What IDC Didn't Say: 2Q2011 Worldwide Server Sales
IDC released its "Worldwide Quarterly Server Tracker" with server hardware sales data for the second quarter of 2011. I'd like to spend a few words discussing this report and its implications.
In IDC's press release there was some "spin," whether intentional or unintentional. Jean Bozman, an IDC analyst, said, "The Unix server marketplace is seeing some rebound in revenue, based on technology refresh for Unix server products from all major vendors." That sounds plausible but, if that were true, we would expect to see roughly equal growth among all the Unix server vendors.
No, that's not at all what's happening. Year over year, the Unix server market grew 1.5% (compared to 17.9% for the overall server hardware market — more on that in a moment). Within the Unix server market, IBM's revenue grew 14.0% and, as IDC noted, IBM gained 6.0 percentage points of marketshare.
Note that IBM had over 50% marketshare in Unix servers prior to this report, but let's consider some simple mathematics and assume IBM had exactly 50%. In order for IBM to grow revenue by 14.0% and the overall Unix market to grow 1.5%, the entire remainder of the Unix market must have shrunk by about 11%. The remainder of the Unix market is mostly HP with some Oracle/Sun, a bit of Fujitsu, and a very little bit of a couple other vendors.
So no, with respect, Ms. Bozman is not correct. The Unix server marketplace saw a rebound based solely on the strength and customer acceptance of IBM's Power servers, which were already far ahead in terms of technology and marketshare and are now accelerating far away from the pack. As predicted here, HP's Itanium server sales crashed. How much did they crash? IDC doesn't say in its press release, but simple mathematics yields a clear answer: "a lot."
IBM's System z servers really turbocharged the server hardware marketplace. IDC reports that System z revenues grew 61.1% year over year, representing 9.0% of worldwide server hardware revenue. IBM mainframes were, by far, the fastest growing servers in IDC's survey. That 17.9% overall growth rate would have been substantially lower if not for mainframe sales.
IDC cautions that these growth rates are unlikely to persist into the latter half of 2011, given global macroeconomic trends. That could well be correct. It's also a reason why, if you're a server vendor, you want to be growing fastest (and certainly not shrinking) heading into any future economic headwinds. IBM has tended to weather economic storms extremely well. If you're buying servers, that's certainly something to keep in mind.
Finally, I would caution yet again that server hardware revenues are somewhat interesting but only part of the hardware vendors' revenues associated with their platforms. That's quite evident with IBM System z mainframes, but it's also true with other types of servers, to varying extents.
|by Timothy Sipples||August 30, 2011 in Current Affairs |
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Come On, Irene: Tips for Disaster Preparation
The most important news in the world is that a Category 1 or maybe 2 hurricane will come close to the centers of the universe. That would be Washington, D.C., and New York City, of course, which have the biggest populations of English speaking journalists. I remember when a Category 4 didn't get so much TV coverage, and I'm a young intern compared to Bob Neidig.
Hurricanes happen. Even if the TV networks get way too excited about them, they deserve respect. IBM reminds us about preparing for disasters in a timely press release.
By the way, if you (or your service provider) have got a couple mainframes spread across a couple different sites, and you are reasonably competent in using them at least to support your critical business processes, congratulations. "Irene" should blow but not bite. And if you've got some hurricane stories to share, please post them in the comments.
|by Timothy Sipples||August 26, 2011 in Business Continuity, Current Affairs |
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Miami, October 3-7, 2011: Be There
I've heard Miami has beaches. And there's an excellent conference. Just go.
|by Timothy Sipples||August 24, 2011 in Events |
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IT Costs Matter Even More to Smaller Businesses
In the video below, Dr. Howard Rubin discusses his latest analysis of IT costs. He points out how critical it is that smaller businesses make the right technology choices, because IT costs typically make up a larger share of their revenues compared to larger businesses. IBM's new z114 — and, I would add, hosted mainframe cloud offerings — present the most affordable opportunities ever for smaller businesses to achieve much the same IT scale efficiencies and cost savings that larger businesses enjoy.
|by Timothy Sipples||August 23, 2011 in Economics |
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HP Announces Big Restructuring: What Does It Mean?
The technology industry continues to make business headlines. Google is acquiring Motorola Mobility to protect and grow its Android franchise, and now HP's new CEO Leo Apotheker makes his big decision to unravel what former HP CEO Carly Fiorina built. Here's a quick summary of HP's actions:
- HP is either spinning off or selling its PC, laptop, tablet, smartphone, and webOS businesses.
- HP is acquiring British software company Autonomy for £7 billion (about $11.6 billion). Autonomy's software helps businesses search unstructured data, such as e-mails.
- The company is providing new, lower financial guidance reflecting additional weakness in sales and profitability. HP also expects restructuring charges.
Wall Street is reacting quite negatively to HP's announcement. As I write this, HP's stock is trading about 18% lower than yesterday's closing price, which was already beaten down as some of the news broke.
Most analysts have focused on HP's exit from the PC business, declaring Apple the victor in that battle. I think that's a little overwrought. Nobody except Apple, Intel, and Microsoft can seem to make much of a profit in the PC business. In what's looking like the most brilliant business decision of the decade, IBM exited the PC business in 2005. In the process, IBM got some extra cash when the business was valuable, cash which the company used to invest in other, more profitable businesses, including software. (That cash covered at least one mainframe model's R&D, for example.) IBM also won significant business respect in the fast growing Chinese market, generating a lot of goodwill for the company as it sold one of the world's most iconic PC brands, the ThinkPad. Even though HP's PC business is the world's biggest in volume and revenue terms, it'll be interesting to see whether HP can get anywhere near the value IBM got ($1.75 billion in 2005 dollars, excluding goodwill). The PC market is a lot different six years later, and HP isn't offering its brand as part of the deal.
There are some analysts who are realizing that HP is belatedly trying to mimic IBM's business model. I think that's HP's clear intention, but I also think Wall Street is correct. The odds are long that HP will be able to pull it off. Instead, I think HP may come to more closely resemble Xerox, with HP's printing business anchoring an IT services and relatively small software business. For example, HP is missing a credible enterprise server strategy given the Itanium meltdown, and that's one of IBM's critical factors in its highly successful business model. Moreover, even if HP can replicate IBM's business model, IBM's management has repeatedly demonstrated an exceptional ability to move to where the ball will be, not where it is today.
That said, I admire Apotheker for trying. Oracle dealt him a serious and perhaps near-fatal blow just as he joined HP, and he had to do something dramatic. HP may attract some bidding interest for its webOS technologies, including Palm's patent portfolio. HP's nascient tablet business won't be at all interesting given lethargic sales, so I would expect that part of HP to be more or less liquidated and disbanded. (You might see some closeout $99 HP tablets soon.) I think HP is overpaying for Autonomy, but, as I mentioned previously, there just aren't too many game-changing enterprise software companies still available for acquisition, especially at reasonable valuations. And Autonomy by itself certainly won't be enough for HP to emerge as a significant enterprise software company. It took IBM over a decade to build its software business, and IBM acquired scores of significant software companies along the way, most much more important than Autonomy. HP has a long road ahead.
UPDATE #1: HP may keep webOS but license it to others. Good luck with that. Perhaps LG and HTC will ring up HP to buy some mobile platform insurance if the price is near zero, but Android is still free and Microsoft has deep and desperate pockets. Also, $99 may be too high a price for an HP tablet. Apple's iPads are so good that they run webOS twice as fast.
UPDATE #2: As I continue to read reactions to HP's announcement, I am finding some more interesting questions. For example, would many people buy HP PCs, laptops, or Itanium servers now? When IBM exited the PC business, a deal was struck in private. In late 2004, IBM announced that Lenovo, already a major PC company, was buying the business. There was a lot of detail immediately available about how Lenovo would run that valuable business, including their plans for expanding the ThinkPad line, specific IBM executives who would join the company, investments in the U.S., etc. All of that detailed transition information reassured current and potential customers as soon as the news broke, and both companies kept their promises. In contrast, the #1 volume PC maker has just announced that they're exiting the business, but there's almost complete uncertainty about where that business will end up and what it will look like. The only decision that has been made is that the HP brand won't be part of the spin-off or the sale, which is hardly reassuring. (Lenovo had rights to the IBM brand for up to five years, and customers knew that IBM would zealously guard its valuable brand.) Dell, Toshiba, Sony, and of course Apple make wonderful PCs and laptops, so there are plenty of other options besides HP. Why did HP announce a business exit without any transition plan? It's weird and confusing.
|by Timothy Sipples||August 19, 2011 in Current Affairs |
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Google Acquiring Motorola Mobility: Hardware Matters
Google announced a friendly takeover of Motorola Mobility less than a day ago as I write this. No fewer than seven law firms have already announced civil lawsuits against Google and Motorola Mobility in relation to the acquisition, which only reminds us that anyone can complain about anything, with or without legal merit. Instead of lawsuits I'll offer some quick analysis, similar to my previous HP Itanium meltdown analysis.
Mobile competition is turning out to be much more interesting than the PC-related battles of the 1980s and 1990s. Most of our planet's inhabitants don't have PCs or PC-like devices, most probably never will, and it's even possible that PC penetration will diminish over time. These trends are disturbing to some incumbent vendors, notably Microsoft. The one-two punch of the Internet followed by mobile computing have upended the technology world, with some potential winners and losers starting to emerge.
Apple is clearly a winner. Michael Dell famously recommended that Apple's management liquidate the company and give the proceeds to shareholders. Fortunately Apple rejected that free advice. Apple has recently surpassed Exxon Mobil as the world's most valuable publicly traded company, depending on which trading day you check. Apple is now over ten times more valuable than Dell. Most of that shareholder value derives from the tremendous success of the iPhone which has spawned the largest and most popular mobile application ecosystem that now rivals the PC. Later this year, Apple is cutting the cord for good: iPhones, iPads, and iPod touches with iOS 5 will no longer require a PC or Mac for keeping in sync and for updating their operating systems. Inevitably that means many people who don't yet have PCs won't buy them, and people who do have PCs will use them less and less. Mobile computing is just more...mobile. (One of the PC's few remaining distinguishing characteristics, the full-sized keyboard, doesn't offer much advantage for Asian languages such as Chinese and Japanese. And if you really want a full-size keyboard you can add one to your iPad or iPhone via Bluetooth.)
Apple is one of the best examples of the newly rediscovered maxim that "hardware matters." Like Exxon Mobil, which is a vertically integrated energy supplier, Apple is the ultimate vertically integrated mobile computing supplier. (IBM mainframes represent the ultimate expression in vertically integrated hardware and software in the business server marketplace. IBM i systems represent another excellent example.) Google has emerged as the other serious participant in mobile computing with its Android operating system and its related application ecosystem. In effect, in the shift to the mobile world Google replaced Microsoft as the dominant client software provider. I think Microsoft has already lost that fight, and the company's partnership with fast-fading Nokia won't work. Microsoft is to mobile computing what Digital Research was to microcomputers in the early 1980s — an odd irony.
In making this acquisition, Google has acknowledged that, as with mainframes, "hardware matters." Oracle has also come to that realization, but I think Oracle could have solved their problem at much lower cost than its acquisition of Sun. Oracle didn't need Sun to build Exadata-type products. I think Oracle was just petrified that IBM would acquire Sun and reacted accordingly. IBM wisely walked away, leaving Oracle with the carcass — and angry Sun customers. Google mostly solves an immediate problem: the attempted intellectual property-based attacks against Android. Google dramatically beefed up its patent portfolio thanks to a big patent purchase from IBM, and now Google picks up Motorola Mobility and its rich patent portfolio in mobile communications. That's smart when faced with the ongoing stupidity that is the patent system.
But Google has also come to realize that hardware and software integration matter, to deliver a smooth, trouble-free customer experience. Google is one of the few companies, even in the technology sector, that's just crazy enough to build its own servers to support its unique in-house software. Google's purpose-built software has co-evolved with its hardware over time. Likewise, Google should be able to take Android to new levels of ease-of-use and function thanks to Motorola Mobility, its most loyal Android partner.
It'll now be interesting to see what Samsung, LG, ZTE, HTC, Sony-Ericsson, and other mobile device manufacturers do. So far they have simply followed the fads, meaning that they've built a lot of Android devices, quite successfully. I don't view any of them as credible software companies. (No, Samsung's Baidu really doesn't count, except perhaps as insurance for Samsung.) Google has proven to be a good partner in many competitive situations. Despite competing in the Web browser arena (with Chrome), Google continues to fund the bulk of the Mozilla Foundation's budget in return for preferential search engine placement in Firefox. Likewise, despite some tension, Google and Apple maintain their partnership in search and in mapping. Google says that they will continue to improve Android and supply new Android versions on a business-as-usual basis. I believe Google, because Google's business model is and will remain based on maximizing eyeballs, i.e. based on advertising revenue. In the early U.S. television industry, NBC's parent, RCA, manufactured televisions, but NBC was also very happy to have viewers tune in using their DuMont and Philco sets. Google's business model is quite similar, and that'll continue.
So, fundamentally, Google's move is about protecting the Android ecosystem from attack and "getting their feet wet" in developing practical Android innovations that they will also readily share with other device makers to maximize their advertising revenue. I'm not the first to say it, but if you want to develop better software you should also build hardware. I think Google made a very smart move here, and I think Motorola Mobility's talents will accrue to the benefit of Android and of all Android partners. Those Android improvements will help widen the gap between Android and, in particular, Windows Phone and Blackberry, both of which seem to be fading fast. Rival handset makers might get a bit nervous, but I think they'll stick with Android and sell a lot of new, much improved devices. They'll also still be free to innovate atop Android if they wish, and they'll have a more powerful partner in terms of fending off IP-related FUD. Google is paying about $12.5 billion for Motorola Mobility which seems like a much better value than Microsoft's $8.5 billion for Skype.
It'll be interesting to see whether Microsoft buys Nokia now. That would be the obvious competitive response, and Microsoft certainly has the cash. It looks like Microsoft could pick up Nokia for about $30 billion. The trouble is, I don't know what Microsoft can do to establish Windows Phone as a significant mobile platform even with Nokia.
This post was updated with additional detail on Motorola, Skype, and Nokia acquisition prices.
|by Timothy Sipples||August 16, 2011 in Future, Systems Technology |
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Brief News Roundup for Mid-August, 2011
Here are some interesting mainframe-related stories from around the world:
- ComputerWeekly interviews 18-year old Danish mainframe engineer John Prehn.
- Data Center Journal reports on "Big Iron Today: The State of Mainframes." Answer: The state is excellent.
- T3 Technologies, TurboHercules, and Neon Software Enterprises have withdrawn their complaint lodged with the European Union's antitrust authorities against IBM. T3 and Neon both lost U.S. court cases against IBM earlier this year.
- The Wall Street Journal writes: "Behind the Youthful Sales Surge for IBM Mainframes."
- Aptly named Micro Focus is looking for a white knight. Meanwhile, Compuware and BMC beat earnings estimates.
|by Timothy Sipples||August 15, 2011 in Cloud Computing, Current Affairs, People |
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Candidate for Lamest Excuse Not to Share Machines
Overheard from a data center manager (closely paraphrasing): "We have to buy separate machines because that's a separate business unit."
That manager made that assertion while sitting next to his company's data center. The building, power supplies, cooling systems, networking, fire suppression systems, security guards, telephones, lighting systems, and numerous other components of that data center — including his (too high?) salary — are all shared across business units. No, each business unit does not have its own data center. They somehow figured out how to share everything except the servers? Really?
What a lame excuse! Unfortunately his company is losing marketshare and has been roundly criticized for its poor efficiency and demonstrably awful IT security. I hope that manager figures out a way to help his company, quickly.
The zEnterprise 196's partitioning (LPARs) has been certified according to Common Criteria EAL5+ standards. No other business server's virtualization has achieved that sophisticated standard, which is equivalent to separate servers. Yes, you can share mainframes — even across businesses, not only business units. Practically everybody who owns mainframes does just that and enjoys the efficiencies.
See also: "How Many Mainframes Do You Need?"
|by Timothy Sipples||August 12, 2011 in Cloud Computing, Economics |
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Amazon and Microsoft Need Mainframes
According to Wikipedia, lightning occurs somewhere in the world about 44 times per second on average. A quarter of those lightning flashes strike the ground. Meteorologically, lightning is extremely common. All the more reason to wonder why both Amazon's and Microsoft's customers suffered hours-long outages due to a lightning strike.
I found Amazon's advice to its customers particularly galling: "For those looking for what you can do to recover more quickly, we recommend re-launching your instance in another Availability Zone." Translation: You handle your own disaster recovery (if you can), because obviously we can't.
These are certainly not these companies' first outages. It's rational to assume they won't be the last.
Fortunately Amazon and Microsoft customers have an alternative. They can follow these simple steps:
- Find at least two data centers, physically separated — your own, or someone else's. (Scores of IT service companies, not only IBM, operate mainframe-based clouds. They used to be called "service bureaus.")
- Put a mainframe at each site — your own, or share someone else's.
- Use any of several common, cross-site disaster recovery features available with mainframes, notably IBM's GDPS. Choose whichever flavor meets your particular RTO and RPO requirements.
- Hire competent IT staff, and pay them reasonably.
- Put your applications and information systems on these mainframes, at least for your most critical business services, end-to-end.
- Stop wasting money with Amazon and/or Microsoft.
|by Timothy Sipples||August 8, 2011 in Business Continuity, Cloud Computing |
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Goldman Sachs Needs a Mainframe
"To our Valued Clients, Due to unexpected trade processing delays, we are experiencing custody reporting delays. We apologize in advance for this inconvenience...."
(Blank) Needs a Mainframe is an ongoing series of posts to The Mainframe Blog, offered as a public educational service to our readers. Mankind always strives for perfection, but unfortunately perfection is not yet obtainable. However, when you need IT service delivery that's as close as possible to perfection, you need a mainframe, or maybe a couple — and you must use them, end-to-end, for the business services that must be delivered as perfectly as possible. Anything else simply isn't the best — and could cost you and your clients billions in the midst of a global financial crisis. Which would be...inconvenient.
|by Timothy Sipples||August 5, 2011 in Business Continuity, Economics |
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