rose to fame in 1989           - Matured in 1990-1993

        - Hurt by “open systems”       - Hurt by inflated expectations       trend in 1990                      in 1990-1992

        - Rebounded 1991                  - Struggling to find own identity

        - Slowed by Euro. slump           in 1992-1993

          and IBM in 1992-1993

        - Rebounded in 1994-1995    - Rebounded in 1994-1995

        - Poised for solid growth        - Poised for solid growth

          in 1996 and beyond                in 1996 and beyond

AS/400 - the Birth.  It was the time of glasnost (“glasnost”= openness) and perestroyka (“perestroika”= restructuring) in the former Soviet Union.  But also that of Cold War.  It was the time IBM was talking openness, but delivering proprietary systems.  It was the era the Big Blue still looked big and invincible almost everywhere except in its mid-section, where DEC seemed omnipotent.  It was the year after IBM’s “year of the customer” (1987), which gave competitors a chance to boast that “every year is the year of the customer” if you don’t do business with IBM.  It was the time of the Seoul Olympics and that of soul searching; the last of Reagan’s presidency.  It was the year before the Berlin wall came down, ushering new hope and joy in Eastern Europe.  It was the year before freedom was reinvented...

 

 

 

 

 

 

 

 

It was in such a time that a new baby was born on June 21, 1988 in the IBM Rochester manger.  “Silverlake[3]”, as the expectant parents referred to the growing embryo during the early months of the two-year gestation period - a record low by the then IT industry standards - was christened “AS/400” at an extravaganza announcement held in New York, and beamed around the world via satellite TV - the first time thousands of IBM customers, business partners and employees witnessed a live birth of a computer baby.

A “Blue Ribbon” Server

“The way we put it together is what sets (the) AS/400 apart.”

Bob Dies, GM, IBM AS/400 Division

“IBM will probably be very successful with the new AS/400 products,” we wrote in a report published the day the AS/400 was born.  And it was... 

As it turned out, the AS/400’s birth was IBM’s best launch in almost a quarter century (since the birth of the S/360 in 1964). 

Since then, the AS/400 launch has become a model for most subsequent major IBM announcements.  More importantly, the product has become a model for all IBM platforms.  Not just because of its integration philosophy; not just because of its industry orientation; not just because it has circled the globe like a “peace dove,” wooing more than 400,000 customers; not just because it has become IBM’s most profitable system...  But because the AS/400 team has achieved all of the above in the face of adversity, both in the 1989-1990 and the 1992-1993 periods.  Just like Eastern Europe...

The second biggest hurdle to a faster IBM business growth is a lack of Western business partners in this emerging market.  That’s especially discernible in the AS/400
business, whose “bread and butter” are the independent business partners.  To be sure, you’ll find some of the Western companies represented mostly through agency agreements with local service or software providers in some Eastern European countries (e.g., JBA, Fiserv, J.D. Edwards, Ibis, Midas, etc.).  But as we pointed out in the first section of this report, that’s only a token presence which is merely scratching the surface of market opportunities.

AS/400: A Global IT “Peace Dove?”

Big in North America, Surging Eastern Europe

Huge Installed Base.  Over 10 years ago, Dick Williams, at the time an IBM mainframe marketing executive, told us perhaps a bit facetiously that, "UNIX has some nice characteristics.  The most significant of them being a large number of users."  The UNIX market which drew such accolades from IBM's high-end sys­tems people numbered only 100,000 users at the time. 

In the years that followed, and especially after the AS/400 announcement in 1988, and its four major subsequent product line facelifts, IBM's combined AS/400 and the S/3X worldwide installed based has grown to nearly half a million units.  And some of these customers have actually switched from their UNIX applications to take advantage of the AS/400’s simplicity and power.  That means several million people who do actual or potential reference-selling for the AS/400.  Coupled with aggressive advertising and merchandising by IBM, all these items could add up to significant marketing assets for IBM and its midrange partners.  

No wonder that the AS/400 is today by far the world's best recognized name in the midrange computer market.  Its unaided advertising awareness exceeds that of any other IBM or com­petitive midrange system.  This means that the AS/400 software de­velopers, distribu­tors and other services suppliers have the market momentum working for them.  No wonder the AS/400 now boasts over 20,000 applica­tions developed by about 8,000 providers. 

Happy Customers.  One of the reasons the AS/400 has been so successful is that this IBM Division never took its customers for granted; it never developed the "commodity" mentality which became prevalent in so many other IBM segments.  As a result, since the majority of its sys­tems are sold out­right, it would have been easy to fall into the com­moditi­zation trap.  But the AS/400 people continued to treat their cus­tomers as if the machines were on a month-to-month rent, meaning the customer could have thrown them out at any time.  Such attitude has consis­tently earned the AS/400 the world's high­est customer satis­faction ratings and loyalty.

Happy Employees.  The attitude of not resting on its laurels and having to earn its stripes all over again every year, also earned the AS/400 Roches­ter lab and factory the U.S. government's coveted Baldridge Award in December 1990 for manufac­turing and de­vel­opment excellence.  And the various trade and business media continue to give the AS/400 people recognition awards, such as the "product of the year," for example.

Low Cost.  It didn't hurt the AS/400's popularity with customers that the product continues to deliver the industry lowest overall cost of computing.  We figure that the product has been on a 40%+ price-per­formance curve ever since its introduction in 1988.  But the customers' greatest savings come from the low cost of mainte­nance of its applications as compared to other computer platforms.  “The AS/400 is the least expensive environment because of its integrated functionality,” stated a recent (1996) study by IDC.  IDC said that the AS/400 delivered the lowest total cost per worksta­tion compared to UNIX, Novell NetWare and Microsoft NT solutions.

Happy Chairman.  But the AS/400 received perhaps its great­est endorsement when IBM's new chairman and CEO, Louis V. Gerstner, and a former large IBM customer (at American Express and RJR Nabisco), threw out the old office systems, "which were not quite into the 1990's", and installed the AS/400 as his system of choice for the company's world headquarters in Armonk, New York.  In a speech to a group of IBM business partners, Gerstner de­scribed the AS/400 as "the most successful computer system ever introduced to the world."  He attributed its success to its low cost and ease of use.  Gerstner compared other systems (e.g., UNIX) to the "Formula 1" racing cars - a sport he said he knew quite well from a supplier standpoint.  They can go very fast, but "they also burn two en­gines a weekend.  That's $500,000 per weekend per car," he said.  And if you ever drove one of those cars from Rochester to Min­neapolis, he speculated that the car would "probably break down," and the driver "would probably get thrown out of the car."

By contrast, Gerstner likened the AS/400 to a "family car."  As a customer, he said he could not care less about tech­nology - the "bits and bytes."  He cared about "solutions," he said.  "The AS/400 is the best 'solution computer' in the world," Gerstner opined.  Which is why "we are going to continue to support it."  

Happy Business Partners.  The AS/400 Di­vision would not have been able to gen­erate such impressive results for IBM had it also enabled the thousands of its business partners to generate wealth for themselves.  As Gerstner told his Rochester audience, partnerships can only work if both parties win, i.e., make money.  For every $1.00 of processor hardware which IBM sells, the AS/400 system generates $4.30 of addi­tional wealth for someone (see the chart on next page).  And more than half of that additional busi­ness "drag" is available to independent providers of application software, mainte­nance, financing and other service compa­nies.  No wonder so many business entrepreurs have flocked to the AS/400 (more on the business partners’ results on the next page).  “It is the only surviving proprietary system on the market today, because IBM made it open,” said Ed McVaney, of J.D. Edwards, a Colorado software vendor.  “It’s an incredible comeback story.”

UNIX Software  Cos. Turning to AS/400.  Rainier Zinow, of German-based SAP AG, until recently a predominantly UNIX software company, said that SAP has joined the AS/400 program “because our customer base communicated to us that they would like to see (the) R3 running on the AS/400.”  PeopleSoft, another UNIX software vendor, said they turned to the AS/400 for the same reason - to meet their customers’ demand.

Best 64-bit PC Server?  Nor is the AS/400’s simplicity appealing merely to UNIX customers or ISVs.  As we pointed out earlier in this report, nearly a quarter of the new AS/400 sales are coming from the PC LAN base.  This percentage is likely to grow as an increasing number of PC users begin to realize that the conversion from the 16-bit DOS or Windows 3.1 applications to the 32-bit Windows NT or Windows ‘95 world will be no piece of cake. 

“We found the (Windows NT) learning  curve is steeper than one would have thought,” said Arthur Tisi, CIO at New York’s Metropolitan Museum, according to an Information Week story.  “Microsoft said we could have it up and running in 20 minutes.  That’s a fallacy; it’s not realistic.”

Some corporate PC customers also told the Information Week that hidden training, migration and support costs related to Windows ‘95 or Windows NT are rarely mentioned.  Or the fact that the “NT appeal will be limited because it can’t run many legacy DOS and Windows applications, and because it lacks support for a long list of device drivers.” 

All of which only leaves the door ajar for a proven 64-bit system (the AS/400) in accounts where the facts, rather than the hype, matter more.  r


To IBM Business Partners, the AS/400 Means Sharing in Growth and Prosperity  

 

 

 

 

4.1 Spotlight    on...

Hungary

A relatively small country (10.4 million population, 61% urban) with a relatively high income for Eastern Europe ($3,700 GDP/capita), Hungary is rapidly industrializing

 

Land of “Goulash Communism.”  Even before the rest of Eastern Europeans dared think about throwing off the Soviet yoke, Hungary was regarded in the West as the land of “goulash communism.”  The implication?  Putting food on the table, even if the capitalist-style, was more important to Hungarians than adhering literally to the communist dogma.  The country was also the most open of the Warsaw Pact states, which is why it served as an escape route to the West by many Czechs, Poles or East Germans.  In the IT industry, well before the Berlin Wall came down, Hungarian companies and individuals were producing the software designed for Western markets (e.g., for some Israeli companies).  Given all that, one would think that Hungary is light years ahead of other Eastern European countries.  Well, think again...

To be sure, Hungary’s $3,700 per capita Gross National Product (GNP) is the highest in Eastern Europe.  And the country has attracted more investments by multinational companies than any other in the region ($6.8 billion between 1990 and 1994, versus only $2.3 billion for Russia, for example, a country 14 times bigger!). 

But Hungary’s economy has sputtered in 1994-1995, with its GNP rising only about 2%, while its neighbors grew at much higher rates (e.g., Czech Republic).  Its inflation has remained relatively high (19% to 20%), double that of the Czech Rep., for example.  And Hungary’s unemployment of 10% to 11% is three to four times that of its neighbor to the north (Czech Rep.).

Budapest - Center of Hungary’s Business World.  “About 20% of Hungary’s population is based in the Budapest area, and about 80% of the country’s business,” said Zsolt Veres, the country sales manager for IBM, an energetic young executive who speaks excellent English and epitomizes the “go-getter” attitudes of the new Eastern European breed of business people.

As we’ve noted in section three of this report, such a high concentration of business in the capital city makes it easier for IT companies to sell their products.  But the fresh paint and a new look of many retail establishments in the Hungarian countryside also serve to remind the visitors that 39% of Hungary’s population live in the rural areas.

Best AS/400 Country.  In terms of the AS/400’s share of the total hardware business, Hungary is IBM’s best “AS/400 country” in Eastern Europe.  The maturity of Hungarian customers is also reflected in the lowest share of PC business of any other country in this region which we have visited.  The main reason for that is the availability of the top-notch AS/400 applications and the system’s ease of use.

But alas, IBM Hungary, as some the other IBM operations in Eastern Europe could use a little more support from the base - Armonk, that is.  For, although six U.S. multinationals[4] are among the top 10 investors in Hungary during 1990-1993, IBM, a company which has had an active subsidiary there since 1936 - was not one of them.  Since that time, however, IBM did invest in a storage products plant (see page 19).

Still, the combined investments of the U.S. multinationals in Hungary during 1995 represented less than a third of that which even the companies from a tiny Austria have made!  German, Dutch, British and French companies have also invested in Hungary more than the U.S.  Do Americans know something the Europeans don’t?  We doubt it.  It is more likely that they are more ignorant about this market.

POLYGON. In the first section of this report, we’ve already showed you a chart depicting a phenomenal growth of Polygon, one of IBM’s Hungarian business partners, which quadrupled its revenues in just two years (between 1993 and 1995). 

Gál György, a company director and one of the six owner-managers in the firm, told us at his Budapest office that his company had become an unwitting systems integrator for IBM.  “We simply responded to what our customers were asking,” he said, sounding almost apologetic that a greater “vision statement” wasn’t at work here. 

Polygon, which started as a maintenance service company, has sold some $2 million-worth of AS/400s in 1995, by merely “responding” to the customer demand, as György said.  They also shipped about $1 million-worth of IBM PCs, and almost $700,000-worth of the RS/6000s - all on an agent-basis.  In addition, Polygon is an “IBM cabling partner,” and a “networking partner,” the company brochure states.  And it represents Arkansas Systems (an American ISV) in Hungary.

In other words, its shade of “blue” is only a tad lighter than that of the Big Blue logo.  But Polygon’s belief that the AS/400 is the best solution for the Hungarian market is possibly even stronger than IBM’s. 

“In two year’s time,” György predicted, “I am convinced that the AS/400 will have an AIX (i.e., UNIX) card, but not the other way around.”  1In other words, he thinks it is more likely that the AS/400 will attract the UNIX aficionados than the other way around.

Inter-Europa Bank. Such feelings were shared by the top IT managers of Inter-Europa Bank, including Tamás Foltányi, the executive director, with whom we met at the bank’s posh and newly renovated headquarters in downtown Budapest - kitty-corner from the ornate U.S. Embassy and the main Hungarian TV buildings.  The bank, which is 27% owned by San Paolo Bank of Torino, Italy, and whose net profit jumped by 42% in 1994, has four AS/400 systems installed.  One of them is the IBM  top-of-the-line 530 model, on which the bank plans to test SAP’s popular “R3” software.  The bank has 30 IT people, 40% of whom support the AS/400, while some 60% work on its Midas application software. r

4.2 Spotlight    on...

Czech Republic

A 1995 photo by Tanja Anne Djurdjevic

Another relatively small country (10.4 million population, 77% urban) with a relatively high income ($3,600 GDP/capita), the Czech Republic has become the darling of Western investors; how long will the party last?

Land of the “Velvet Revolution.”  While other Eastern Europeans shot or shoved their way out of the Soviet domination, the Czechs shouted themselves into a “velvet revolution.”  In the end, their home grown communists left office quietly, tail between their legs, as the former dissident-playwright, Vaclav Havel, became the new president.  “A trip from the jail to the throne,” is how one Eastern European writer described his colleague’s rise to power in 1990.  Six years later, the Czech Republic, the Western part of the country the world once knew as Czechoslovakia (before the 1990s), has become the new darling of tourists as well as Western investors in Eastern Europe.  

Having invested heavily into the (re)building of the business infrastructure, especially that of its banking and telecommunications systems, some Western economists think that the country has already achieved what it takes to qualify for a full membership in the European Union.  Six of the eight economists interviewed by the Central European Review in April 1995, said they would invest between 10% and 25% of their total Eastern European funds into this tiny country.  The economists from Deutche Bank (Germany) and Creditanstalt (Austria) led the way by earmarking 30% and 25% respectively of their investment portfolio for this purpose.

From Boardrooms to Scaffolds.  And invested they have...  Prague, one of the most beautiful cities in Europe even before its “Renaissance II,” is almost literally being rebuilt while preserving its old charm.  Even before the main summer tourist season began, one could see hordes of tourists speaking scores of foreign languages in its streets.  About the only negative comment about Prague we heard came from a young American student - that there were “too many Americans here.”  It’s unlikely that the city’s hoteliers, bankers or shopkeepers would complain about something like that.

IBM in Czech Rep. IBM formally joined the “velvet revolution” in 1992, when its subsidiary, IBM ^eská republika, was formed.  To overcome the handicap of a deficient local telecom structure, IBM invested early on in installing equipment on the existing TV relays with which to deliver its Global Network.  Such foresight paid off.  Today, IBM services revenue in this country accounts for about a quarter of the total, partly because of this.

Although IBM ^eská republika is second only to Russia in terms of its total revenue, its performance exemplifies what we called “picking of the low hanging fruit” in the section two of this report. 

Instead of marketing aggressively its higher value integrated solutions, such as the AS/400, for example, IBM in the Czech Rep. has been basically taking orders.  And since the slick marketing by Microsoft and HP has made the PCs and UNIX be perceived as “cool” by customers, about 55% of the total IBM ^eská republika hardware revenues were generated by the low-margin PC products.  IBM’s most profitable AS/400 and S/390 platforms, accounted for only 22% and 5% respectively of the company’s 1995 hardware revenues.  Worse than that is the trend.  Both high-margin products’ shares have declined from the year before.

Hall of ^SOB’s main branch in Prague

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

"HP had a longer-term view of the market," said Lumir Srch, president of ITS, a.s., an IBM AS/400 business partner, who has stuck with the Big Blue through thick and thin.  “They made a massive investment into the future.”

Meanwhile, Karel Petrzela, a top IBM ^eská republika marketing executive, seemed merely content to acknowledge that, from an image standpoint, “DEC’s Alpha is known in the Czech Republic for its speed; HP for its UNIX peformance, while IBM is perceived as a mainframe company.”

Ceskoslovenská Obchodní Banka (CSOB). After hearing an IBM executive make such a statement, it was quite refreshing to visit an enthusiastic AS/400 customer.  Pavel Holec, the IT manager for ^SOB, one of the country’s fastest-growing banks.  “The AS/400 is quite popular today (as a server),” Holec said referring to the product’s appeal among his banking colleagues.  He attributed this to a trend toward centralization, which has followed the early phase of IT development in the Czech Republic - buying of decentralized, stand-alone systems.

And Holec knows what he is talking about first-hand.  “This (his data centers) is something like a user laboratory,” he said.  His operation runs the Ibis banking software on a total of 63 AS/400 systems, installed at the Prague head office as well as in 15 branches across the country.  Holec and his team completed the system design and installed the software and hardware in less than a year since the signing of the contract in late 1991.  The ^SOB bank has invested more than $50 million in IT since April 1991.  Its IT department now employs some 200 people.  Still, other Czech banks of comparable size, which don’t use the AS/400, employ “at a minimum twice as many people” in the IT functions, says Holec.  To ^SOB, such savings are one of the key benefits of the AS/400 solution.

Thanks to the advent of Czech telecom systems, Holec’s next plan is to use his AS/400s in a full client/server mode.  “I used to have to wait a long time for international connections when I called the Ibis support in the U.K.,” he said.  “Now I get through in a matter of seconds.  Now, a client/server solution makes sense.”

ITS, a.s.. ITS is an IBM AS/400 business partner which develops and sell software for international trading companies.  Based in one of the few high-rise office buildings in Prague, built in the 1960s by the state-owned Czechoslovak trading company, ITS literally enjoys a high level view of the industry and its city.

Srch, the ITS president whom we had mentioned earlier in this report, said that his company was successful as an AS/400 marketer “despite IBM.”  Back in about 1992, when the “open systems” (i.e., UNIX) trend swept the country, ITS was getting vibes from the IBM people which implied that the Big Blue would not be supporting the AS/400 in the long run.  But Srch and his people kept the faith and stuck with their game plan, convinced that the AS/400’s virtues - as a powerful, yet easy-to-use integrated business solution - would eventually overcome IBM ^eská republika’s lack of marketing commitment to it. 

ITS is still a believer, even though Srch says that IBM continues to lack good advertising, and is losing market share to HP.  “IBM is still ahead,” Srch said, “but only by two points now.”  Sooner or later, Srch is hoping, such trends may serve as a wake-up call to IBM management.

Ding-dong, ding-dong... r

Prague: The Old Town Square

Jan Hus Memorial in Foreground

A 1995 photo by Tanja Anne Djurdjevic

4.3 Spotlight    on...

Poland

Eastern Europe’s second largest country (39 million population, 62% urban) has been growing the fastest (7% GDP in 1995); IBM and the AS/400 are both thriving here

Land of “Solidarnosc.”  Possibly more than any other country in Eastern Europe, Poland has contributed to the fall of communism and rise of market-driven economies.  Led on the ground by a mustached electrician from the Gdansk shipyard, Lech Walesa, who later became the country’s first elected president, and inspired spiritually by the first Pole ever to become Pope (John Paul II), this staunchly Catholic country became a symbol of resistance to communist oppression in the early 1980s.  A simple Polish word, "Solidarnos}," the rallying slogan of the striking Gdansk shipyard workers, became renowned and admired world-over as a badge of courage.  But real freedoms and financial rewards for the Polish people had to wait until after 1989, when the Iron Curtain was lifted on Eastern Europe. 

They Saw the Light First

 

After several years of struggling to privatize its industries and businesses, the Polish GDP shot up by 7% in 1995, according to The Economist, making Poland by far the hottest economy not just in Eastern Europe, but in all of Europe, too!

The country is bigger than Italy, and its economy is much more spread out than it is the case with Hungary or the Czech Republic - as we’ve noted earlier in this report.  Poland’s heavy industry, for example, is concentrated mostly in the southern part of the country.  Yet this has not stopped some top economists such as those from Salomon Bros, and J.P. Morgan, fingering between 40% and 50% of their Eastern European investment portfolios for this country.

IBM in Poland.  IBM had a relatively late start in Poland, setting up shop there in October 1991.  But IBM had high expectations for this market right from the start.  “I was given an $X million quota the first year,” recalled Miroslaw Szturmowicz, the country’s general manager.  “By contrast, HP’s corporate office merely told its Polish manager ‘try to do the best you can, and we’ll back you all the way’.”

But the difference in corporate styles between IBM and HP didn’t stop Szturmowicz and his team from achieving enviable results.  Despite the fact that about 70% of the IT spending in Poland is PC-based, IBM Poland has managed to build up its AS/400 business to about 27% of the total hardware. 

“There was a myth that you could do everything on PCs,” said Szturmowicz.  So rather than wait for miracles to happen, he and his team set out to educate their customers.  Lacking advertising funds, they managed to get the local IT press to write some articles about the AS/400.

Yet getting the Western business partners interested hasn’t been a party.  Some have come and gone, lacking a commitment an emerging market requires.  But others who have stayed, also thrived...

JBA. “The AS/400 is the best option for the Polish market,” said Krzysztof Abramowski, Poland’s sales manager for JBA, a U.K.-based global AS/400 ISV, which started its Polish operation in 1993.  The sales executive praised the AS/400’s ease of use.  “You can put it in a room, turn out the lights, and walk away.” 

The implication?  Even if the AS/400 “takes a licking, it keeps on ticking!”  For that reason, “there is a growing awareness of the AS/400’s virtues,” agreed Marek Dziduszko, JBA’s marketing manager in Poland.

Bank Inicjatyw Gospodarczych (BIG). BIG S.A., a publicly-traded Polish bank formed in 1989, epitomizes the excitement, the energy, the success, the vitality of new Eastern European businesses.  Two young people, Pawel Pytkowski and Renata Strauch, both fresh out of college and in their first real jobs, managed to do in nine months with only four other associates what usually takes scores of finicky Western programmers to accomplish in years.  They put the BIG Bank in business - the 21st century-style!

Using the Ibis software now installed on 11 AS/400 systems - at the bank’s Warsaw HQ as in its eight branches -  these two young executives who share an unpretentious office (their desks face each other), became Poland’s first Ibis/AS400 customers.  “The AS/400 is a good system,” is all this modest young lady would say, who attended no courses at all.  “The system’s self-taught menus are very good,” she added.  Strauch has learned all she knows about the AS/400 and the Ibis software by self-instruction!

She and Pytkowski, her nominal “boss,” who handles the hardware issues while she focuses on software, are a part of a young work force with big responsibilities at the BIG Bank.  Over three-quarters of the bank’s employees are under 40 years of age.  About 97% of them have either a college or a high school diploma. 

So why did the “up and coming,” “MTV generation” people like Pytkowski and Strauch choose a system like the AS/400?

· Security - “most important”

· Easy connection to other systems

· Very easy to learn and operate

No wonder BIG Bank is now also making big profits - thanks to the AS/400 and the people like Pytkowski and Strauch.  They had the foresight and the courage to do what’s best for their business, not what’s fashionable at the moment. r

  5. Some AS/400 Lore

What to do when a cow runs dry

(from ANNEX BULLETIN 91-23, 4/22/91)

            "'I have portraits of my family here,' said Bob LaBant, the top executive of IBM's Applications Business Systems (ABS) line of business (LOB), pointing to the three poster-size photos of the new AS/400 models displayed at last week's IBM preannouncement meeting for industry consultants in New York.  His remark drew laughter from the group.  Later the same day, however, in a dinner conversation, LaBant also explained how some old 'down home' Midwestern farming truisms helped guide his Rochester, MN, development people in their marketing strategies."

            "Inside and outside IBM, some have referred to the highly successful AS/400 line as an IBM 'cash cow.'  And with good reason.  In 1990, for exam­ple, this line grew at over 20%, and 'achieved top financial performance in IBM of any LOB,' according to this senior executive.  But the cautious LaBant, himself from the Midwest (Ohio), worried about what would happen if the cow ran dry.  That's when a member of his Rochester team, a native of Wisconsin who comes from a dairy farm family, jumped in.  'Well, you know what you have to do when a cow runs dry, don't you?' he asked LaBant.  'No, I don't,' re­plied LaBant.  'You've got to get her a bull!' explained the Minnesotan.  'Once the cow has her baby calf,' he continued, 'you are back in the dairy business.' 

            Well, the IBM AS/400 'cash cow' has just delivered its offspring -- all 11 of them -- each more nimble and more powerful than its parent... We do not know how IBM managed the fertilization process, or how long the gesta­tion period lasted.  But we hear that the morning following the above conver­sation with LaBant, the IBM Rochester staffer found a big wrought iron sculp­ture of a cow (or was it a bull?) on his office desk."  r

Las Vegas and Rochester: Glitz and Substance

(ANNEX BULLETIN 91-23, 4/22/91)

 

            "Two years and 10 months ago, the six original AS/400 models premiered at a New York Hilton gala IBM unveiling.  The second generation was scheduled for a launch in front of over 4,000 Common (user group) customers in Las Vegas.  True to the reputation of this glitzy Nevada desert city, the IBM introduction hoopla promises to be -- well, glitzy, what else?  For his keynote speech, LaBant will ride a motorcycle onto the stage, where a magician who will transform his wife into a live Bengal tiger.  The beast, in turn, will become the new AS/400 -- all to a crescendo of music and spectacu­lar lighting effects. 

            Despite the planned splashy Las Vegas launch, there is something truly 'earthy' and 'home-spun' about this Rochester-developed product line.  Maybe that's because of the down-to-earth nature of the Minne­sota farming town in which it originated.  Rochester's two claims to fame are the IBM lab/plant and the Mayo Clinic.  'If you are not employed by either, chances are you are a dairy farmer,' one of the local people explains."  r

A small team of developers in Building 15 of the IBM Rochester (MN) lab took on the IBM bureaucracy.  And won!  So, John Thompson, an IBM senior vice president, promptly gave them an "Energizer Bunny," as a symbol of their courage.  The developers then wired the bunny's heart into an AS/400.  The two­some now flash in unison.

What did the "Rochester rebels" do?  Try to kill two birds with one stone.  They figured out a way for IBM to make money while testing new technology.  Instead of kissing up to the bosses, and doing what seemed "politically cor­rect," they did what they felt was right.  The new AS/400 Advanced 36, the first IBM system to use the 64-bit POWER/PC chips, had to be built anyway so as to test the new technol­ogy, according to Glenn Van Benschoten, the manager of AS/400 hardware develop­ment.  "So why not test it under the lower demands of S/36 customers, while offering them an attractive way to upgrade for their old system?," the Rochester team reasoned.  Why not indeed?  Except that it seemed unorthodox, at least in the AS/400 world[5].  But the Rochester team battled on, refusing to take "no" for an answer from some "doubting Thomases" on the AS/400 HQ staff. 

The rest is history... 

The Roch­ester team got its "Energizer Bunny" to go with its field test.  The growth-minded S/36 customers will get an upgrade option which is five to eight times more powerful than their present system.  And they will be ready for object-oriented upgrades once they become available on the AS/400.  The IBM treasury will get an unexpected cash infusion from the new technology instead of a bigger lab bill.  Finally, the company's senior management will be able to point to this story an example of "people power" at the "new IBM."  As a result, even those who had initially opposed the idea will now be able to share the benefits of a bril­liant marketing move - by the engineers!

The preceding anecdote, which Bill Zeitler, the former IBM AS/400 assistant general manager, shared with a group of consult­ants in San Francisco in 1994, exempli­fies why the IBM Rochester people have been so unique.  And why they've become so uniquely successful.  "Gerstner's chal­lenge is to figure out how to transplant the Roch­ester model elsewhere in IBM," said one former IBM executive who has worked with, but was never directly re­sponsible for the Rochester operation.  "These people really know their customers and their mar­ketplace." r

Gerstner Delivers “Vision II

(from ANNEX BULLETIN 96-15, 3/04/96)

Nick Donofrio, the head of IBM server businesses, picked up right from where (the IBM chairman) Gerstner left off in his Mar. 4 address to analysts in New York).  Not just in terms of content, but also by displaying an almost evangelical zeal about the righteousness of the IBM strategies.

“We continue to focus maniacally on the competitiveness of our server platforms,” Donofrio said right off the bat.  He added that both the AS/400 and the S/390 systems hold the No. 1 market share positions in their markets., while the RS/6000 and the PCs are among the top three.

AS/400.  Donofrio said that there are now over 360,000 AS/400s installed worldwide, along with about 150,000 S/36s.  The AS/400 market now has about 10 million end users running some 28,000 applications, most of which were developed by its 8,000 business partners.  And even though 1995 was the year in which the AS/400 tried to go through a “transformation without disruption” (to customers), as Donofrio put it, it still managed to attract new customers to the tune of 20% of total shipments.  That’s because the AS/400 has been proven to offer the lowest overall cost of ownership of any system, said Donofrio, citing an industry study in support of this claim. 

Why are these AS/400 virtues not more widely known on Wall Street, even if Main Street is in love with the product?  Because “people tend to focus on the purchasing event, not the owning event,” explained Donofrio. r


Table 1 - AS/400 Financial Results

"THE END"


[1] Based on the Deutsche Bundesbank statistics.

[2] Hungary and the Czech Rep. had the $3,700 per capita GDP in 1995, versus $2,900 in Russia and $2,300 in Poland.

[3] “Silverlake,” the name of a small lake in Rochester, MN, was the IBM code name for the AS/400.

[4] The six top U.S. multinationals are: 1. GE; 2. Ameritech; 3. US West; 4. GM; 5. Alcoa; 6. Ford.

[5]IBM's mainframe developers have often introduced new chip technology first in smaller, air-cooled systems, before shipping them in volume in the top-of-the line machines.

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Volume XII, No. 96-32
June 14, 1996

Editor: Bob Djurdjevic
Published by Annex Research;
e-mail: annex@djurdjevic.com

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