Corporate IT Buying Behavior & Customer …...2007/08/15 · Corporate IT Buying Behavior &...

© 2007 Technology Business Research, Inc.

TBRT EC H N O LO G Y B U S I N ES S R ES EAR C H , I N C .

August 15, 2007

Corporate IT Buying Behavior & Customer Satisfaction Study: x86-Based Servers

Second Calendar Quarter 2007

Author: Julie Perron

Publish Date: August 15, 2007

281.7IBM

183.6Dell

184.0HP

2Q07 TBR RANK

2Q07 TBR SCOREx86-BASED SERVER VENDOR

IBM Market Intelligence

© 2007 Technology Business Research, Inc.2

Second Calendar Quarter 2007x86-Based Server Customer Satisfaction

TBRTechnology Business Research, Inc.

Executive Summary 3State of the Marketplace 4The Score in 2Q07 5Competitive Strengths and Weaknesses 6Defining Events of 2Q07________________________________________________________________________8Most Noteworthy Events 92Q07 Event Summary 11Annotated Analysis: Dell Explainer_______________________________________________________________16TBR’s Watch List 18Historical Record 27

2Q07 In-depth Analysis 29Understanding the 2Q07 Ranking Positions 30Analysis of Shifting Current Positions 33Tracking the Satisfaction Indices 35GAP Analyses: Tracking Expectation Fulfillment 39Trends of the Reporting Period 52Improvements GAP Analyses 55The Loyalty Factor 58x86-Based Server Differentiation 62

Appendix A: Analytical Graphs and Tables 66Appendix B: x86-Based Server Customer Satisfaction Scores 4Q04 Through 2Q07 76Appendix C: Calendar Quarter Movement – Past Four to Six Calendar Quarter Scores_______________________________79Appendix D: Historical Strength & Weakness Analysis for Selected Attributes 86Appendix E: Satisfaction Trends for Key Server Satisfaction Attributes 88Appendix F: Categorical Responses to Performance Differentiating Attributes _____________________________________99Appendix G: Study Design & Methodology 107Appendix H: Analytical Procedures 114Appendix I: Survey Instrument 123

Table of Contents





Executive Summary





IMPORTANCE OF/SATISFACTION WITH POWER & COOLING

AND VIRTUALIZATION SOLUTIONS

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

Power & Cooling Virtualization Power & Cooling Virtualization

Importance (5 pt. scale) Satisfaction (7 pt. scale)

DELL HP IBM

TBR

SOURCE: TBR.

State of the Marketplace

RECENT CONTRIBUTIONS FROM DELL:

TBR expects server consolidation and virtualization efforts will take center stage at Dell in response to customer requirements, as those suggested (to the right).Supplemental cooling systems based on refrigerant through partnership with Emerson (Liebert XD);Energy Smart services providing assessment and optimization;Energy Smart PowerEdge server models;Dual Dynamic Power Management (power regulator) with Opteron servers.

RECENT CONTRIBUTIONS FROM HP:

Virtualization strategy extends not only across server, blade and storage but I/O as well;HP VirtualConnect Ethernet and Fibre Chanel Virtualization modules to reduce administrative costs/time through simplified connectivity and management of blades;Power-capping capabilities added to HP Insight Control;Thermal Zone Mapping (TZM) providing 3-D model for analyzing datacenter airflow;HP Proactive BladeSystem Service includes power and cooling management;Upcoming: Dynamic Smart Cooling (DSC) uses sensors to actively manage/adjust AC conditions.

RECENT CONTRIBUTIONS FROM IBM:

New, low-wattage x86 servers announced in April, including quad-core Xeon, blade servers and dual-core Opteron choices;Calibrated Vector Cooling, an IBM proprietary solution for maximizing air flow inside racks and blades;Increased blade density (through flash drives, low-voltage processors and high bandwidth connectivity) to optimize virtualization;Project Big Green to improve water management and carbon outputs at datacenters.

Most Pressing Industry Requirements Believed to be Power & Cooling Solutions and Virtualization

Forming a baseline for future study iterations, TBR asked study participants* how important power & cooling and virtualization solutions are to their organizations, and how satisfied they are with their systems manufacturers’ current solutions.The feedback: The solutions are seen as of moderate importance (ranking just below server management tools) in relative importance compared to traditional requirements for product reliability andservices. Satisfaction came in at the lower end of the scale relative to the traditional categories we measure.* Caution: Small sample base. TBR began asking the question in April, just three months of data represented here.





Dell Regains No. 1 Ranking (Alongside HP) After Two-year Absence

Dell only competitor whose weighted satisfaction index (WSI) advances (+1.1%)

• Satisfaction gains were led by delivery time and phone support.

• Satisfaction with server value and ease of doing business increased moderately.

HP’s WSI recedes by 1.5%• Satisfaction with technical support (phone, on-site)

declined most significantly.

• Most remaining areas exhibited moderate-level declines, suggesting a broad-based correction in position.

IBM’s WSI declines an additional, albeit modest, 0.8%

• Two areas exhibited significant levels of declining satisfaction – delivery time and server management tools.

• Remaining categories stabilized following substantial declines of 1Q07.

The Score in 2Q07

Current Patterns: • Dell appears to be continuing its recovery pattern, previously stalled by

its declining positions in 4Q06.

• While HP’s overall position has corrected, its historical competitive strengths remain unencumbered.

• Progress established since 2Q05 has been entirely given back by IBM.

2Q07 vs. 1Q07 WEIGHTED x86-BASED SERVER SATISFACTION

RATINGS AND RANKINGS

85.3

84.0

82.481.7

83.6

82.6

78

80

82

84

86

1Q07 2Q07

HP IBM Dell

1

1

2

1 1

2

SOURCE: TBR.

TBR

2





Competitive Strength & Weakness Determinations Point to Strengthening Dell Positions

Determinations Based on Two-pronged Results: Statistical Significance Tests (Three Tests) and GAP Analyses (Two Tests)

• Dell has been transfigured: the company presented with three competitive strengths that were last observed up to two years ago and recovered from past challenges in phone support and management tools.

• HP retained its two product/solution-oriented competitive strengths, while its 1Q07 competitive strength for overall valueproved to be short-lived.

• IBM’s warnings from 1Q07 accelerated into full competitive weaknesses, while the company relinquished its previous vestige of strength in phone support.

Competitive Strengths & Weaknesses

What were the defining moments of 2Q07?• Although HP is meeting some new challenges, it has tenaciously

defended its top-ranking position by upholding inordinately high satisfaction ratings for hardware quality and server management tools.

• Dell is beginning to show that it does have the ability to solve past challenges: areas of chronic weakness are continuing to mend, while long-lost competitive strengths (value, delivery time, ease of doing business) are resurfacing.

• IBM’s performances have now been compromised for a full six months, leading to both an acceleration of its 1Q07 warnings into weaknesses and the loss of a previous strength for phone support.

YELLOW shaded boxes represent areas where positions have declined, e.g., competitive strength downgraded to neutral, neutral downgraded to warning, etc.

BLUE shaded boxes represent areas where positions have improved, e.g., removal of a warning, transition from weakness to warning, emergence of a new strength, etc.





Competitive Strength & Weakness Determinations Confirm Ranking Positions

Competitive Strengths & Weaknesses

• HP continued to hold its No. 1 ranking position in 2Q07 due to its continuing and compelling competitive strength for hardware reliability along with its competitive advantage, albeit softened, for server management tools. Yet, it is largely due to the reliability advantage that HP remains a sector leader. Hardware quality is the attribute most greatly influencing the WSI score, and any competitor to grab this competitive win becomes largely unshakeable.

• Dell achieved a WSI rating just 0.5% behind that of HP, closing a gap that was as great as 3.2% in 1Q07. Dell regained three of the competitive strengths it has not shown since pre-3Q05. Competitive advantages within server value, delivery time, and ease of doing business all fall within the middle range of the weighted attributes. Dell’s position was also enhanced by its recovery from past competitive warnings (for phone support and server management tools).

• IBM’s WSI measures a 2.3% distance from that of Dell, with this alone explaining its lower ranking position. In addition, IBM was the only vendor with competitive weaknesses and/or warnings in 2Q07, all occurring in the same areas where Dell exhibited competitive strengths. Clearly, IBM’s challenges are in relation to its marketing muscle and not its products and solutions.

Dell and IBM highlighted performances represent the inverse of one another: Dell’s strengths = IBM’s weaknesses.





2Q07 Represents an Energized Reporting Period for Dell, While Competitors’ Positions Soften

• Many of Dell’s scores increased in 2Q07, led most substantially by satisfaction gains for delivery time, phone support, overall value, and ease of doing business. There were no areas where satisfaction declined significantly.

• HP’s score corrections occurred systemically: declining positions were observed across the board in 2Q07 in contrast to largely improving positions in previous reporting periods. Only two of the occurrences where satisfaction declined, however, met the requirements for being statistically significant: on-site support and phone support.

• For IBM, only delivery time and server management feature positions dipped significantly. The remaining positions were largely stable.

Defining Events of 2Q07

• Across all four categories where Dell’s positions improved in 2Q07, competitors’ positions fell back. This contributed to Dell’s reclaiming its delivery time, value and ease of doing business competitive strengths from periods past (pre-3Q05). In addition, the situation also contributed to Dell’s recovery from a phone support competitive warning.

• The least amount of movement occurred for all three vendors in the area of hardware reliability, where HP retained its competitive strength position for the fifth consecutive reporting period.

Proportional shifts of 2% or greater are considered significant changes.

PERCENT CHANGE IN MEAN POSITIONS, 2Q07 vs. 1Q07

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

Del

iver

y Ti

me

Har

dwar

eQ

ualit

y/R

elia

bilit

y

Pho

ne S

uppo

rt

On-

site

Sup

port

Rep

lace

men

tP

arts

Ava

ilabi

lity

Ser

ver

Man

agem

ent

Ove

rall

Val

ue

Ove

rall

Eas

e of

Doi

ng B

usin

ess

Ove

rall

Sat

isfa

ctio

n

Dell HP IBM

SOURCE: TBR.

TBR





TBR’s List of Performance Differentiators Shifts Due to Strengthening of Dell Positions Against Weakening Competitors

Most Noteworthy Events in Context

Technical support (phone support/on-site) was no longer a performance differentiator in 2Q07, due largely to Dell’s recovering positions against competitors’ (HP in 2Q07; IBM in 1Q07) positions.





TBR’s List of Performance Differentiators Shifts Due to Strengthening of Dell Positions Against Weakening Competitors

Most Noteworthy Events in Context

New Performance Differentiators in 2Q07: Delivery time and ease of doing business. In these areas, Dell reestablished dominance after a lengthy (nearly a two-year) hiatus during which customer perceptions had merged. These replace the currently absent technical support areas as previous performance differentiators.

Subtle Shift: HP held the position of dominance for server value in 1Q07. It was to be a short-lived honor, as Dell reclaimed it in 2Q07, for the first time since 2Q05. During the interim (3Q05 to 4Q06), all three competitors had comparable performances.





Leading Performance Differentiators: Hardware Reliability and Server Management Tools, Both Favoring HP

2Q07 Event Summary – At A Glance

See Notes Page for clarification of analytics.

SOURCE: TBR.





Leading Performance Differentiators: Customer Services Favor Dell over IBM

2Q07 Event Summary – At A Glance

See Notes Page for clarification of analytics.

SOURCE: TBR.





Dell’s Yearlong Recovery Leads to Reclaimed No. 1 Ranking

• Dell was the only competitor to show an improvement in its performances during 2Q07. This resulted in the most stable yearlong trendline (net shift 0%, or a wash) as Dell continues its recovery pattern.

• The 1.1% increase in Dell’s WSI in 2Q07 was driven predominantly by significantly rising satisfaction for delivery time and phone support, enhanced by moderately improving ease of doing business and server value satisfaction.

• Dell’s competitive profile shows a transfiguration: Dell regained its delivery time and server value competitive strengths (not observed since 2Q05), its ease of doing business strength (last observed in 3Q04), while recovering from its previous phone support and server management warnings.

• Dell satisfaction positions are currently at or above their high points of the year across all areas but phone support. Yet, its phone support satisfaction position achieved parity with that of HP in 2Q07.

• Success & Challenges:

• Successes: Delivery time, ease of doing business, server value.

• Challenges: Phone support, on-site support, server management, differentiation strategy.

• Bottom Line: Dell has benefited from strengthening its marketing arm (through reestablished competitive advantages for delivery time, value, and ease of doing business) while resolving technical support issues (no longer cited with competitive warnings). While the company benefited somewhat from its competitors’ weakening performances, there has clearly been an ongoing recovery in place for the past 18 months that has accelerated during the past two reporting periods.

2Q07 Event Summary - Dell




TBRTechnology Business Research, Inc. 2Q07 Event Summary - HP

HP Staunchly Defends its Strong Competitive Position Based on Perceptions of Solid Product Quality & Functionality

• HP experienced an unusual decline in positions in 2Q07. That the decline was systemic suggests that it may have been an expected correction following a long run of steadily rising satisfaction and loyalty positions. This pushes HP’s yearlong net position slightly into the red (-0.3%).

• The 1.5% decline in HP’s WSI in 2Q07 was part of an overall correction, with the exceptions of technical support where positions declined more significantly for both phone and on-site support satisfaction.

• HP’s 2Q07 positions remained largely stable from past positions for the year, with the exceptions of all areas of technical support, including replacement parts availability, where current positions are considerably lower than those earlier in the past year.

• HP’s competitive profile has largely remained intact. The company maintained its compelling hardware reliability competitive strength into 2Q07 (representing its fifth consecutive win) and its server management tool strength (representing its third consecutive win).


• Successes: Hardware reliability, server management tools, customer loyalty, differentiation strategy.

• Challenges: Phone support, on-site support, meeting requirements of a diverse mix of customers.

• Bottom Line: HP has carved out its success as a No. 1 competitor based its customers perceptions of the quality, functionality and value of HP products and solutions (through bulletproof competitive advantages for hardware reliability and management tools). Today, expectations may be rising relative to support services due to significant customer challenges in the datacenter as environments become increasingly mixed/diverse.




TBRTechnology Business Research, Inc. 2Q07 Event Summary - IBM

Marketing Challenges Continue to be Responsible for IBM’s Subordinate Ranking Position

• IBM has been the most compromised competitor: its performances of the past two reporting periods drove down its net position forthe year by 1.1%. IBM’s WSI has not shown an increase since 2Q06.

• The 0.8% decline in IBM’s WSI in 2Q07 was driven by continuing declines relative to satisfaction with delivery time and server management tools. All else remained relatively stable.

• IBM’s delivery time satisfaction ratings have dipped for three consecutive reporting periods for a total decline in position of 8%. Server management tool satisfaction has been weakening for four consecutive reporting periods for a total decline of 11%.

• IBM’s principal concerns at present are with satisfaction with delivery time, server value and ease of doing business where, interestingly, there appears to be a schism of opinion – a split between very satisfied customers on one side against dissatisfied customers on the other.

• IBM’s current satisfaction positions are far below their higher levels of the second half of 2006. Exception: Phone support, where IBM continues to bring in its strongest competitive showings.

• IBM’s competitive profile shows an acceleration of recent trends: competitive warnings in 1Q07 for delivery time and server value were downgraded to full competitive weaknesses; and IBM received a new competitive warning for ease of doing business (beginning to show signs of weakness in 1Q07) while losing hold of its competitive strength for phone support.


• Successes: Hardware reliability, phone support.

• Challenges: Delivery time, ease of doing business, server value (the inverse of Dell which exhibited competitive strengths in these areas); server management tools.

• Bottom Line: IBM is currently confronted with challenges related to its marketing strategies, as exemplified by the areas where competitive weaknesses have emerged (delivery time, value, ease of doing business or relationship building).





AVERAGE PERCENTAGE CHANGE, MEAN POSITIONS, 4Q05 to 2Q07

-1.00%

-0.80%

-0.60%

-0.40%

-0.20%

0.00%

0.20%

0.40%

0.60%

0.80%

HardwareReliability

ServerManagement

Tools

On-siteSupport

PhoneSupport

ReplacementParts

Availability

DeliveryTime

Ease of DoingBusiness

OverallValue

OverallSatisfaction

WSI

Dell HP IBM

TBR

SOURCE: TBR.

Dell Explainer: Dell Benefits From Both Steadily Strengthening Performances and Competitors’ Softening Performances

Annotated Analysis – Dell Explainer

CORPORATE X86-BASED SERVER WEIGHTED SATISFACTION

SCORES 1Q05 THROUGH 2Q07

80

81

82

83

84

85

86

1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

Dell HP IBMSOURCE: TBR.

TBR

Dell’s WSI hit its lowest points in the history of the study in 4Q05, and again in 4Q06.Following 4Q05, Dell’s positions modestly advanced throughout most of 2006, followed by a full correction in 4Q06.The first half of 2007, however, has brought a newfound recovery into place at a time when competitors’ positions have begun to weaken.

In averaging out the percentage shift from one reporting period to another since 4Q05, Dell has not lost any ground. Meanwhile, competitors(particularly IBM) have encountered a number of new challenges.Most noteworthy have been Dell’s significantly improving positions relative to satisfaction with delivery time and value (renewed competitive strengths in 2Q07) and phone support (having recovered from a competitive weakness).While Dell’s hardware reliability standing also increased during this timeframe, note that here the competition from HP simply serves to raise the bar of expectation. HP continues to outperform Dell in this area by a significant margin.





Dell Explainer: Dell’s Competitive Profile Returns to Similar State to When No. 1 Ranking Positions Were Consistent

Annotated Analysis – Dell Explainer

Note that Dell reclaimed its competitive strengths relative to server value and delivery time (strengths that had largely determined its No. 1 ranking status before 3Q05).

Ease of doing business also returned, a competitive advantage not observed since 3Q04.

During the recovery period, Dell also managed to pull away from past competitive challenges in the areas of technical support and server management tools.





TBR’s Watch List Differs From the Competitive Strength & Weakness Analysis

TBR’s Watch List

TBR takes the following factors into consideration in determining items on the Watch List:Results of the Improvements GAP Analysis based on a vendor’s expectation fulfillment for a category against its overall expectation fulfillment across all measured attributes.

Competitive positioning based on results of statistical significance tests.

Results of the Standard GAP Analysis for the vendor against positions of its competitors.

Decline in satisfaction in past two reporting periods and in the past two calendar quarters.

Loss of competitive strength.

Items are removed from the Watch List when a vendor has recovered its competitive position from past recent reporting periods.

Differences:The analysis is both backward-looking and forward-looking.

Items placed on the Watch List are often not necessarily areas where the vendor has underperformed the marketplace or a specific competitor.

Included are areas where a vendor may have recently excelled, yet the competitive field has shifted during the current reporting period.





TBR Watch List Identifies Product/Solution Functionality and theSupport to Back it Up as Focus Areas for Dell

(see notes page for explanation of rationale codes)

TBR’s Watch List: Dell

Citation Rationale

DELL A B C D E NotesHardware Reliability

Significantly below industry average at 99%; HP at 95%.

Slightly above average

GAP rating of -13% against competitors' average -8%

Small improvement against HP's slight decline in position with IBM stable. Overall, very little movement observed within this variable in 2Q07.

Retains neutral rating while HP retains competitive strength for fifth consecutive reporting period.

While Dell's mean satisfaction position of 6.05 remains solid, competitors' positions, namely HP, have moved up substantially ahead of Dell. In a marketplace where hardware reliability perceptions dominate the customer experience, Dell needs to be perceived as comparable to the competition in terms of high availability. New product and solutions focus areas, including energy efficient designs, and improving functionality and ease of use of server management tools should all contribute to a strengthening position for Dell in terms of how its customers perceive its hardware reliability. With the recent positive activity relative to how Dell customers perceive solutions value and ease of doing business, we should eventually expect to see these attitudes spill over into more positive perceptions of the hardware quality.

Server Management Tools

Now comparable to industry average but significantly below HP at 95% confidence.

Primary Meeting expectations as well as either competitor

No change while competitors' positions declined

1Q07 warning lifted after previous five reporting periods of warnings or weaknesses.

In 2Q07, Dell has benefited from competitors' declining positions and not from any noteworthy improvement on Dell's part, hence the continuing presence of server management tools on the Watch List. Dell's recent announcements relative to OpenManage, expanded partnerships including a strong relationship with Altiris, focus on simplified management, and strategy around Unified Management Architecture need to be presented within the framework of a well-managed marketing message along with extensive in-house testing prior to release. TBR believes Dell's messaging around simplified management will resonate with Dell customers as, clearly, the industry as a whole has not paid ample attention to the needs of customers to improve the usability of their management tools in an environment focused on adding functionality upon functionality.






(see notes page for explanation of rationale codes)


Removed from Watch List: Server Value. Satisfaction levels increased by nearly 2% in 2Q07 while HP’s position declined by a similar magnitude. This allowed Dell to retake its competitive strength position for the first time since 2Q05. Dell outperformed the industry average at the 95% confidence level and also outperformed IBM. The Improvements GAP Analysis showed server value as an area where Dell exceeds customer expectations. Nonetheless, the difference between the performances of Dell and HP remain nearly imperceptible (Dell held the competitive advantage position that HP had earned in 1Q07 because Dell’s position compared more favorably to the industry average than did HP’s). This will likely continue to be a very close competition.

Citation Rationale

DELL A B C D E NotesPhone Support Now

comparable to industry average

Primary GAP rating -2%, slightly better than HP's -3.5%

Increased significantly (+2.2%) while both competitors' positions declined

Warning lifted from previous two reporting periods.

While the recent findings suggest TBR should remove this item from the Watch List, it remains identified as a Primary concern via the Improvements GAP Analysis. This tends to recur due to the combination of high expectations and the fact phone support satisfaction tends to run lower than all other aspects of the customer experience.Dell continues to evolve its Enterprise Command Center model by developing tools for optimization that can be shared between Dell support technicians and the customers themselves. Dell continues to expand its training programs for its technicians. These recent improvements may account for some of the volatility we have observed this past year. Potentially, what we are observing in the 2Q07 results has been the long-awaited reaction to continuous improvement efforts.

On-site Support Comparable to industry average and to each competitor individually

Secondary Meeting expectations as well as HP

No change while HP's position declined significantly

Second consecutive reporting period of neutral performance

With Dell's recovery from past competitive weaknesses and warnings, this might be a candidate for removal from the Watch List. However, Dell's competitive positioning has benefited in the past two reporting periods from declining positions of competitors. While Dell effectively meets expectations for on-site support, demand levels are increasing as the marketplace adjusts to greater support requirements with newer technologies and projects such as server consolidation. The company's focus on enhancing its Enterprise Command Center model, increased training and retraining, greater utilization of Dell-badged field reps, improved processes for measuring effectiveness, and greater specialization knowledge are all geared toward improving customer satisfaction. Should Dell continue to show improving performances in this study, TBR will certainly remove this from the list of cautions.







Recent and Ongoing Developments at Dell for Addressing Challenge Points:• Change in image by repositioning Dell as a trusted provider of hardware/software/services solutions – selling

server/storage solutions bundles as a value proposition including enhanced management tools and installation and maintenance services. Dell’s “Project Hybrid” is an initiative focused on removing complexity in IT and reducing maintenance costs, as well as changing the image of Dell from box-maker to total/expert solutions provider and innovator. We should expect to see a number of upcoming announcements from Dell in the area of solutions innovation as part of Project Hybrid. Most recently, Dell announced it would be selling advanced supplemental cooling systems based on the superior absorption properties of refrigerant (while competitors’ solutions use water) through a partnership with Liebert.

• Enhancing its previous image as a good listener by building up relationships with customers and evolving build-to-order model to design-to-order, incorporating the active input of Dell’s expert engineers in customized product, solutions and services offerings.

• Enhanced specialized services for servers, including installation and deployment with the backing of large systems integrators with whom Dell has created relationships. Dell will also be working more closely with VARs, allowing them to provide customized services as well as Dell extended-warranty service plans.

• And continuing investment in technical support services for enterprise customers.





Citation Rationale

HP A B C D E NotesServer Value Comparable

to industry average yet significantly outperformed the average in 1Q07. Significantly outperformed IBM at 95% confidence in 2Q07.

Above average position

GAP rating of -3% against Dell's -1%

Declined by 1.6% while Dell's position advanced by a similar margin. It was this occurrence that resulted in Dell outperforming the industry average in 2Q07, as HP had done in 1Q07.

1Q07 competitive strength lifted and handed back over to Dell

How customers perceive server solutions value is clearly becoming a battleground between Dell and HP. Customers are paying greater attention to manageability and functionality to cut costs by reducing labor requirements/staffing as well as the major new issue of power and cooling. HP has been particularly active and particularly vocal with regard to its patented power & cooling solutions and this may be having a positive effect on how customers perceive HP's value proposition. HP's very successful blade server solutions business may also be playing into customers' perceptions of value. As we commented in the 1Q07 findings (where HP outperformed the industry average while Dell did not), "HP currently has the momentum, yet it may be short-lived based on the recent activity of Dell." HP will need to focus on its messaging and perhaps draw some specific comparisons against Dell in terms of its value proposition as we continue to observe alternating wins between Dell and HP.

Reinstated - Phone Support

Comparable to industry average yet slightly behind IBM's performance

Primary GAP rating -3.4% against Dell's -2% and IBM's +2%

Declined by 2% while Dell's position advanced by a similar margin, thus removing HP's previously slim advantage. From 1Q06, HP's ratings have dropped a total of 4%.

Remaining neutral

HP had an opportunity to be perceived as differentiated in the marketplace relative to phone support. However, recent complexities introduced into technologies and solutions have likely increased customers' requirements for the rapid response expected in the phone support mechanism (versus eSupport types of models). It is entirely possible that HP is experiencing an increase in call volume based on these marketplace changes. Certainly, IBM has recognized this and acted by adding a new call center. HP may need to take in some of these considerations while their automated model comes up to speed.

Reinstated- On-site Support

Comparable to industry average

Secondary Meeting expectations as well as competitors

Declined significantly (-3.2%) while competitors' positions were more stable, thus removing HP's previously slim advantage.

Remaining neutral

Similar to the above, HP had an opportunity but new product/solution introductions, changes within customers' infrastructures, and the associated learning curves, are likely increasing requirements for on-site support as well. HP is currently in a transition phase as the company attempts to bring automated (preventative) support offerings to customers that may be also looking for a customized, personalized approach to services.

HP Must Focus on its Support Offerings and Value Perceptions (see notes page for explanation of rationale codes)

TBR’s Watch List: HP

Note: Both phone and on-site support were removed from Watch List in 1Q07, and both were reinstated in 2Q07 because previous improvements have not been sustained.





HP Must Focus on its Support Offerings and Value Perceptions

TBR’s Watch List: HP

Recent and Ongoing Developments at HP for Addressing Challenge Points:

• Taking a leadership position in providing end-to-end power & cooling solutions through a portfolio based on efficient components and systems and patented solutions that manage and optimize power consumption. HP has more than 1,000 patents in the power & cooling solutions area. The company has also been perceived as a leader in systems management. HP has added both power capping and new collaborative remote management capabilities into HP Insight Control. HP says its Insight Power Manager increases server density by up to 70% through improved control of power usage and optimization. In late July, HP announced Thermal Zone Mapping, providing a three-dimensional model for analyzing and optimizing air conditioning states in datacenters. On the virtualization front, HP’s vision is of a convergence of servers, storage and blade technology with virtualization extended not only across these systems but integrated with I/O as well.

• Continuing to find success with its blade offerings by collectively addressing what HP views as customers’ key pain points: time management, energy, change management and cost. HP addresses cost management through an investment protection commitment and compatibility between the generations. Most recently, HP announced a comprehensive, proactive service to help simplify blade deployment and management. This Care Pack service provides personalized, on-site support and a designated expert account manager. HP developed this new service in response to their discovery that blade servers are now being run to support more mission-critical applications than in the past and the realization that blade deployments involve a number of risks and complexities. TBR sees this specific offering as potentially addressing some recent customer pain points around technical support while enhancing perceptions of value.





IBM’s Watch List Expanded Due to Recent Setbacks (see notes page for explanation of rationale codes)

TBR’s Watch List: IBM

Citation Rationale

IBM A B C D E NotesDelivery Time Performed

significantly below industry average at 99% confidence; below Dell at 99% and HP at 95% confidence

Primary GAP rating -7% vs. competitors' average 0%.

Declined a further 2.3% while Dell's position improved by a similar margin. IBM's mean satisfaction ratings have declined a total of 8% from 3Q06.

Accelerated from 1Q07 warning to a full weakness in 2Q07. Had been neutral consistently from 3Q05 through 4Q06.

Being able to deliver new products as promised, as well as effectively meeting delivery time commitments for its products in general, has typically been more a pain point for IBM customers than its competitors' customers. We had been led to believe that IBM had effectively addressed this issue, particularly as it worked to streamline its supply chain operations over the past several years. During the first half of 2006, IBM's satisfaction positions for delivery time advanced at a remarkable pace, resulting in a 2Q06 high point position that remained solid for several reporting periods and in proximity of competitors' positions. In 4Q06 we began to see a small level of decline that was accelerated into 1Q07 with its substantial 4.4% drop in position, followed up by an additional 2.3% decline in 2Q07. Remnants of IBM's recent recovery have all but disappeared from the radar screen. If customers are beginning to experience that which they believed had been put to rest, this could have serious consequences for IBM and the data set for the first half of 2007 certainly suggests the effects have been reverberating.

Server Value Performed significantly below industry average at 95% confidence; Dell at 99% and HP at 95% confidence

Average rating position

GAP rating -6.2% versus competitors' average -2%

No real change in position while Dell's mean satisfaction position increased by nearly 2%. This is the second consecutive reporting period in which IBM's ratings have declined.

1Q07 competitive warning accelerated to full weakness in 2Q07. Had been consistently neutral from 3Q05 through 4Q06.

IBM had been making substantial progress in communicating its value proposition to customers where the perception of value was seen as aligned with IBM's expert performances in the areas of server management and technical support. Since the decline in satisfaction in 1Q07 for server value is part of a comprehensive decline across all positions, it may be intertwined with some perceived failure on the part of IBM that was seen as a negation of past improvements - perhaps delivery time. In attempting to understand what factors are highly correlated with perceptions of value among IBM customers in 2Q07, we find a relationship with ease of doing business exists. This suggests there have been some disappointments with the company's strategy among some customers, a reasonably small group, yet large enough to have had such reverberating effects throughout all of IBM's satisfaction measures for the period.

IBM has recently been active in announcing some new products, focused on improving energy costs, including new x86 rackmount and blade servers, a fairly recent enhancement to its Power Exec management tool for managing datacenter power usage. In the area of performance, IBM rolled out new servers incorporating Flash storage in lieu of the traditional hard drive for improved performance and reliability. IBM continues to work on its perception as an innovator and all of these efforts should help to set things back on course. IBM's ability to deliver to its schedule will be critical.





IBM’s Watch List Expanded Due to Recent Setbacks (see notes page for explanation of rationale codes)


Citation Rationale

IBM A B C D F NotesServer Management Tools

Comparable to industry average while underperforming HP at 95% confidence level.

Secondary Meeting expectations as well as competitors

Declined by 2%, along with HP, while Dell remained stable. Since 2Q06, however, IBM's server management tool satisfaction ratings have collectively declined by 11%.

Neutral determination in 2Q07; had earned competitive strength determinations consistently from 1Q06 through 4Q06.

IBM's performance relative to server management tool satisfaction has been choppy, exhibiting very wide swings that are now moving in the negative direction and cutting into IBM's historical leadership position. In 4Q06, the consequences were that HP overtook IBM with a full competitive strength, while IBM was reduced to a marginal competitive strength. This pattern accelerated into the 1Q07 reporting period. HP may be benefiting both from its January announcement involving proactive problem resolution through remote monitoring, power management functionality, simplified unified infrastructure management, the first major update to Systems Insight Manager since late 2005, and service level features such as the ability to retrieve service events and warranty status. IBM is currently in a quiet period, having made no recent announcements relative to IBM Director capabilities. The good news is that HP's lead is softening; its competitive strength in 2Q07 came in as a marginal one. This area will serve to be an important battleground for all three competitors throughout the current year and beyond.

On-site Support Comparable to industry average

Average rating position

Meeting expectations as well as competitors

No change in position while HP's ratings declined significantly. IBM's mean satisfaction positions have declined a total of 5% from 3Q05.

Neutral performance for second consecutive reporting period. Had earned competitive strengths in five of the previous reporting periods (3Q05 through 4Q06).

While IBM's satisfaction positions stabilized in 2Q07,there has been an overall steady decline in position for the past year. More importantly, this was once a considerable IBM competitive strength (throughout 2006 IBM earned competitive strength determinations for on-site support quality). While it is not entirely clear what might be driving this, TBR suspects that, like HP, it has to do with customer demand levels in a marketplace where technology solutions have been changing and concerns regarding energy consumption have been rising. There is also the possibility that recent gains in new account wins, where new customers have come from different vendor backgrounds (usually HP) and thus different expectations, may have created greater challenges for IBM. Or, with the gain in customer accounts, an issue with IBM support resources may have been the cause.

NEW - Ease of Doing Business

Performed below the industry average at 95% confidence level; below Dell at 95% confidence.

Secondary GAP rating -3.5% vs. competitors' average +1%

Declined only modestly in 2Q07 (-1%), yet comes on the heels of a more significant decline in position observed in 1Q07. Meanwhile, Dell improved in 2Q07 to reclaim its competitive strength determination.

New competitive warning issued in 2Q07.

There is a strong correlation between the quality of relationships and both perceptions of solutions value and technology quality. IBM's recent issues with the ability to deliver new technologies as promised has also likely taken its toll on the perceived quality of relationships with its customers. While there are several factors that could influence the ease of doing business rating, TBR believes delivery time may be the key, in that IBM's ratings for this attribute declined a total of 8% from 3Q06. As TBR continues to emphasize, all things are related in this competition and successfully addressing any perceived shortcoming will ultimately benefit IBM's performance across the remaining attributes.





IBM’s Watch List Expanded Due to Recent Setbacks


Recent and Ongoing Developments at IBM for Addressing Challenge Points:

• Continuing to intelligently adjust support backup to customer requirements through the realization that call centers will need to be expanded. IBM announced the opening of a new call center in Delaware with plans to staff 200 in the first year; 445 in the second and 500 by 2009. This may be an example of how IBM arguably maintains greater consistency over phone support satisfaction than competitors.

• Continuing messaging and leadership on the power & cooling challenge through IBM Cool Blue portfolio technologies, including the second-generation Power Exec for capping and setting limits to energy consumption. IBM most recently added low-wattage x86 servers to its line-up. While the low-wattage systems have a greater upfront cost, the savings in power and cooling costs represent a longer-term value. Perhaps IBM needs to increase the volume of its messaging, particularly around more complex reasoning behind its value propositions, as the study results suggest HP is currently more successful in this area. IBM’s blade servers offer not only lower power consumption but higher bandwidth connectivity and solid state flash memory, collectively contributing to a proper platform for virtualization and data consolidation.





Dell Holds Record for Number of Wins, Yet Unsettled Competition Since 3Q05 Continues to Resist Predictability

• Since its emergence in 4Q97 as a No. 1-ranked player, Dell lost hold of that distinction only two times – through the middle of 2005.

• Beginning in 3Q05, however, the nature of this competition changed: from 3Q05 through to 4Q06, IBM and/or HP consistently earned and/or shared the No. 1 ranking position.

Historical Record

Historically, Dell has achieved the lion’s share of No. 1 ranking positions – a total of 30 times during the 41-reporting-period history of this study. HP’s and IBM’s wins have been more recent:

• For HP, half of its No. 1 ranking position achievements have occurred since 3Q05.

• All of IBM’s No. 1 rankings occurred in consecutive order from 3Q05 to 4Q06; four occurrences were shared with HP.

New Developments:• While HP and/or IBM dominated the competition from

3Q05 to 1Q07, the 2Q07 reporting period brought a new surprise: Dell’s return to the No. 1 ranking position.

Since 2Q05, we have observed four separate cycles in the ranking position alignments with the marketplace fluctuating. The longest stretch involved the HP/IBM shared No. 1 positions from 1Q06 to 4Q06. The 1Q07 results throw another wrench into the mix, with HP emerging as the sole possessor of the No. 1 spot.

X86-BASED SERVER VENDOR RANKING POSITION WINS

(Based on 41 reporting-period history, 1Q97 through 2Q07)

30

25

6

11

0

5

10

15

20

25

30

35

Dell Any #1 Dell Sole #1 HP #1 IBM #1

SOURCE: TBR.

TBR





SOURCE: TBR

In the Contemporary Era, Competitors Shuffle for Differentiation SuccessThe Original Era of Predictability Has Been Replaced by Uncertainties

Historical Record

Remnants of the

Original Era

Evidence of the New

Eras

• In the original era (pre-3Q05), differentiation was dominated by perceptions of server value (Dell dominated in 31 of the past 36 reporting periods) and delivery time (Dell dominated in 21 of the past 36 reporting periods; IBM lagged in 25). Placement of the competitors was far more predictable than that faced since 3Q05.

• Since 3Q05, performance differentiators have shifted around to include product quality and functionality and technical support.

• The unique patterns of the 1H07 results brings back some of the old, with a twist: IBM regains its old competitive disadvantages for delivery time and perceived value; HP retains its competitive strengths for product quality and innovation; and Dell reclaims its historical competitive strengths in areas of weakness for IBM.

Some old patterns

returning?

While 2Q07 may mark the beginning of yet another cycle – wherein Dell returns to No. 1 placement and marketing success trumps solutions innovation, yet HP remains a No. 1 player specifically due to the way the company is perceived as an innovator – it might instead represent a new wave of uncertainty as the industry transitions to solve new customer pain points.





2Q07 In-depth Analysis





IBM and HP Positions Remain Well Separated• Where HP’s performance positions shot past those of IBM in 1Q07, the condition has softened only modestly in 2Q07: from a 3.4%

separation of WSI positions in 1Q07 to 2.7% in 2Q07.

• Both competitors’ WSI positions declined in 2Q07, though more significantly for HP (-1.5%) than for IBM (-0.8%).

• Yet, in spite of a more significant decline in overall position for HP versus IBM, HP’s competitive advantages have remained largely intact. Very modest softening of HP’s leads were observed relative to hardware reliability (having somewhat of an effect due to the high weight of this attribute), value and ease of doing business. In addition, a small HP advantage relative to on-site support has been eradicated.

Understanding the 2Q07 Ranking Positions

• In the cases of hardware quality, value, and ease of doing business, HP’s positions declined by a greater magnitude than those of IBM, hence the softening of HP’s leads.

• HP’s position strengthened against IBM’s relative to delivery time due to a significant decline in position for IBM.

• IBM gained some strength against HP in the areas of technical support due to significantly declining positions of HP against largely stable IBM positions.

IBM TO HP MEAN RATING DISTANCES, 2Q07 VS. 1Q07

(NEGATIVE NUMBERS SHOW HP ADVANTAGE; POSITIVES IBM ADVANTAGE)

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

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1Q07 IBM to HP Distances 2Q07 IBM to HP Distances

IBMAdvantage

HP Advantage

SOURCE: TBR.

TBR





Dell Continues to Narrow Performance Gaps against HP• A significant, 3.2% performance gap between the WSI positions of HP and Dell in 1Q07 collapsed to a mere 0.5% in 2Q07.• This narrowing of the gap was driven by a 1.1% increase in Dell’s WSI against HP’s 1.5% position decline.• The factors most substantially contributing to this shift include Dell’s improving (phone support) or stabilized (on-site support) technical

support positions against HP’s significantly declining ones. Dell’s delivery time position advanced significantly as well, while that of HP remained largely static.

• Dell has also whittled away at HP’s performance advantages relative to hardware quality and server management tools. Yet, HP’s lead in these solutions-oriented categories, which speak to the perception of innovation, remain valid at high levels of confidence.


• Dell’s phone support satisfaction rating increased substantially against HP’s position, which declined at a similar magnitude.

• Dell’s on-site support rating remained largely stable while HP’s declined significantly.

• Dell’s server management satisfaction position was the only one of the three competitors to have remained stable; HP’s position declined modestly, enough to somewhat narrow the performance gap between the two.

• While not of statistically significant magnitude, Dell’s overall value and ease of doing business rating positions advanced while those of HP’s declined. It was enough to assure Dell competitive strengths in both areas, while taking over HP’s 1Q07 position in the spotlight for value excellence.

DELL TO HP MEAN RATING DISTANCES, 2Q07 VS. 1Q07

(NEGATIVE NUMBERS SHOW HP ADVANTAGE; POSITIVES DELL ADVANTAGE)

-12.00%

-10.00%

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

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1Q07 Dell to HP Distances 2Q07 Dell to HP Distances

DellAdvantage

HP Advantage

SOURCE: TBR.

TBR

Dell’s most noteworthy advancements in technical support





Dell Moves Away from Interlocked Position with IBM• Dell moved ahead to a No. 1 ranking position while IBM remained in the No. 2 spot. Due to Dell’s 1.1% increase in position and IBM’s 0.8%

decline, a sizeable, 2.2% margin wedge emerged between their 2Q07 WSI positions.

• Between these past two reporting periods, Dell has managed to strengthen or reestablish significant performance advantages over IBM across the areas of delivery time, overall value, and ease of doing business.

• Dell also has whittled away at IBM’s previously compelling performance advantage relative to phone support.


• Dell strengthened its delivery time competitive advantage over IBM with a significant increase in Dell’s mean rating that corresponded with a similar magnitude decline on the part of IBM.

• In the cases of server value and ease of doing business, Dell’s positions moderately improved while those of IBM were largely unchanged.

• In the most noteworthy development, Dell’s phone support position advanced significantly while that of IBM remained basically stable.

DELL TO IBM MEAN RATING DISTANCES, 2Q07 VS. 1Q07

(NEGATIVE NUMBERS SHOW IBM ADVANTAGE; POSITIVES DELL ADVANTAGE)

-12.00%

-7.00%

-2.00%

3.00%

8.00%

13.00%

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1Q07 Dell to IBM Distances 2Q07 Dell to IBM Distances

DellAdvantage

IBM Advantage

SOURCE: TBR.

TBR





2Q07 Results Show Current Momentum Favoring Dell

• The moderate gains established by Dell in 2Q07 across all three measures suggest customers’ perceptions of their vendor continue the change in direction, as glimpsed at in 1Q07.

• In contrast, the positions of both HP and IBM declined across all three measures.

Analysis of Shifting Current Positions

TBR believes two distinct patterns are at work behind the new findings for 2Q07:

1. Dell’s satisfaction and loyalty positions declined precipitously in late 2005. Although what followed was a long period of reasonable stability, Dell’s positions remained well behind the competition. Now, Dell’s positions have improved for the past two reporting periods, suggesting ongoing and significant corrective actions are beginning to take hold. Dell’s marketing arm is clearly strengthening.

2. Both HP and IBM have been focusing on extending their solutions offerings to meet the critical, and changing, dynamics of today’s marketplace, while battling one another along the way. This creates pressures for both vendors to keep pace with rising customer expectations. Also, their marketing strategies are being challenged to solidify complex customer engagements.

PERCENT CHANGE IN LOYALTY AND SATISFACTION

FROM PREVIOUS REPORTING PERIOD TO 2Q07

-3%

-2%

0%

2%

Dell HP IBM

Loyalty Satisfaction Weighted SatisfactionSOURCE: TBR.

TBR





Dell and HP Positions Largely Stable for the Year; IBM Shows Decline

• The 1.1% increase in Dell’s WSI in 2Q07 restored its yearlong activity to a draw, pulling it well out of negative territory. Dell’s indices have improved for the past two reporting periods, thus cancelling out the declines observed during 4Q06.

• The 1.5% decline in HP’s WSI in 2Q07 has had its consequences. Nonetheless, the vendor’s yearlong progress has largely been stable, showing only a modest level of decline.

• IBM’s activity for the year has brought it down to lower levels on the WSI scale than in the recent past. All four of the past four reporting periods have brought declining WSI positions to IBM.

Analysis of Shifting Current Positions


RATINGS PERCENTAGE CHANGE

CURRENT VS. PREVIOUS REPORTING PERIOD

(COMPARED TO AVERAGE SHIFTS OF PAST YEAR)

-0.84%

1.10%

-1.55%

-0.32%

-1.10%

0.09%

-4.0%-3.0%-2.0%-1.0%0.0%1.0%2.0%3.0%

Dell HP IBM

2Q07 Average ShiftSOURCE: TBR.

TBR





Yet Another New Competitive Performance Cycle EmergesBoth HP and IBM Suddenly Encountering Challenges; Dell Makes Second Consecutive Advance

Dell’s WSI positions have advanced a total of 1.7% for the past two reporting periods. Its improving positions in 2Q07 resulted in it reclaiming the No. 1 ranking position, following a nearly two-year (or seven-reporting-period) absence during which either HP, IBM, or both occupied the winning slots.

The expected gentle stability of HP’s WSI trendline dropped suddenly in 2Q07. A 1.5% decline in position is not considered significant by most measures; however, relative to HP’s performances of the past six reporting periods, it does appear a bit unusual. Yet, note that HP’s WSI advanced by 1.4% in 1Q06, beginning a cycle of measured progress thereafter. The decline encountered in 2Q07 places HP’s WSI back to between its 4Q05 and 1Q06 positions.

IBM’s WSI incurred a substantial loss in position in 1Q07, and, while positions of the most recent calendar quarter have been strong, the effects of the first calendar quarter 2007 interviewing period have yet to be shaken off.

Tracking the Satisfaction Indices

Dell’s WSI lagged the competition by significant margins throughout 2006.

During this timeframe, WSI positions of HP and IBM were consistently interlocked.

The past two reporting periods have brought some surprises: greater challenges encountered by HP and IBM; gradual strengthening of Dell’s positions.



81

82

83

84

85

86

1Q06 2Q06 3Q06 4Q06 1Q07 2Q07


TBR





Polynomial Distributions Show Continued Stability (in Spite of 2Q07 Occurrences)Meanwhile, Dell’s Trendline Begins to Show Progress; IBM’s Trendline Compromised




79

80

81

82

83

84

85

86

1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

Poly. (IBM) Poly. (Dell) Poly. (HP)

SOURCE: TBR.

TBR





The Long-term View Shows Predictability in Placement to 3Q05;More Unsettled Competitive Positioning Suggested by 1H07 Results


Prior to 3Q05, Dell maintained a generally consistent level of leadership in customer satisfaction in the x86-based server space.

IBM’s position moved up suddenly and significantly from 2Q05 to 3Q05, and subsequently built on that new pattern until 1Q07 when things began to unravel.

For HP, a pattern of consistency broke in 1Q06 with uncharacteristically strong movement into 1Q07, followed up by the recent setback.

A look at Dell’s historical pattern shows that periods of strength and weakness alternate in cycles. We may currently be at the brink of a new cycle of resurgence.

CORPORATE X86-BASED SERVER LONG-TERM WEIGHTED SATISFACTION SCORES

2Q01 THROUGH 2Q07

77

78

79

80

81

82

83

84

85

86

87

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

3Q05

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07


TBR





Polynomial Distributions for the Long-term View Show Crossover Pattern of Late 2005, Unsettled Patterns of Post 2006


CROSSOVER

CORPORATE X86-BASED SERVER LONG-TERM WEIGHTED SATISFACTION

SCORES 2Q01 THROUGH 2Q07 - FITTED POLYNOMIAL DISTRIBUTION

78

79

80

81

82

83

84

85

86

87

88

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

3Q05

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

Poly. (Dell) Poly. (HP) Poly. (IBM)

SOURCE: TBR.

TBR

ERA OF PREDICTABILITY

ERA OF UNCERTAINTY?





Hardware Reliability/QualityHardware Reliability Requirements the Stiffest; HP (and now IBM) Changing the

Nature of This Competition in Recent Reporting Periods

• Expectation-to-satisfaction gaps tend to run widest for hardware reliability due to extremely high expectations.

• All three vendors had fallen further behind expectations over time, likely driven by increasing complexities and requirements.

• Positions of both HP and IBM have advanced significantly since 1Q06, driven by increasing satisfaction.

GAP Analyses: Tracking Expectation Fulfillment

MAJOR INFLUENCES:• Higher performing, more

energy efficient dual-core and multicore processors.

• Datacenter overcrowding driven by growing capacity requirements.

• New issues with power & cooling in the datacenter.

• Server consolidation through virtualization requirements increasing.

• More sophisticated management tools and solutions.

• Increasing concerns and requirements for security.

• It is not just about the hardware.

Note that if we were to use the standard “comfort zone” (up to -5% as acceptable performance), no server vendor would be able to meet that stringent requirement level. Consequently, TBR allows wider GAP ranges, in this case anything smaller than -12% would be considered an accomplishment in this marketplace.

RELIABILITY ANALYSIS

AVERAGES 2Q04 THROUGH 2Q07

-18.0%

-16.0%

-14.0%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07


TBR

HP and IBM have recently been performing consistently within TBR’s adjusted (see below) “comfort zone.”





Hardware Reliability/QualityInfluenced by Shifting Expectations for Hardware Reliability in Marketplace

With Changing and Maturing Technologies


• In tracking the pure satisfaction positions for hardware reliability, satisfaction levels among HP customers were in a continual state of improvement from early 2006 to their peak around 4Q06/1Q07. These high levels of satisfaction (upwards of 6.4 mean on the 7-point satisfaction scale) should be difficult to sustain. Yet, HP appears to be diligently continuing this trend.

• IBM’s satisfaction positions, previously as elevated as those of HP, have settled into a holding pattern.

• For Dell, satisfaction levels declined precipitously through the latter half of 2005. A surge of higher satisfaction presented during 1Q06, followed by general consistency. While Dell maintains a position at or above the mean 6.0 mark (required to avoid a competitive warning), its positions are consistently placed at significantly lower levels than those of HP.

This graph represents the pure mean satisfaction ratings for hardware reliability, unlike the GAP

positions represented in the previous slide.

None of the competitors are failing to adequately meet their customers’ expectations for hardware reliability. Instead, it is a difference between satisfaction (Dell), somewhat stronger satisfaction (IBM) and “delight” on the part of HP. HP has successfully managed to turn satisfaction into “delight” and has also been able to maintain this position.

HARDWARE RELIABILITY SATISFACTION HISTORICAL ANALYSIS

5.60

5.70

5.80

5.90

6.00

6.10

6.20

6.30

6.40

6.50

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

Dell HP IBM

SOURCE: TBR.

TBR





Server ValueDell Abruptly Reclaims its Server Solutions Value Advantage

MAJOR INFLUENCES• Customers are searching for much

more than attractive purchase pricing; server value has become a catch-all expectation, incorporating everything from reliability to technical support and management tools.

• New issues such as power and cooling (in light of rising energy costs) and virtualization (as a means to consolidate datacenter sprawl) are becoming critical components of the value equation.

• The influence of relationship quality also figures strongly into customers’perceptions of value.

• IBM’s GAP rating has dropped below those of the competition following a very long run of improving positions.


HP’s place in the spotlight for achieving a competitive advantage for server value was short-lived: Dell came back to scoop up the honor in 2Q07. Prior to 2Q07, there was an extended period during which Dell was not necessarily viewed as the leader in server solutions value.

This has largely been a competition between HP and Dell. IBM has only once (3Q05) achieved a GAP rating well within the comfort zone.

VALUE ANALYSIS


-13.0%

-11.0%

-9.0%

-7.0%

-5.0%

-3.0%

-1.0%

1.0%

3.0%

2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07


TBR





Server ValuePure Satisfaction Ratings for Server Value Show Dell Making a Comeback While HP Eases Off;

IBM Clearly Loses Momentum• Dell’s performance was in a steady state of

decline from 2Q05 through 2Q06.

• Overall, Dell’s satisfaction positions remained constant from late 2005 through 1Q07, followed by an abrupt rise in position in 2Q07. This resulted in Dell’s reclaiming its competitive strength, wresting it from HP (who held the strength position in 1Q07).

• While HP’s positions increased only modestly from late 2004 through to 3Q06, a sharp rise in satisfaction positions during 4Q06 brought HP to a new level. In 1Q07, HP achieved a rating position significantly higher than the industry average for the first time; however, this was not sustained into 2Q07.

• While IBM had been on a steady course of improvement from early 2005, a considerable drop in satisfaction levels occurred in 1Q07, accelerated into 2Q07. The drop resulted in a score that was significantly behind the industry average.


This graph represents the pure mean satisfaction ratings for server value, unlike the GAP positions

represented in the previous slide.

OVERALL SERVER VALUE SATISFACTION HISTORICAL ANALYSIS

5.40

5.50

5.60

5.70

5.80

5.90

6.00

6.10

6.20

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07


TBR

Drivers of Server Value Perceptions: Hardware Reliability, Ease of Doing

Business.





Server SupportAll Three Vendors Adequately Meeting Customer Expectations

MAJOR INFLUENCES• Greater requirement for advanced and

specialized technical skill involving specialties such as Linux, blade servers, virtualization software, etc.

• Growing need for automated, remotely managed and preventative methods of managing systems states.

• Updates, patches, and other seemingly mundane, but ultimately annoying tasks.

• New challenges in the datacenter in terms of deployment, management and datacenter redesign.

• Greater involvement of facilities directors with IT department functions.

• While all three competitors came upon more challenging times in mid- to late-2005, Dell was most adversely affected.

• Dell has improved significantly from its 4Q06 low point and has just recently achieved parity performances with the competition.


Expectations for server support tend to be understated by respondents in our study, where issues revolving around hardware, value and relationships tend to overshadow technical support. TBR continues, however, to determine a strong connection between server support satisfaction and overall perceptions of server vendors.

SUPPORT ANALYSIS


-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07


TBR

Note that HP’s trendline, where GAP positions typically populate the “exceeding expectations”portion of the graph, dropped in 2Q07. This was driven by significantly declining satisfaction. Nonetheless, HP continues to meet expectations fully.





Server SupportBoth Phone Support and On-site Support Satisfaction Have Recently Ceased to

Serve as the Performance Differentiators Once Observed


Phone Support: While Dell’s satisfaction positions are currently on the mend, note that a number of dips and rises have occurred in the past. To hold its No. 1 ranking, Dell will need to begin to see greater consistency in the way customers perceive its services.

IBM had marginally held its competitive advantage in 1Q07. In 2Q07, all it took was a small dip in satisfaction, while Dell moved the low point of the spread up considerably. Consequently, IBM lost hold of its competitive strength standing in 2Q07.

On-site Support: For extended periods of time, TBR noted significant performance differences relative to on-site support, shifting from a Dell lead to an IBM lead. In 1Q07, on-site support failed to serve as a performance differentiator due to IBM’s considerable drop from the leadership position. Dell appears to have experienced a recent improvement, while HP has lost considerable momentum. In 2Q07, the scores of the three competitors converged.

Note: The graphs on this slide represent mean satisfaction positions, not GAP ratings.

PHONE SUPPORT SATISFACTION HISTORICAL ANALYSIS

5.20

5.30

5.40

5.50

5.60

5.70

5.80

5.90

6.00

6.10

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

Dell HP IBM

SOURCE: TBR.

TBR

ON-SITE SUPPORT SATISFACTION HISTORICAL ANALYSIS

5.40

5.50

5.60

5.70

5.80

5.90

6.00

6.10

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07


TBR





Server Delivery/AvailabilityDell Reasserts its Dominance for Supply Chain Effectiveness

• Dell’s historically strong position was being challenged, primarily by HP. Yet, the past two reporting periods have revealed growing satisfaction levels among Dell’s customers, leading ultimately to the reassertion of Dell’s competitive strength in 2Q07.

• HP remains a strong contender.

• IBM’s ability to meet customer expectations for delivery time was significantly compromised in 2007.


PRODUCT DELIVERY/AVAILABILITY ANALYSIS


-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

Dell HP IBM

SOURCE: TBR.

TBR





Server Delivery/AvailabilityRising Satisfaction Combined With Competitors’ Declining Positions Has Restored Dell’s Past Reputation

for Manufacturing and Supply Chain Efficiencies• During the time period from 2Q06

through 4Q06 and in a competition where competitors’ positions were improving, Dell’s generally stable satisfaction positions proved insufficient.

• Due to various movements of competitors (primarily HP), Dell had not been cited with a competitive strength for delivery time since 2Q05.

• In 2Q07, Dell’s position advanced considerably, thus reinstating its long lost competitive advantage.

• Nonetheless, HP’s satisfaction positions have exhibited a steady state of improvement over time, compromised only slightly in the past two reporting periods.

• IBM’s performances have been irregular. The recent declines in position have fully erased the progress established during 2006.


This graph represents the pure mean satisfaction ratings for server delivery time, unlike the GAP


DELIVERY TIME SATISFACTION HISTORICAL ANALYSIS

5.20

5.30

5.40

5.50

5.60

5.70

5.80

5.90

6.00

6.10

6.20

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07


TBR





Replacement Parts AvailabilityAs With Full Systems Delivery, Dell’s Past Reputation for Replacement Parts Availability Under Challenge

• All three competitors are basically keeping pace with the very high demands for replacement parts availability.

• From early 2006, all three competitors’performances were improving. However, the trend was not sustained: GAP positions have collectively backtracked since late 2006.

• Yet, none have been compromised to the extent that TBR has issued competitive warnings.


REPLACEMENT PARTS DELIVERY/AVAILABILITY


-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07


TBR





Replacement Parts AvailabilityAs With Full Systems Delivery, Dell’s Past Reputation for Replacement Parts Availability Under Challenge

• Dell’s mean satisfaction positions have been largely stable over time. In 2Q07, its position increased modestly for the second consecutive reporting period, yet there were no significant performance differences between Dell and either of its competitors.

• HP’s trendline shows overall long-term improvement, with general stability in the more recent reporting periods. Satisfaction levels did decline, however, in 2Q07, placing its mean position behind that of Dell (not significantly) for the first time since 4Q05.

• IBM has been the most improved performer over the long term, yet satisfaction levels declined significantly in 1Q07, remaining stable into 2Q07.


This graph represents the pure mean satisfaction ratings for parts availability, unlike the GAP positions represented in the previous slide.

REPLACEMENT PARTS AVAILABILITY SATISFACTION HISTORICAL ANALYSIS

5.40

5.50

5.60

5.70

5.80

5.90

6.00

6.10

6.20

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

Dell HP IBM

SOURCE: TBR.

TBR





Ease of Doing BusinessRelationship Issues Indirectly Powerful; Previously Comparable Performances Breaking Apart

• Expectations for ease of doing business vary widely, increasing when customers need the undivided attention of their systems manufacturer.

• Consequently, GAP positions have aligned rather closely across the three competitors over time.

• In 1Q07, however, GAP positions moved significantly apart and the condition accelerated into 2Q07. This affected Dell in the positive sense as it achieved a competitive strength, while IBM was negatively impacted and cited with a warning.


EASE OF DOING BUSINESS


-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

Dell HP IBM

SOURCE: TBR.

TBR





Ease of Doing BusinessRelationship Issues Indirectly Powerful; Previously Comparable Performances Breaking Apart

• Prior to late 2005, Dell had carved out an important niche for itself by significantly outperforming competitors in the relationship area.

• Since that time, Dell’s satisfaction trendline had been steadily declining while competitors’ positions advanced, hence the convergence.

• The condition of converged positions endured from late 2005 through late 2006.

• For the past two reporting periods, however, Dell’s positions have improved, suggesting customer trust is building from past, more challenging time periods. Dell regained its competitive strength in 2Q07.

• Meanwhile, IBM’s positions have declined steadily for three consecutive reporting periods, ultimately culminating in a low point in 2Q07 and a competitive warning.


This graph represents the pure mean satisfaction ratings for ease of doing business, unlike the GAP


EASE OF DOING BUSINESS SATISFACTION HISTORICAL ANALYSIS

5.30

5.40

5.50

5.60

5.70

5.80

5.90

6.00

6.10

6.20

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

Dell HP IBM

SOURCE: TBR.

TBR





Server Management ToolsOutlining HP As Consistent Performer; IBM Reactionary; Dell Most Challenged

• Most consistent performer: HP

• Most erratic: IBM

• Consistently most challenged: Dell

• Stated expectations tend to run on the lower end of the priority spectrum, thus we represent the mean satisfaction positions over time.

• HP’s positions have been consistent, setting the standard for the industry.

• For the past three reporting periods, HP’s consistency paid off: HP reclaimed its competitive strength as a result of IBM’s declining positions.

• IBM’s scores arced in an extreme manner – up relatively consistently for a total gain in position of 16% from 2Q05 to its peak in 2Q06. This was followed by four consecutive reporting periods of declining positions, down a total of 11% in value.

• Dell has exhibited some modest levels of improvement. Its competitive warning status (issued from 1Q06 through 1Q07) was lifted in 2Q07, due to a slight narrowing of HP’s advantage as well as IBM’s steadily declining positions.


Polynomial distributions show stability of HP’s trendline, inconsistencies of IBM’s, and the gently declining position of Dell.

SERVER MANAGEMENT TOOLS SATISFACTION HISTORICAL ANALYSIS

5.20

5.30

5.40

5.50

5.60

5.70

5.80

5.90

6.00

6.10

6.20

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07


TBR

SERVER MANAGEMENT TOOLS SATISFACTION HISTORICAL ANALYSIS -

Polynomial Distributions

5.20

5.30

5.40

5.50

5.60

5.70

5.80

5.90

6.00

6.10

6.20

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

Poly. (IBM) Poly. (HP) Poly. (Dell)SOURCE: TBR.

TBR





Analysis of the Past Four Reporting Periods Dell’s 2Q07 Positions Reach New High Points of Year Across Most Categories

• The 1.1% increase in Dell’s WSI positions from 1Q07 to 2Q07 was driven by significantly improving satisfaction across four areas: delivery time, phone support, overall value, and ease of doing business.

• All 2Q07 positions are now at or above their high points of the year, with but one exception: Dell still needs to continue to close gaps against previous (3Q06) performances for phone support satisfaction.

• New high points were registered (for the year) in the areas of delivery time and server value, both examples of how Dell earned No. 1 ranking positions in past studies.

• Areas where performances have been largely consistent throughout the year include hardware quality, on-site support, and replacement parts availability.

Trends of the Reporting Period

Dell regained its No. 1 ranking position (previously observed in 2Q05) by reinforcing positions across its traditional areas of strength – value, delivery time, and ease of doing business. Additional contributors include improved phone support satisfaction positions and the appearance of stronger performances relative to server management tools due to declining positions of competitors.

DELL X86-BASED SERVER CUSTOMER SATISFACTION TREND ANALYSIS

3Q06 TO 2Q07

5.20

5.40

5.60

5.80

6.00

6.20

6.40

Del

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y Ti

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usin

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Ove

rall

Sat

isfa

ctio

n

3Q06 4Q06 1Q07 2Q07

SOURCE: TBR.

TBR





Analysis of the Past Four Reporting PeriodsHP’s Performances Correcting Following Long Period of Strength

• The 1.5% decline in HP’s WSI from 1Q07 to 2Q07 was driven by moderately declining levels for multiple attributes. Satisfaction with on-site support, however, declined significantly.

• Positions were largely stable relative to satisfaction with delivery time and hardware quality.

• Satisfaction positions have been most consistent throughout the year relative to delivery time, hardware quality, and overall satisfaction.


HP’s greatest strength lies in its ability to sustain inordinately high levels of satisfaction for hardware reliability, the most critical satisfaction attribute. It is for this reason that HP has maintained a No. 1 ranking position for the past six reporting periods.

HP X86-BASED SERVER CUSTOMER SATISFACTION TREND ANALYSIS

3Q06 TO 2Q07

5.20

5.40

5.60

5.80

6.00

6.20

6.40

Del

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Ove

rall

Sat

isfa

ctio

n

3Q06 4Q06 1Q07 2Q07

SOURCE: TBR.

TBR





Analysis of the Past Four Reporting Periods Declining Positions of the First Half of 2007 Have Had Consequences for IBM

• The 0.8% decline in IBM’s WSI from 1Q07 to 2Q07 was largely due to significantly declining satisfaction positions for delivery time and server management tools. All remaining categories were generally stable, following significant declines of 1Q07.

• There has been a considerable divide between performance positions of the first half of 2007 versus the second half of 2006.

• Two exceptions:

1. Hardware reliability, where positions have largely remained both stable and strong.

2. Phone support, where IBM may have lost its competitive strength status, yet has shown relatively less variability in perception than in the remaining attributes.


IBM clearly has a distance to travel to restore satisfaction positions to their levels of the second half of 2006. Only the performances relative to hardware quality and phone support remain largely unaffected by this trend.

IBM X86-BASED SERVER CUSTOMER SATISFACTION TREND ANALYSIS

3Q06 TO 2Q07

5.20

5.40

5.60

5.80

6.00

6.20

6.40

Del

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usin

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Ove

rall

Sat

isfa

ctio

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3Q06 4Q06 1Q07 2Q07

SOURCE: TBR.

TBR





Server Management and Phone Support Identified as Priority Areas No. 1 for Dell• Primary Areas Requiring Improvement Efforts: Server management, phone support.

• Secondary Areas Requiring Improvement Efforts: On-site support.

• Areas of Competency: Delivery time, value.

• Standard GAP Analysis Comparisons: Dell’s phone support GAP rating in the standard analysis shows a score of -2%, a somewhat better performance than HP’s -3.4%. Yet, it appears from this analysis that phone support will emerge as an area needing constant monitoring. In addition, server management features, also with a GAP within the comfort zone, continues to show up in the Improvements GAP Analysis. These findings simply suggest that Dell cannot take its eye of the ball in either of these areas. The secondary item featured, on-site support, shows a similar result.

Improvements GAP Analyses

• Dell’s mean satisfaction rating position for phone support achieved parity with the competition. Dell likely need only keep a diligent eye on its continuous improvement efforts as they compare to high customer expectations.

• Dell’s server management tool satisfaction rating continues to fall short of HP’s, though the gap is narrowing. New features through Dell’s alliance with Altiris are recent developments, and we would not expect to see customer reactions for at least the next six months.

• While the Improvements GAP Analysis suggests Dell has effectively met its customers’ expectations for hardware reliability, its standard GAP position runs at -13%, in contrast to an average of -8% among competitors. A mean satisfaction rating of 6.0 is reasonable, yet customers may be wanting more than adequate in this marketplace (consider high Improvements GAP ratings for hardware reliability among Dell’s competitors). Dell needs to consider how to transfer adequate satisfaction to a level of “delight,” as HP has done.

SUGGESTED AREAS OF IMPROVEMENT FOR DELL 2Q07

40

60

80

100

120

140

160

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Maintain

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Reco

mm

en

ded

Acti

on

s

SOURCE: TBR.

TBR





Phone Support Re-emerges as a Potential HP Challenge

Primary Area Requiring Improvement Efforts: Phone support.

Secondary Areas Requiring Improvement Efforts: On-site support borderline.

Area of Competency: Hardware reliability expectations exceeded by a significant margin.

Standard GAP Analysis Comparisons: HP’s phone support GAP rating position of +3.4% increased slightly from the previous reporting period; while still well within the comfort zone. It remains on the radar screen as an area identified by the Improvements GAP Analysis, perhaps as a reminder of the fickle nature of x86-based server customers in this world of complexities and of myriad new and emerging solutions.


HP’s mean satisfaction position for phone support no longer represents a competitive advantage over Dell due to a nearly 2% decline in position.

HP’s on-site support satisfaction rating also declined, yet by a greater magnitude, hence its appearance as a secondary area of concern via the Improvements GAP Analysis.

SUGGESTED AREAS OF IMPROVEMENT FOR HP 2Q07

40

60

80

100

120

140

160

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Hold Back/Exploit

Maintain

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Reco

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en

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Acti

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SOURCE: TBR.

TBR





Delivery Time Re-emerges as Potentially Crippling Issue for IBMPrimary Area Requiring Improvement Efforts: Delivery time

Secondary Areas Requiring Improvement Efforts: Server management.

Area of Competency: Exceeds expectations by a considerable margin for hardware reliability.

Standard GAP Analysis Comparisons: IBM’s standard GAP rating for delivery time is at –7%, a considerable deficit to the +2% and -1% GAP positions posted by Dell and HP, respectively. While IBM’s server management GAP rating does not suggest an issue, the analysis has pointed to this attribute due to the company’s declining positions over time. In the area of server value, where IBM was cited with a competitive weakness in 2Q07, its standard GAP position of –6.2% ran outside the “comfort zone” and well behind Dell’s -2.3% as well as HP’s -3%. Within the ease of doing business area (a competitive warning in 2Q07), which is indirectly related to the total customer experience, IBM’s standard GAP rating ran within the comfort zone, yet the company was the only one to post a negative score.


IBM’s delivery time satisfaction rating declined an additional 2.3% in 2Q07, placing this issue at an urgent level of concern.

Server management tools satisfaction also declined significantly in 2Q07, part of an extended period of progressively declining positions.

SUGGESTED AREAS OF IMPROVEMENT FOR IBM 2Q07

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100

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SOURCE: TBR.

TBR





HP Maintains Customer Loyalty Rating Significantly Higher Than Industry Average

While IBM’s emerges as significantly lower than the industry average; significantly lower than both HP and Dell.

The Loyalty Factor

2Q07 CORPORATE X86-BASED SERVER BRAND LOYALTY

3.90

4.154.07

3.2

3.5

3.8

4.1

4.4

Dell HP IBM

SOURCE: TBR.

TBR





HP’s Winning Customer Loyalty Record Continues to be a Major Factor in This Competition

• While HP’s customer loyalty positions were challenged by IBM in 2Q06 and 3Q06, we observed a significant decline in IBM’s rating in 4Q06, allowing HP to return to its dominant position.

• HP’s customer loyalty score trendline has exhibited the greatest stability of the competitive field.

• IBM’s customer loyalty rating position declined for the third consecutive reporting period, setting a new low in 2Q07.

• Dell’s customer loyalty rating began to decline in 2Q05. The company has yet to recover its positions of 2004, when it averaged as high as that of HP. Nonetheless, we have been observing subtly moving improvement for the past two reporting periods.

The Loyalty Factor

Customer loyalty ratings often serve as predictors of what might come to pass relative to customer satisfaction evaluations. For IBM, its sudden decline in 4Q06 may have been the first indicator that customer perceptions were about to change.

X86-BASED SERVER LOYALTY 2Q04 THROUGH 2Q07

3.6

3.7

3.8

3.9

4.0

4.1

4.2

4.3

4.4

2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

Dell HP IBM

SOURCE: TBR.

TBR





Brand Switching ActivityAll Three Competitors Generally Coming Out Even

The Loyalty Factor

The proportion of customers replacing the three major brands of x86-based servers during the past year has approximately equaled the proportion of those adding the three major brands.

• In contrast to the more forward-looking customer loyalty rating, brand switching behavior in this study is a backward-looking metric.

• While in previous periods of this study IBM had been largely gaining new accounts, this trend has begun to slow.

CORPORATE X86-BASED SERVER BRAND SWITCHING - 2Q07

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Dell HP IBM

Replaced Added

SOURCE: TBR.

TBR





Brand Switching ActivitySwitching Index Trendline Shows Account Wins for Dell and IBM Slowing; HP Generally Gaining

The Loyalty Factor

• Over an irregular course, HP moved from a previously consistent trend of losing more accounts than it gained to one where the breakout becomes nearly a wash in 1Q07.

• In 1Q07, Dell’s switching index dropped to just below the 0% mark. With a few irregularities along the way, Dell’s trendline has been one of gradual reduction in new account gains.

• IBM’s trendline shows a gradual reduction in new account wins over time, yet remains well out of the “red” area of the graphic.

• Brand switching in the x86-based server segment is relatively rare: fewer than 10% indicate they switched brands in the past year.

• Among organizations switching x86-based server brands, pricing/costs continue to lead the list of causes, though only narrowly over additional considerations such as hardware quality, technical support, corporate mandate, relationships, and product design/performance.

SWITCHING INDEX = PERCENT REPLACED - PERCENT ADDED

4Q04 THROUGH 2Q07

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

Dell HP IBM

SOURCE: TBR.

TBR





One in Three Customers Believe Brand Differentiation is Real

x86-Based Server Differentiation

When asked if any x86-based server vendor stands apart from the crowd relative to its product quality or design, or its services, fully one in three respondents indicate they believe so.

This is a measure of brand differentiation outside the perception of pricing.

"Outside of price, do you see any of the x86-based server

vendors as having differentiated

themselves in the marketplace?"

No, 64.7%

Yes, 35.3%

SOURCE: TBR.

TBR





HP Remains Ahead of IBM as the Most Differentiated Vendor

Among those who believe differentiation exists, HP was most often identified as the most differentiated x86-based server vendor. HP was cited as such by nearly two in five respondents.

IBM was cited as the second most differentiated server vendor by one-third of respondents, with Dell mentioned by one-quarter.


"If yes, which vendor?"

Dell, 24.0%

HP, 37.0%

IBM, 32.5%

SOURCE: TBR.

TBR





HP Has Solidly Remained Ahead of Competitors as the Most Differentiated Vendor For Past Four Reporting Periods


• HP’s trendline has clearly been the most stable in terms of identification as a differentiated brand.

• The IBM brand experienced a significant drop in number of mentions in 2Q06, from which it has yet to recover.

• Dell experienced a long and steady decline in mentions to its lowest point in 1Q06, from which it quickly recovered. Mentions of the Dell brand, however, have stalled since 2Q06.

PERCEPTIONS OF MOST DIFFERENTIATED X86-BASED

SERVER VENDOR, 2Q05 THROUGH 2Q07

(% OF "BELIEVERS" CITING EACH VENDOR)

15%

20%

25%

30%

35%

40%

45%

2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

IBM HP DellSOURCE: TBR.

TBR





Hardware Reliability Most Often Cited as Source of DifferentiationSecondary reasons for citing brand differentiation: Technical support, customer services, design/features

Reasons for selecting Dell: Dominated by hardware reliability/quality. Secondary reasons include technical support, services and features/design. There was a much smaller gap between number of mentions for reliability versus support among Dell’s customers.

Reasons for selecting HP: Hardware reliability first; multiple secondary factors include customer services, technical support, design and tools. HP customers were most steadfastly connected to reliability as a differentiating factor.

Reasons for selecting IBM: IBM customers predominantly cited reliability as a differentiating factor. Secondary mentions included technical support and features/design.


REASONS FOR CITING BRANDS AS DIFFERENTIATED

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Hardware Quality/Reliability

Support Features/Design Services Tools Performance Consistency/Stability

Dell HP IBM

SOURCE: TBR.

TBR





Appendix A: Analytical Graphs & Tables





Stated Importance of Satisfaction Attributes Shows IBM Customers Looking for Comprehensive Quality Experiences

Overall Expectations among x86-based Server Customers:

• Critical: Hardware reliability

• Very Important: Replacement parts availability, overall value

• Also Important: Delivery time, ease of doing business

• Somewhat Important: Phone support, on-site support, server management tools

Relative Importance of the Attributes

Expectations Vary by Customer Group/Type:• While HP and Dell customers tend to isolate hardware

reliability at the critical level of importance, IBM customers tend to evaluate all attributes of the customer experience comparably. This proclivity among IBM customers might help explain the recent decline in satisfaction: extremely high expectations.

• IBM customers are more focused than competitors’customers on the quality of on-site support.

• HP customers continue to demonstrate a greater-than-average requirement for server management tools.

CORPORATE X86-BASED SERVER IMPORTANCE RATINGS BY PRIMARY VENDOR

3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4 4.6 4.8 5.0

Server mgmt features

On Site Support

Phone Support

Ease of DoingBusiness

On-Time ReliableDelivery

Value

Replacement PartsAvailability

Hardware Quality

Dell HP IBM

SOURCE: TBR.

TBR





Perceptions of Technical Support, Server Management and Hardware Reliability All Drive Overall Satisfaction

The multiple regression analysis shows the influence of satisfaction attributes on perceptions of server vendors overall.

Clearly, the lower-ranked attributes of on-site support and server management tools (based on stated importance of the attributes, as indicated in the previous slide) wield much stronger influence over customer perceptions than one might expect.

While Dell’s positioning in the competition has clearly improved, the areas contributing to its No. 1 status (competitive strength areas of delivery time, value, and ease of doing business) are not showing up as strong influencers of overall satisfaction. More likely, it is the areas where competitive weaknesses have diminished that show up as most relevant.

Note the lack of the hardware reliability category as an influencer of overall satisfaction among HP customers – clearly seems to be taken for granted (expected). Technical support items have been marked in red due to recent declines in satisfaction.

Derived Importance

Commonalities: On-site support, server management tools.

Support continues to wield a considerable influence on the customer experience, present now for the past five reporting periods as a predictor of overall satisfaction.

When customers are asked to directly state their priorities, more prominent critical areas such as reliability and value tend to overshadow issues such as on-site support and server management features (see previous slide). Yet, customer experiences within these understated areas tend to have a significant influence on how a customer rates their vendor overall.

Note: Categories marked in red text indicate areas with less influence on the overall experiences. Those in bold are clearly very positive influencers.





Statistical Significance Test No. 1 Shows Strengthening Dell PositionComparing Each Player’s Performances Against Sum of Competitors’ Using Standard Test

• Dell has recovered from below-par performances in the areas of phone support and server management satisfaction, while gaining several new areas of exemplary performance: delivery time, overall value, and ease of doing business.

• HP remains the pacesetter in the competition. However, HP’s competitive advantage relative to server value dissipated after a fleeting period of distinction in 1Q07, yielding the honor back into Dell’s court.

Statistical Significance Tests

New developments in 2Q07:

Delivery time and ease of doing business join the list of performance differentiators.

Phone and on-site support drop off the list. This is the first time TBR has observed such commonality of experience for server support since pre-3Q05.

While IBM’s scores are beginning to flip back to previously more solid performance levels, the effects of declining positions during the first calendar quarter of 2007 have contributed to the emergence of these three new areas of competitive disadvantage.





Statistical Significance Test No. 2 Elaborates on Findings of Test No. 1Paired Comparisons Using Standard Test

• Against IBM, Dell gained several new competitive advantages – overall value, ease of doing business, and a recovery from a deficit performance for phone support from the previous reporting period.

• Against HP, Dell recovered from two deficit performances of 1Q07 – phone support and overall satisfaction, while gaining a new advantage relative to delivery time.

• HP’s performances against those of IBM have largely remained comparable to those of 1Q07, with the exception of a new competitive advantage for delivery time.

Noteworthy Wins/Losses:

• Dell outperformed both competitors for delivery time.

• HP outperformed both competitors for hardware reliability satisfaction.

• IBM underperformed both competitors relative to satisfaction with delivery time and value.


Dell vs. IBM comparisons make up the majority of new cases of performance differentiation in 2Q07.

Note complete lack of performance differentiation across all areas of technical support.





Statistical Significance Test No. 3 Confirms Growing List of Performance Differentiators

Bonferroni Correction, the Most Stringent of TBR’s Applied Tests

• This test confirmed most results of the standard t-tests. Exceptions: Insufficient evidence of HP outperforming competitors relative to server management tools. While HP marginally retained its competitive strength position in 2Q07, it is worth noting that the performance gap has been narrowing.

• The numerical results suggest HP’s No. 1 ranking position was considerably more solid than that of Dell. This was largely due to HP having outperformed IBM for both overall satisfaction and customer loyalty as well as hardware quality (the three most critical categories for dominance), while Dell underperformed HP in the all-important hardware reliability category.


New performance differentiators in 2Q07:

Delivery time

Ease of doing business





Competitive GAP Analysis Demonstrates Shifting Competitive Landscape

Competitive GAP Analysis

X86-BASED SERVER VENDOR COMPETITIVE GAP ANALYSIS 1Q07

40

60

80

100

120

140

160

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Exceeds

Fully Meets

Short of

Exp

ecta

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Fu

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en

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SOURCE: TBR.

TBR

• In the 2Q07 study, TBR observed no performance differences relative to either phone or on-site support.

• Among the most substantial performance differences was hardware reliability, wherein two competitors’ GAP positions were positioned outside the “fully meets”expectation zone – HP exceeding marketplace expectations and Dell nearly falling below.

• Across several categories where Dell has come to dominate, substantial performance differences have emerged. Most notably, these include value, delivery time, and ease of doing business – all areas where IBM’s positions represent the flip side of Dell’s.

• In contrast to the 1Q07 results, HP gave up some ground in all areas save those where the vendor continues to dominate the competition: hardware reliability and server management tools. HP clearly has control over product/solutions-oriented categories, while technical support and marketing concerns are not as durable.

• Basically, the trendlines are the same shape for all three competitors in eyeing the GAP positions across the categories. The difference between these past two reporting periods is that HP’s trendline fell back toward the midrange, while Dell’s rose and IBM’s dropped much closer to the “falling short of expectation” area of the graph.

X86-BASED SERVER VENDOR COMPETITIVE GAP ANALYSIS 2Q07

40

60

80

100

120

140

160

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Exceeds

Fully Meets

Short of

Exp

ecta

tio

n

Fu

lfillm

en

t

SOURCE: TBR.

TBR





The Majority of GAP Positions Meet the Comfort Zone*

Standard GAP Analysis

• The measured attributes in the graph are arranged from those areas where vendors are more challenged to meet customer expectations to those areas where vendors tend to meet, then exceed, expectations.

• IBM does not hit the “comfort zone”(beginning at -5% GAP positions) until the fifth attribute, ease of doing business. IBM’s GAP positions trail those of competitors across the areas of value, delivery time, and ease of doing business – all areas where IBM was cited with competitive weaknesses or warnings.

• Dell’s GAP positions trail those of competitors for hardware reliability.

• Note that Dell’s phone support GAP rating improved and is now well within the “comfort zone” and comparable to that of HP.

• HP no longer outperforms competitors in any of the categories, due to Dell’s increasingly positive performances.

* Comfort Zone: In TBR’s formula for determining GAP positions (mean satisfaction minus mean relative importance, divided by mean satisfaction, represented as a percentage), the “comfort zone” is defined as a percentage as great as -5% that is considered an acceptable disconnect between customer expectation and satisfaction. Typically, TBR allows somewhat wider GAP positions for hardware reliability and replacement parts availability, due to the inordinately high (and likely impossible-to-meet) expectations for these two attributes.

GAP RATINGS BY VENDOR

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

Hardware Quality ReplacementParts Availability

Overall Value On-time ReliableDelivery

Overall Ease ofDoing Business

On-site Support Phone Support ServerManagement

Features/Ease of

ManagementDell HP IBM

TBR

SOURCE: TBR.





Units Installed, Purchased and Planned

• HP customer sites tend to run larger than the average. Dell sites no longer trail the industry average in terms of volume installations, suggesting the vendor is increasing its presence at large enterprise accounts.

• The IBM customer sites have declined in number of installed and planned x86-based servers. While TBR’s sampling frame by company size has not shifted, this new finding may suggest a greater propensity toward server consolidation.

x86-Based Server Buying Behavior

Linux-based Server Usage Stabilizes

• The proportion of x86-based server customers running the Linux operating system remains strong, yet appears to have leveled off.

• IBM continues to lead the way in Linux installations.

SITES RUNNING LINUX ON THEIR X86-BASED SERVERS

20%

30%

40%

50%

60%

Dell HP IBM

3Q06 4Q06 1Q07 2Q07SOURCE: TBR.

TBR





A Greater Mix of Server Architectures Emerges…• While Xeon obviously dominates the landscape, AMD Opteron-based systems are beginning to make a respectable showing in

the mix of server infrastructures.

• HP leads in AMD installations, followed by IBM and then Dell, just beginning to hit the radar screen.

• HP’s Itanium (EPIC architecture) now represents 11% of HP’s product mix in the study.

x86-Based Server Buying Behavior

…With Strong Blade Server Representation

BLADE SERVER PENETRATION

AT x86 CUSTOMER SITES

0%

10%

20%

30%

40%

50%

60%

70%

Dell HP IBM

Installed Planned





Appendix B: x86-Based Server Customer Satisfaction Scores: 3Q04 Through 2Q07





3Q04 Through 2Q07

x86-Based Server Customer Satisfaction Scores





Appendix C: Calendar Quarter Movements (Performances of the Past Four to Six Calendar Quarters)




TBRTechnology Business Research, Inc. Calendar Quarter Movement

DELL X86-BASED SERVER SATISFACTION,

PAST FOUR CALENDAR QUARTERS

5.005.205.40

5.605.806.006.206.40

6.606.807.00

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Jul-Sep 06 Oct-Dec 06 Jan-Mar 07 Apr-Jun 07

SOURCE: TBR.

TBR





HP X86-BASED SERVER SATISFACTION,


5.00

5.205.40

5.60

5.806.00

6.20

6.40

6.606.80

7.00

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Sat

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ctio

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Jul-Sep 06 Oct-Dec 06 Jan-Mar 07 Apr-Jun 07SOURCE: TBR.

TBR





IBM X86-BASED SERVER SATISFACTION,


5.005.205.405.605.806.006.206.406.606.807.00

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dwar

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Jul-Sep 06 Oct-Dec 06 Jan-Mar 07 Apr-Jun 07

SOURCE: TBR.

TBR





Dell x86-based Server Satisfaction by Calendar Quarter, Past Six Quarters

4.8

5

5.2

5.4

5.6

5.8

6

6.2

HardwareReliability

Value Ease ofBusiness

Delivery Time PartsAvailability

Phone Support On-siteSupport

ManagementTools

OverallSatisfaction

1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

TBR

SOURCE: TBR.





HP x86-based Server Satisfaction by Calendar Quarter, Past Six Quarters

5

5.2

5.4

5.6

5.8

6

6.2

6.4

6.6

HardwareReliability




ManagementTools

OverallSatisfaction

1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

TBR

SOURCE: TBR.





IBM x86-based Server Satisfaction by Calendar Quarter, Past Six Quarters

4.6

4.8

5

5.2

5.4

5.6

5.8

6

6.2

6.4

HardwareReliability




ManagementTools

OverallSatisfaction

1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

TBR

SOURCE: TBR.





Appendix D: Historical Strength & Weakness Analysis for Selected Attributes




TBRTechnology Business Research, Inc. Historical Strength & Weakness Analysis





Appendix E: Satisfaction Trends for Key Server Satisfaction Attributes





Delivery Time

Satisfaction Trends

DELIVERY TIME SATISFACTION HISTORICAL ANALYSIS

5.20

5.30

5.40

5.50

5.60

5.70

5.80

5.90

6.00

6.10

6.20

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07


TBR





Hardware Reliability

Satisfaction Trends

HARDWARE RELIABILITY SATISFACTION HISTORICAL ANALYSIS

5.60

5.70

5.80

5.90

6.00

6.10

6.20

6.30

6.40

6.50

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

Dell HP IBM

SOURCE: TBR.

TBR





Replacement Parts Availability

Satisfaction Trends

REPLACEMENT PARTS AVAILABILITY SATISFACTION HISTORICAL ANALYSIS

5.40

5.50

5.60

5.70

5.80

5.90

6.00

6.10

6.20

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

Dell HP IBM

SOURCE: TBR.

TBR





On-site Support

Satisfaction Trends

ON-SITE SUPPORT SATISFACTION HISTORICAL ANALYSIS

5.40

5.50

5.60

5.70

5.80

5.90

6.00

6.10

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07


TBR





Phone Support

Satisfaction Trends

PHONE SUPPORT SATISFACTION HISTORICAL ANALYSIS

5.20

5.30

5.40

5.50

5.60

5.70

5.80

5.90

6.00

6.10

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

Dell HP IBM

SOURCE: TBR.

TBR





Management Tools

Satisfaction Trends

SERVER MANAGEMENT TOOLS SATISFACTION HISTORICAL ANALYSIS

5.20

5.30

5.40

5.50

5.60

5.70

5.80

5.90

6.00

6.10

6.20

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07


TBR





Server Value

Satisfaction Trends

OVERALL SERVER VALUE SATISFACTION HISTORICAL ANALYSIS

5.40

5.50

5.60

5.70

5.80

5.90

6.00

6.10

6.20

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07


TBR





Ease of Doing Business

Satisfaction Trends

EASE OF DOING BUSINESS SATISFACTION HISTORICAL ANALYSIS

5.30

5.40

5.50

5.60

5.70

5.80

5.90

6.00

6.10

6.20

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

Dell HP IBM

SOURCE: TBR.

TBR





Overall Satisfaction

Satisfaction Trends

OVERALL X86 SERVER SATISFACTION HISTORICAL ANALYSIS

5.50

5.60

5.70

5.80

5.90

6.00

6.10

6.20

6.30

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

Dell HP IBM

SOURCE: TBR.

TBR





Overall Satisfaction vs Weighted Satisfaction Index

Satisfaction Trends

WEIGHTED SATISFACTION INDEX AGAINST OVERALL SATISFACTION RATINGS -

HISTORICAL ANALYSIS

80

81

82

83

84

85

86

3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

Weig

hte

d

5.7

5.8

5.9

6.0

6.1

6.2

6.3

Overa

ll

WSI Dell WSI HP WSI IBMOverall Satisfaction Dell Overall Satisfaction HP Overall Satisfaction IBM

TBR

SOURCE: TBR.





Appendix F: Categorical Responses to Performance Differentiating Attributes





Hardware Reliability/Quality

Categorical Responses

SATISFACTION WITH HARDWARE QUALITY/RELIABILITY

BY CATEGORY

0%

10%

20%

30%

40%

50%

<5 5 6 7

Dell HP IBM

TBR

SOURCE: TBR.

Dell underscored competition due to a comparative lack of “7” ratings and a somewhat greater number of “5” (meaning “good”) ratings.

IBM’s performances were somewhat spread out in that the vendor received the fewest number of “6” ratings but as many perfect “7” ratings as did HP. Note as well that IBM received the highest number of dissatisfied ratings.

HP represents the idea – the fewest number of lower scores with a very high concentration of 6’s and 7’s.





Phone Support


SATISFACTION WITH PHONE SUPPORT

BY CATEGORY

0%

10%

20%

30%

40%

50%

<5 5 6 7

Dell HP IBM

TBR

SOURCE: TBR.

Dell’s performance (while now comparable to the competition) could benefit by bringing in a greater number of perfect score (7) ratings.

IBM’s performances were arguably most exemplary, with the highest number of perfect 7 scores and the lowest number of “5”(or good) ratings.





Server Value


SATISFACTION WITH SERVER VALUE

BY CATEGORY

0%

10%

20%

30%

40%

50%

<5 5 6 7

Dell HP IBM

TBR

SOURCE: TBR.

The performances of Dell and HP remain very close with only the subtle difference that HP received a higher proportion of “5” (or good) ratings.

IBM clearly had the more dissatisfied customers, yet there does seem to have been a schism of perception – a split between the dissatisfied and the highly satisfied. Note that IBM achieved as many perfect “7” ratings as did HP and Dell.





Server Management Tools


HP clearly takes the lead in server management tool satisfaction due to a significantly greater number of perfect “7” scores and a dearth of ratings below “5”.

While both IBM and Dell are generally lacking in perfect “7” scores, IBM presented with a greater number of dissatisfied customers while Dell’s were more of the moderate level of satisfaction.

SATISFACTION WITH SERVER MANAGEMENT TOOLS

BY CATEGORY

0%

10%

20%

30%

40%

<5 5 6 7

Dell HP IBM

TBR

SOURCE: TBR.





Delivery Time


SATISFACTION WITH DELIVERY TIME

BY CATEGORY

0%

10%

20%

30%

40%

50%

<5 5 6 7

Dell HP IBM

TBR

SOURCE: TBR.

Dell presented with the greatest number of perfect 7 ratings and fewer in the 5 or less categories.

IBM clearly came up with the greatest number of dissatisfied customers (20% rated IBM’s delivery time less than a 5)





Ease of Doing Business


SATISFACTION WITH EASE OF DOING BUSINESS

BY CATEGORY

0%

10%

20%

30%

40%

50%

<5 5 6 7

Dell HP IBM

TBR

SOURCE: TBR.

Dell’s marginal competitive advantage was due to fewer “5” (or good) ratings relative to those in the “6” or “7” range.

Nonetheless, Dell’s lead over HP was quite narrow.

IBM customers were largely split; while IBM achieved as high a number of “7” scores as its competitors, nearly 20% rated ease of doing business less than a “5”.





Overall Satisfaction


SATISFACTION WITH OVERALL SATISFACTION

BY CATEGORY

0%

10%

20%

30%

40%

50%

60%

<5 5 6 7

Dell HP IBM

TBR

SOURCE: TBR.

The overall satisfaction metric results shows how Dell and HP are now evenly matched, while IBM has fallen behind.





Appendix G: Study Design & Methodology





2Q07 Sample Overview

TBR’s 2Q07 Corporate IT Buying Behavior & Customer Satisfaction Study: x86-Based Servers is based on interviews with qualified respondents at 407 medium and large U.S. and Canadian establishments, primarily MIS/IT, systems management and purchasing managers.

A number of the respondents are responsible for purchasing multiple brands for their company or site and thus were interviewed twice (once for each brand).

Consequently, 456 interviews were completed for the reporting period.

The x86-based server segment interviews for the reporting period were distributed as follows: 150 Hewlett-Packard customer interviews, 152 Dell customer interviews and 154 IBM customer interviews. Interviews were conducted between January 2 and June 30, 2007.

Study Design & Methodology

Methodology & Sample





Demographics: Type of Business/Industry

Study Design & Methodology





Regional Distribution

Demographics

NORTH AMERICAN DISTRIBUTION OF SAMPLE BASE

Central North15%

Pacific15%

South Atlantic17%

Canada5%

North Atlantic20%

Central South15%

New England6%

Central West7%

SOURCE: TBR.

TBR





Number of Employees

Demographics





Job Titles & Functions

Demographics





IT Infrastructure

Demographics

• 2Q07 sample represents a total of 2.6 million units (desktops, notebooks, servers).

• 2Q07 sample represents total purchase intent of approximately 450,000 units.





Appendix H: Analytical Procedures





Satisfaction Ratings

Totally Dissatisfied

(Failure) Mediocre Totally

Satisfied Failure Very Poor Poor Fair Good Very Good Excellent

1 2 3 4 5 6 7

The customer satisfaction analysis was based on several lines of questioning. Respondents were asked to grade their vendor across a series of attributes (listed below) for each brand the surveyed corporations purchased in the most recent buying cycle. At the conclusion of the attribute testing, respondents were asked to provide a rating based on a 7-point Likert scale.

Respondents were also asked to indicate the relative importance of each of the attributes in choosing their brand. These responses were given on a 1- to 5-point scale, with 1 meaning not at all important and 5 meaning very important. These ratings determined the gap between vendor satisfaction and importance, or how well the vendor manages expectations.

Respondents were then asked to indicate on a 1- to 5-point scale the degree of their loyalty toward their primary vendor(s). Finally, respondents were asked whether their corporation switched from one vendor to another during the past 12 months, and if so, which vendors were involved and why a change was made.

Analytical Model





Measured Attributes

Customer satisfaction and relative importance were measured for each of the following attributes.

On-time Reliable DeliveryHardware Quality On-site Support Phone Support Overall Value Overall Ease of Doing Business Replacement Parts Availability Server Management Features/Ease of Management Overall Satisfaction

Analytical Model





Satisfaction StatisticsA table of satisfaction statistics (including mean, standard deviation, standard error, range around the mean representing 95% confidence interval and standard t-test) describes customer satisfaction for each vendor in each attribute area, with special emphasis on overall satisfaction. A series of t-tests was performed on each vendor against the sum of its competitors, and the attribute areas where significant differences in score were indicated are marked. The t-test is a significance test that compares two means in order to determine if one mean is significantly different than the other, taking variability of response into consideration. The purpose of these tests is to determine if any of the group’s mean differences observed (e.g., a group being a set of customers of one vendor) cannot be entirely explained by random or natural variation within sampled groups of customers. In other words, the observed differences are real. TBR uses an independent sample t-test assuming unequal variances, or the standard student’s t-test. Those attributes with an α level of 0.05 or less are cited as indicating there is a 95% chance that concluding the two means are different is correct. A t-test of the grand mean (the mean of all scores for all attributes combined) serves to determine whether any of the vendors’ scores overall tend to run higher or lower than the competitors’ scores.

As a backup to the above tests, an alternate test (the bonferroni correction) is used for confirmation purposes (e.g., one-way analysis of variation). The variation within a group of customers is first determined in these one-way ANOVA tests. These variations are then compared to the variability between the groups (e.g., between the Dell, HP and IBM customers). The between-group variation is measured by the sum of the squared differences between the sample mean of each group and the grand mean, which is then weighted by the sample size in each group. The between-group variation will be larger than the within-group variation (variation within each specific customer group) if there are meaningful differences between the means. The attributes that pass this additional test are also cited in the report. While the one-way ANOVA identifies which attributes are affected by differing means according to customer group, further tests such as the bonferroni identify exactly which means differ from one another.

Analytical Procedures





The competitive GAP analysis measures the gap between a vendor’s customer satisfaction for each attribute area against the expectations (importance ratings) of the market (all respondents). The standard against which each vendor is measured is the average size of that gap for all server vendors. The GAP analysis compares vendor satisfaction per attribute against importance per attribute among the vendor’s customer base relative to overall satisfaction for all vendors per attribute against overall importance for all vendors per attribute. The formula for each attribute area independently is as follows:

GAP = ____(Vendor Importance * (7-Vendor Satisfaction)____ * 100(Grand Mean Importance * (7-Grand Mean Satisfaction)

The product for the above is graphed on a scale where values between 40 and 80 are areas where the vendor exceeds customer expectation; values between 81 and 120 are where the vendor fully meets expectation; and values greater than 120 are where the vendor falls short of expectation.

A second GAP analysis (the standard GAP analysis) considers how each systems vendor manages the expectations of its own customer base. For each vendor independently and for each attribute area, the mean satisfaction rating is graphed next to the mean importance rating (adjusted from a 5-point scale to the 12-point scale used for customer satisfaction). There are three possible outcomes: satisfaction meets customer expectation (bar graphs are equal or within a range where the gap is not significant); satisfaction falls short of expectation (indicating areas where the systems vendor may want to consider focusing greater efforts on raising satisfaction); and satisfaction exceeds expectation (indicating attribute areas where the systems vendor may be focusing more than is necessary).

Yet another GAP analysis (the Improvements GAP analysis) is focused on determining the areas where the vendors need to set up improvement programs and areas where they may be able to pull back resources. It uses a similar formula to the competitive GAP analysis; however, the denominator becomes the grand mean importance and satisfaction for the vendor across all of the attributes. In this test, TBR compares the gaps for each of the individual attributes against the average gap for the vendor. Areas where the gaps measure wider than the average are areas where the vendor most urgently needs to focus its improvement efforts.


GAP Analyses





A trend analysis compares each vendor’s customer satisfaction scores for the current reporting period separately against those from both the preceding reporting period and the reporting period prior to that. By comparing against both reporting periods, TBR is able to determine if any changes are indicative of a real change in historical pattern. This graph uses a 95% confidence-interval technique; the scores for each vendor are represented with the mean indicated in the middle from which the lines extend in both directions the distance of the standard error around the mean. This analysis is used to determine the reasons a vendor may move up or down in the rankings from previous reporting periods. Is it because the vendor improved or because the competition declined in customer satisfaction? The analysis also is used to pinpoint potential problem areas or areas where marked improvement is evident.

A multiple regression analysis is run for each form factor and for each vendor in order to determine the principal drivers of overall satisfaction. Each of the attributes is specified as independent variables and measured against the dependent variable: overall satisfaction. The attributes selected are the best predictors for overall satisfaction. The analysis uses a stepwise multiple regression with missing values handled in one of two ways: the missing values are replaced by the mean or pair-wise comparisons are made. TBR advises the reader to consider the results of this analysis with a measured amount of caution because many of the attributes are highly correlated with one another and can be as highly correlated with one another as they may be with the overall satisfaction attribute. The smaller sample sizes encountered when broken down by vendor also detract from the reliability of the results.


Trend Analysis & Multiple Regression Analysis





Loyalty ratings are provided by the respondents for their primary vendor(s) on a scale from 1 to 5, where 1 means little to no loyalty and 5 means solid loyalty. The means for each vendor are represented against one another and against the grand mean. The loyalty ratings are becoming less reliable indictors of true customer satisfaction because strong levels of loyalty are often established higher up within an organization as corporation mandates. They are not necessarily related to customer satisfaction as feedback from the actual users within the organization.

Levels of vendor loyalty are confirmed by determining from the respondents whether they have switched from one vendor to another during the past 12 months. In addition to determining the proportion of companies that have switched brands, the study determines which brands were involved and the principal reasons for the switch.


Vendor Loyalty Ratings





Numeric Weighting Model

1. A numeric weighting model is applied in order to provide a ranking of the vendors and a meansfor tracking overall change in customer perception over time. Where N represents the total number of attributes, AI the importance score for each attribute and AS the satisfaction scorefor each attribute, the formula applied for calculating the weighted satisfaction index, on anindividual respondent basis is:

Weighted Satisfaction Index = 100*7/1

1

⎟⎟⎟

⎠

⎞

⎜⎜⎜

⎝

⎛

∑

∑

=

=N

ii

N

iii

AI

AIAS

Note: The total number of attributes for the x86-based server segment = 10 The above has been calculated for each respondent, with missing values (Don’t Know or NotApplicable responses) having been replaced with the mean value for the attribute for the vendorgroup. The weighted satisfaction index for each vendor is the mean of the respondents’weighted scores. The calculation for the individual satisfaction index is as follows. Where S = the sum of the satisfaction rating times the corresponding importance rating acrossthe total attributes; and where I = the sum of the importance ratings across the attributes:

Weighted Satisfaction Index = ( )1007∗IS


9





Vendor Ranking Positions

Vendor ranking positions are determined primarily based on the average weighted satisfaction index positions, with a minimum distance of 1.0% generally required in order for TBR to assign separate ranking positions to any two vendors. The determination of ranking positions does not end here, however. Additional factors such as number of competitive strengths versus weaknesses also play into the final decision, which is a team effort by TBR principals. Consequently, less than a 1% distance can occur between two vendors’weighted satisfaction index positions yet they may be assigned separate ranking positions based on the additional factors stated above.


A competitive strength and weakness table is the final result of all the above analyses. The table points to the attribute areas that are definite strengths or weaknesses for each vendor. Areas of neutrality are those attributes where the vendor’s customer satisfaction performance is about average. The formula utilized for the determinations is: each attribute receives a score of 0 for neutrality, +1 for a positive and –1 for a negative. Three analyses are reviewed: the t-test analysis (0 for null, +1 for significantly higher scores and –1 for significantly lower scores); the competitive GAP analysis (0 for meeting expectation, +1 for exceeding and –1 for falling short); and the vendor GAP analysis (same as above). The standard t-test results are compared to those of the more stringent “bonferroni analysis” and those passing both tests are noted with an extra point. The three scores for each attribute are summed up. Any attribute with a total score of +2 or –2 is cited as a strength or weakness; total scores between these ranges are cited as neutral areas. Those with scores of +3 or –3 are areas of particularly strong strength or weakness. Marginal determinations (warnings or marginal strengths) come about when the determination is borderline, e.g., only the first t-test was passed, or the t-test was passed as a potential area of strength but a poor GAP rating negated it.

Competitive Strength & Weakness Table





Appendix I: Survey Instrument





2Q07 Survey Instrument

Survey Instrument

II. X86-BASED SERVER SATISFACTION

SCREENER

Are you personally involved in evaluating or recommending x86-based servers for your organization?

YES NO

Please list all brands of x86-based SERVERS purchased by your company over the past 12 months and what are the approximate proportions of annual purchases? _____________________________________ ______% _____________________________________ ______% _____________________________________ ______% TOTAL MUST ADD UP TO 100%

For your x86-based server vendor (VENDOR BEING RATED), can you specify the approximate number of units purchased within the past 12 months?

VENDOR BEING RATED # UNITS PURCHASED PAST YEAR

Dell [ ]1 ___________

HP [ ]2 ___________

IBM [ ]3 ___________

Are the (brand rated) servers you have bought in the past year based on the following types of architecture? (read list)

Celeron Y/N

Pentium Y/N

XEON-32 Y/N

XEON-64 Y/N

Opteron Y/N

Itanium Y/N

Other Specify Y/N






Survey Instrument

Are you running the Linux operating system on your (brand rated) servers?

YES NO

What are your general levels of satisfaction for your (vendor being rated) Servers for each of the following attributes?

This is a 1-7 point scale with the following points, where 1 means totally dissatisfied (complete failure on the part of the vendor) 2 is “ very poor”, 3 is “Poor” 4 means Average/Acceptable or fair, 5 means “good”, 6 means “very good” and 7 means totally satisfied or excellent. Please feel free to answer “Don’t Know” for areas where you are not sufficiently involved and “Not Applicable" for services you do not receive or use or if you have not been buying or using the products for a sufficient period of time.

Overall hardware quality combining out-of-box quality and hardware reliability?

Failure Very Poor Poor Fair Good Very Good Excellent Don't Know Not Applicable

1 2 3 4 5 6 7 DK NA

Overall Value including price paid plus short and long-term costs?


1 2 3 4 5 6 7 DK NA

Ease of doing business with vendor?


1 2 3 4 5 6 7 DK NA






Survey Instrument

Product delivery time/availability?


1 2 3 4 5 6 7 DK NA

Replacement parts availability?


1 2 3 4 5 6 7 DK NA

Phone Support?


1 2 3 4 5 6 7 DK NA

On-site support including on-site support response and expertise?


1 2 3 4 5 6 7 DK NA

Server management tools?


1 2 3 4 5 6 7 DK NA

OVERALL satisfaction?


1 2 3 4 5 6 7 DK NA






Survey Instrument

We’d like to understand how important each of the attributes were in contributing towards your overall satisfaction. Using a 5-point scale, where 1 means not at all important and 5 means extremely important, please rate each of the attributes according to how they influence your brand selection

Not Important Average Importance Extremely

Important

Hardware reliability/quality 1 2 3 4 5

Overall Value 1 2 3 4 5

Ease of doing business with vendor 1 2 3 4 5

Delivery time/product availability 1 2 3 4 5

Replacement parts availability 1 2 3 4 5

Phone Support 1 2 3 4 5

On-site support 1 2 3 4 5

Server Management Tools 1 2 3 4 5

On a scale of 1 to 5 how solid is your loyalty to your (VENDOR BEING RATED) servers, with 1 being the least loyal and 5 being the most?

Least Most

1 2 3 4 5






Survey Instrument

In the past 12 months, has your company switched (either temporarily or permanently) from one x86-based server vendor to another?

YES NO

(IF Yes ) Switched from_______________To________________ What was the reason for switching?

(If the respondent Switched Vendors check off up to three reason why in the table below)

1 [ ] Pricing/Costs

2 [ ] Corporate Mandate

3 [ ] Reliability/Quality

4 [ ] Support

5 [ ] Availability/Delivery

6 [ ] Relationship with vendor

7 [ ] Hardware design

8 [ ] User preferences

9 [ ] Standardization

10 [ ] Performance/features

11 [ ] Project-driven

12 [ ] Replacement parts availability

13 [ ] Trial/test

14 [ ] Other ______________________






Survey Instrument

Outside of pricing, do you see any of the vendors as having differentiated themselves in the x86-based Server marketplace based on product, support, or services?

YES NO

(If YES) Which vendor?________________________________

and in what manner? (check all that apply)

CODE REASON INCLUSIONS 1 [ ] Hardware Quality/Reliability Hardware quality, reliability, durability

2 [ ] Support Technical support as specified, also including phone support, parts availability

3 [ ] Services Any mentions of services in general, but does not include tech support

4 [ ] Features/Design Added features, anything relating to product design such as scalability, screen size; also includes ease of use, advanced technology

5 [ ] Tools Added tools, management tools, manageability, software 6 [ ] Performance Anything specifically relating to performance, speed 7 [ ] Availability/delivery Product delivery, availability 8 [ ] Relationships Sales rep relationships, account reps, ease of doing business

9 [ ] Consistency/Stability Anything relating to product planning, usually use words consistency or stability

10 [ ] Other Please specify reason

Has your organization purchased any blade servers?

YES NO

(If no, ask Q17, otherwise skip to Q18)

Is your organization currently evaluating blade server solutions for a potential future purchase?

YES NO

Are you personally involved in evaluating non-mainframe storage subsystems?

YES NO

If no, can you provide us with the appropriate contact?

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