Ibm's Parallel Power Rangers

How to climb the ladder at today's IBM? Be a team player, and focus on the customer. Just ask Irving Wladawsky-Berger. On Jan. 6, the 49-year-old computer scientist--dressed in jeans and a sweater for an all-day seminar--was unexpectedly summoned to the Armonk (N.Y.) office of IBM Chairman Louis V. Gerstner Jr. The big boss wanted to break the good news: His tiny (by IBM standards) $200 million business unit was being elevated to a full-blown division, and Wladawsky-Berger was being promoted--even as Gerstner was pushing out two high-profile, long-time executives.

Gerstner stressed that it had been teamwork and market focus that won Wladawsky-Berger the promotion. "He wanted to make sure I understand the cultural characteristics so there would be no misunderstanding in his senior management team," says Wladawsky-Berger.

The message: Gerstner needs more IBM executives to do what Wladawsky-Berger does. In three years, he has built a thriving business around a new kind of large-scale computer--so-called parallel machines that use dozens of ordinary microprocessors and other off-the-shelf parts to deliver mainframe power in a compact, relatively easy to use, and inexpensive package.

In the process, Wladawsky-Berger's crew took innovative approaches that caught Gerstner's eye. While avoiding the "not-invented-here" syndrome that has often slowed IBM's entry into new markets, they were still good team players. They used technology that had been developed--and paid for--by other IBM units. Their SP2 system is built from the guts of IBM's RS/6000 workstation, which uses the PowerPC chip developed by IBM, Apple Computer, and Motorola. The SP2 also uses AIX, IBM's version of the UNIX mperating system so that the 10,000 programs that exist for RS/6000s run on the machine. Disk drives come from an IBM group in San Jose, Calif. And technology from IBM's lab manages the system's internal communications.

PROFIT MONSTER. Hook it all together, and you have a state-of-the art parallel computer and a tremendous profit producer. Gross margins on the SP2 are about 58%--significantly higher than the 40% IBM gets for traditional mainframes. Wladawsky-Berger's approach cuts both cost and time to market: "We inherit all the hard work others have done and then concentrate on getting to market as fast as humanly possible," he says.

Timing is everything. And the SP2 puts IBM in the right place at the right time. In fact, because the machines excel at work such as scanning huge databases, they are sparking new uses--and new demand for--large-scale computers. That's good news for Wladawsky-Berger's Power Parallel division, whose sales are expected to more than double, to around $500 million in 1995. "In the past, you would have to go to a mainframe because they were the only things that could handle large applications," says Revlon Inc. Chief Information Officer Gene Pinadella. "But parallel computing has taken away some of the reason you would stay with a mainframe." Revlon will run North American operations on an SP2.

The success of IBM's parallel machines will take some of the sting out of the inevitable decline of conventional mainframes, a $7 billion business for IBM. Market researcher Gartner Group Inc. estimates that the total market for such large-scale parallel machines will skyrocket from last year's $600 million to $5.3 billion in 1998. The new technology will then eclipse the market for mainframes, which by 1998 is expected to contract to $5 billion (chart, page 81). Analysts expect IBM SP2 sales to hit $1 billion by the end of 1996. Already, IBM has shipped 350 machines--ranging in price from $150,000 up to $40 million.

For the new machines, the killer application is data-mining--the ability to quickly sift through millions of bits of data to find patterns or similarities. For example, IBM says a retail chain searching sales data with an SP2 made an interesting discovery: 28% of women who buy cosmetics also buy greeting cards. Now, that customer is making use of such findings to design a new layout for its stores--with cosmetics and greeting cards closer together.

OPEN DOORS. For John Alden Life Insurance Co., the machine is sorting through millions of medical claim forms to give management a moment-by-moment picture of the business. "Decision support is where this technology will do well," says Sullivan McConnell, director of information technology. "Getting the information faster is how we're competing in the '90s." McConnell says the SP2 finishes "in tens of minutes" tasks that took a mainframe all night.

The promise of computing power that is faster, cheaper, and more flexible is opening doors in places IBM was never welcome. Bose, the Boston-based maker of high-fidelity speakers, is one of Hewlett-Packard's biggest customers in New England. But Bose researchers wanted to use powerful software to analyze components for acoustic properties and kept running out of steam on existing computers. The best HP had to offer was a powerful parallel computer that is still in development. "IBM had a more established technology," says Dwight Schirmer, purchasing agent for Bose. "This is the first piece of equipment we've purchased from IBM, including PCs. It was a breakthrough."

IBM may, indeed, have a breakthrough product in the SP2. But Wladawsky-Berger can't do it alone. He's depending on the rest of Big Blue to keep the pieces he uses competitive and low-cost--a risky strategy, since IBM'S workstation business already lags behind such suppliers as Sun, HP, and Silicon Graphics. "There is a critical link between one's workstation business and one's [parallel] business," says Greg Papadopoulos, a former Thinking Machines Corp. employee and now chief scientist for Sun Microsystems Inc.'s server unit. "The workstation business builds volume." Of course, any SP2 sales help IBM's workstation business, too. That's the kind of teamwork Gerstner rewards.

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