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Why IBM is still excited about the mainframe

I think it is highly unlikely that mainframe sales break $3.5bn a year very often, and I doubt they ever see $4bn a year again unless something really weird happens in the systems business. IBM's Power-based server business, which includes AIX, Linux, and OS/400 machines, accounted for around $5bn a year in sales in the past three years, and have held sales in the first half of 2009, at $2.2bn by my estimates.

Only when you throw in the substantial - and wickedly profitable - mainframe software stack into the mainframe sales equation can you understand why IBM is still excited by the mainframe. This software is rented on a monthly basis for the 10,000 mainframes installed worldwide.

For most users, there is not a competitive product they can buy. And this is where IBM gets the billions and billions of dollars to do share buybacks. IBM could give away mainframe hardware and probably still have the same profit margin it has with Unix machines. Legacy code is a sweet, sweet thing for IBM and for customers who just can't imagine recoding their mainframe apps. So long as they have money to cut those monthly checks.

The IDC statement on the mainframe report didn't say much else, other than IBM's use of specialty engines has revitalized the platform, that processing power and uptime were key differentiators for the mainframe, and that saving money was the number one reason for moving applications off the mainframe.

And now to CA, the software maker, which is deeply involved in the mainframe game. The company surveyed 100 mainframe shops in July and August and was willing to share more details about its findings than IDC was. CA talked to companies that ranged in size from $500m to more than $10bn in annual sales about their mainframes and what they are happy with and worried about.

Among those mainframe shops surveyed, 95 of the 100 said they had distributed servers (Windows, Linux, and Unix) in their data centers as well; 26 said they outsourced applications, 19 said they used various software-as-a-service officers, and 13 said they had other kinds of mainframes.

To get an idea of how deep these companies were into mainframes, CA found that a quarter of the mainframe shops had an aggregate of 20,000 MIPS or more in their data centers; another 10 per cent of the shops had between 10,000 and 20,000 MIPS and 22 per cent had between 1,000 and 10,000 MIPS. Nearly another quarter had relatively modest mainframe setups, with under 500 MIPS, and only eight per cent said they had between 500 and 1,000 MIPS.

Big Fail

About one-eighth of the shops said they didn't know. If you do the weighted average on the midpoint of those shops, you're talking about an average shop having around 7,650 MIPS, and at around $1,000 per MIPS for the iron (taking into account a mix of regular and specialty engines), call it somewhere around $8m in mainframe iron. Those customers polled probably have somewhere around $675m in mainframe hardware.

In aggregate, those companies polled by CA allocated about 38 per cent of their IT budgets to mainframe hardware and software, while 56 per cent of the budget covered those distributed platforms; the remaining six per cent of the budget went to hosted apps of one sort or another.

When looking at new workloads, mainframes are beat out by distributed platforms except when it comes to transaction processing applications. But a little more than a third of the time, no matter what kind of application is going into the mainframe shop, the mainframe gets a chance.

Attesting to the backbone nature of the databases running on mainframes at mainframe shops, a third of the companies polled said that if the plugs were pulled from their mainframes all their applications - even those running on distributed platforms - would fail. Another 27 per cent said a lot of important applications on distributed systems would fail, but some could keep running; 24 per cent said some would fail and another 13 per cent said there would little impact.

The mainframe has its place, and like every other platform, it has to compete on the merits. Quarter after quarter, year after year. ®

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