Mainframe at 50: Still No End In Sight For IBM’s Big Iron

Although has chosen to celebrate the mainframe’s 50th anniversary tomorrow (in Big Blue’s defense, it is commemorating the debut of Big Iron year-long), the fact is that today, April 7, is the official Big 5-0 for the System/360, which was unveiled in 1964. It wasn’t the first , which class of machines started shipping in the 1950s from a number of other companies, but as of today, its successors are pretty much all that are left standing from competitors like the BUNCH – Burroughs, Univac, NCR, Control Data and Honeywell.

Fast forward 50 years and mainframes, now considered really big servers, are still going strong. For the most recent quarter (4Q13), total revenue declined 4.4% to $14.2 billion, with high-end systems (including IBM’s latest 360 version, the System Z) slumping 28.5% year-over-year to $2.8 billion. There are approximately 10,000 mainframes still running hundreds of thousands of critical enterprise applications for financial institutions, federal agencies and others.

At IBM’s last earnings call, the company announced 4Q13 revenue of $27.7 billion, with System z sales down 37% against a very strong quarter a year ago when revenue was up 56%. In the current cycle, we have shipped 28% more MIPS, compared to the same period in the prior cycle, and the revenue and gross profit in the current cycle are each about 99% of the previous cycle, said Martin Schroeter, Chief Financial Officer, Senior Vice President – Finance and Enterprise Transformation. “2015 will see another z cycle, so there will obviously be a little bit of tailwind there,” he added.

If IBM’s mainframe makeover is tomorrow, another company that has a long history in Big Iron was prepared to be a little more timely. CA Technologies (AKA Computer Associates, 1976-2010), goes back a long way with IBM and the mainframe. The company has been generating annual revenues in the $4.6-billion range, with half of that coming from its mainframe business.

“The mainframe is still an important part of our story, and we’re one of the only companies, next to IBM, that’s still investing in the mainframe, said CEO Michael Gregoire in a recent interview. “But we’re trying to modernize the platform.”

Last month at the annual SHARE Conference (B 1955), the association that represents over 2,000 of IBM’s top enterprise computing customers, CA announced scholarships to support the next generation of mainframe leaders, part of a program launched 4 years ago. “We are pleased to invest in the next generation of technologists that will continue to revolutionize the mainframe and deliver a new class of trailblazing solutions that will continue to drive so many of the vital transactions we engage with every day,” said Michael Madden, general manager, Mainframe, .

In an interview with IT Trends & Analysis, Madden said the mainframe is the transaction processing engine for some of the largest enterprises. “80% of world’s business data either resides on or is created by the mainframe.”

Throw in the sunk costs of the mission-critical applications and the actual porting costs to less-expensive platforms is unbelievable, he added. “We’re talking about 5-10 years to do the migration and tens of millions of dollars to do it.” There’s just no ROI that can justify that, he said.

Then there’s where IBM is taking the mainframe conversation, to be central to the . “The platform is absolutely set up to play in the just to handle the transactional workloads… price performance… agility and adaptability.” It’s the only platform that can adapt to these demands, said Madden, “no one else can do that.”

Just buying a mainframe is now competitive with high-end commodity servers, he said, around $75,000 for a Linux-based system. “As you scale up, costs are much better… and software costs fall off the table dramatically… 1/10-1/12 the cost.”

Once considered a candidate for the recycle bin, mainframes are gaining new life, said Madden. Customers are looking for new workloads to run on the platform, like cloud and mobile. And then there are the emergence of a new class of customers, service providers or cloud service providers. “The proof points are the people who are writing the checks.”

Madden thinks the mainframe skills gap is another area of concern and opportunity. The $1-million scholarship program helps, but that’s not enough. Over the last 4-5 years his workforce has morphed to one-third Gen Y, or millennials. “That puts us ahead of the curve, pays big dividends for us.”

Life for the mainframe is far from over at 50, he said. From our perspective, we’re looking for the ability for customers to really take advantage of the investment in the platform.”

Author: Steve Wexler

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