October 2003

HP’s sales of 3000 wind down

Customers reach for new systems, but not at last-minute or on HP’s advice

HP is putting on a sales drive to produce a strong final month of its fiscal year — but much of the HP 3000 community did its shopping for new systems well before this month’s end of HP sales deadline.

HP’s notices about the end of new system sales have not been a significant factor, according to reports from customers and resellers, reflecting a community that continues to keep to its own path, even as HP exits server sales for the 3000. Some sites are still learning that HP is leaving.

“We’ve still finding people who do not know it’s end-of-life yet,” said Jack Harbaugh, who manages new system sales for authorized reseller Pivital Solutions. The reseller that just joined the HP 3000 sales ranks this spring found a customer who wanted to add “200 to 300 new users,” according to Pivital’s president Steve Suraci. “They said, ‘What do you mean we can’t get the system after Oct. 31?’ “

The reseller’s field sales report echoed a pattern from other channel members and HP 3000 sites: HP’s communications about the system’s “end of life,” as the vendor has been calling its march to the date when HP stops selling new systems, haven’t motivated much last-minute buying. Customers have kept to their own schedules, and many have stocked up long before the final month.

Pivital’s surprised customer already has an existing N-Class server, a more common pattern among those buying HP’s last generation of HP 3000s. “A lot of the last-minute customers that we are getting are not 9x7 and 9x8 customers. They’re N-Class and A-Class customers, people that are somewhat progressive and taking one last crack at it.”

A deadline with flex

HP has advised its channel the system will not be on any HP price list for Nov. 1, but the vendor has also told customers and resellers that orders placed by Oct. 31 will be honored. Several resellers added that North America’s 3000 distributor Client Systems was going even further to flex the sales deadline. The distributor has told two resellers that if a firm quote was extended on a deal by Oct. 31, the 3000 will be delivered to the customer.

The speed of that delivery seemed to be slipping during the last quarter of HP’s 3000 sales. Cognos Director of Customer Operations Bob Berry said that he’s heard reports of 3000s taking longer to arrive than ever before. And Pivital’s officials said an order placed in the early part of August did not arrive until a month later for an A-Class HP 3000. “Those used to be off-the-shelf systems,” Harbaugh said.

Pivital’s Suraci has been telling the customer base the N-Class systems are likely to be a rare item in the used marketplace, too. “At most it’s in about 5 percent of sites,” he said of the N-Class.

Kirk Olson of reseller Cerius said the company is offering customers last-minute promotions. But the reseller said that late sales traffic hasn’t been overwhelming.

“We have not seen a large number of last-minute orders for the e3000, nor have we seen any close-out promotions from HP,” Olson said. “The HP e3000 marketing team is basically down to one person — Alvina Nishimoto — and she is very busy just trying to keep up with all the e3000 issues.”

Business at Cerius is leading away from the 3000. “Our largest e3000 customers have either transitioned or are very close to final conversion to new platforms,” Olson said, with three out of four applications moving to Unix and the rest going to Windows platforms.

Single-system 3000 customers at Cerius are homesteading, “but looking for new applications. Only 25 percent of these sites have moved to new platforms. Many of these users are going to move toward their application vendor’s new platform.”

Customers make plans

Whether they are staying on the 3000 or leaving, customers who responded to our September survey were putting 3000s online this year for the first time. “Since we decided at the end of 2002 to homestead, we upgraded our hardware at the beginning of 2003,” said Ken Cook at Progressive Stamping in Royal Oak, Mich. “Our main concern now is hardware support for the future, but as the third-party support companies come online I think we’ll be okay. For right now the plan is to hang on to the 3000 for as long as possible.”

Technical Services Manager John Bawden at QualChoice said the company wanted to upgrade next year to a used system, even though it has already planned to migrate. “But the economy and the high cost of software license upgrades makes the likelihood of that happening very doubtful,” Bawden said. “Odds are we will still be running our current systems into 2006 and maybe longer.”

Concern over the total cost of any upgrade, including software fees, is looming over sites. John Pickering, a consultant at a North American wood product manufacturer, said negotiations with software companies may block any last-minute sale.

“We're currently busy putting a quick proposal together to buy a new 3000,” he said. “We’re looking at replacing our Series 969 with a new N-Class before they go off the price list. The PowerHouse upgrade fee threatens to kill the whole N-Class deal. We will attempt to negotiate with Cognos.”

Cognos’ Berry said that application providers have been pushing the urgency to get to A-Class and N-Class systems. “We’re still aggressively helping any customer move to A and N-Class. Our year starts in March, and through August it’s been a very good year. We’ve seen a lot of people move to these boxes.” He added that September has shown a letdown, though.

Pickering said the price of his upgrade looks more attractive at the end of sales. “In spite of our distaste for HP's unceremonious dropping of the 3000 line, they have made the offer just too good to pass up. They really seem to have recognized that they need to go to extra lengths to buy back some customer loyalty and good will.”

Even those sites whose future application path is already assured are purchasing N-Class servers. Joe Dolliver at healthcare consultancy Axiom Systems said the company’s clients who use Amisys/3000 software have moved to more modern hardware, even though Amisys has the new HP-UX Amisys Advance ready.

“I have helped some of my old AMISYS clients leap forward to purchase HP 3000 N-Class systems while they are waiting to migrate to Amisys Advance,” Dolliver reported.

A number of upgrades “in the double digits” at a major North American client took place over the last year to get N-Class servers installed, according to a manager who wanted to remain anonymous. These systems will upgraded as well, even beyond when HP can sell extra processors. “If HP does not have the parts, we will look in the secondary market,” the manager said. “I am sick to see the HP 3000 platform be discontinued.”

The option of a used 3000 marketplace was cited often by those who responded to the survey. “For now we're staying pat,” said T. Keith Robertson of Comsonics. “Any improvements to our 3000 will come from the used market. HP's treatment of the 3000 community has soured me on their products. They seem more intent on selling printers and notebooks than back-end servers. Our eventual migration path may or may not include an HP server. ”

For some customers, even a move to the more-available 9x9 systems — easily purchased on the used market — as an upgrade offers an improvement.

“The end of HP 3000 sale date does not affect us,” said Dan Buckland of retailer Hickory Farms. “We upgraded in 2002 from a Series 959-400 to a 989-450. It’s a fantastic difference.” Hickory Farms uses the Ecometry e-commerce application and plans to move to the HP-UX version in 2005 or 2006.

Price, and some return on the investment of a current system, will motivate customers like Quadax, Inc., a healthcare billing outsource firm. Even with an intention to migrate, a hardware purchase could happen there.

“We might purchase a new machine if we can swing a deal with one of our old ones,” said VP of Information Systems Gene Calai. “We plan on running our current 3000s for some time. And we have finally started putting some serious effort into researching migration.”

A speed bump

Resellers were reporting that while the 3000 upgrade business has been better during 2003 than in prior years, they don’t expect pent-up demand to explode during October. Customers have been doing their purchasing all year long.

“We’ve been all about Oct. 31 ever since we got into the game,” Pivital’s Suraci. “If there’s going to be a wave at the end, it’s going to be no more than a speed bump. It’s certainly not going to be a big pile of upgrades that hit before Oct. 31.”

Pivital’s Harbaugh said that HP continues to lay off people in its organization that know the 3000 line, making the upgrading more difficult. “The last thing those people care about is selling an HP 3000 as they go out the door.”

HP hasn’t offered last-quarter incentives to resellers of Pivital’s sales volume, Suraci said. “Those kinds of incentives are for the Logicals of the world,” he said. But even at Logical, one of the US nationwide sources for new 3000s, volume has not been any heavier of late.

“Things in the 3000 arena have been slow for us, as you might expect,” said Bill Carter, Logical’s HP liaison. Carter said that Client Systems’ president Mike Murphy told him “if we got our quotes in to him through October, we could order beyond that date. He’s expecting things to pick up.” The distributor will be operating its Phoenix 3000 used system operations beyond Oct. 31.

The used marketplace not only has a longer future, more certain future, but customers are looking toward better value there. Steven Waters, the VP of Systems for Cannex Financial Exchanges Ltd., said 3000 purchases will sweeten an already attractive ownership picture.

“At Cannex we are still counting on the used market for our HP 3000,” Waters said. “In fact, just yesterday we purchased a 969/120 for disaster recovery purposes. For us it is business as usual, and we plan to revaluate sometime in 2005. But for now, we will enjoy rock bottom prices for rock solid hardware.”