The Mainframe Blog Home

Free Stuff for Your Mainframe: 2013 Edition

FREE! That's a word we all like to hear, though maybe "no additional charge" is more truthful since nothing in life is truly free. In the past I've listed many of the mainframe freebies available, and those posts have been popular. This post is an update since there are so many more mainframe freebies now. Please do grab these freebies, explore, and put them to productive use. After all, the price is right.

Free Mainframes

Free mainframes? Did you say free mainframes? Yes, you can get access to mainframes free of charge with certain caveats. Here are some examples:

• IBM's Master the Mainframe Contest offers free access to z/OS for students (and perhaps others) competing in a series of educational challenges. If you're among the top finishers you might even land a job offer from IBM or from other employers.
• Want to bring your commercial or open source application to z/OS and/or Linux on zEnterprise? No problem! Sign up for IBM's Validation Program for z/OS and/or Linux on System z Test Drive.

Free Mainframe Operating Systems

Linux is an open source operating system licensed per the GNU Public License (GPL). This type of license means that you don't have to pay a license fee to obtain and to use Linux, though Linux distributors (such as Novell and Red Hat) charge fees if you want their optional support services. Here are some examples of Linux distributions and other operating systems available for zEnterprise:

• Novell offers its SUSE Linux Enterprise Server for zEnterprise for download to evaluate. If you like it, you're encouraged to subscribe to Novell's support services.
• Red Hat offers its Enterprise Linux for zEnterprise for evaluation, too.
• Other Linux distributions for zEnterprise include Debian Linux and Fedora Linux.
• An older release of z/VM is available from IBM for evaluation.
• A release of the discontinued OpenSolaris is available for zEnterprise from Sine Nomine Associates.
• ZZSA is not actually an operating system. However, it doesn't need an operating system to run. It's a useful set of tools that can start up on a "bare" LPAR on its own. You can display and edit data on disk, and it's helpful to diagnose IPL problems.
• IBM's Customized Offerings Driver (5751-COD) is a miniature version of z/OS that can help support new z/OS installations.

IBM Freebies for z/OS, z/TPF, z/VSE, and z/VM

• IBM makes its Java Software Development Kit (SDK) releases for z/OS available at no additional charge. JZOS is included which provides Java methods for accessing many z/OS resources along with a batch launcher and toolkit. You may also be interested in the Java technologies available from Dovetailed such as Co:Z and Tomcat for z/OS.
• The DB2 Accessories Suite for z/OS (5697-Q02) includes many useful tools and accessories to make DB2 for z/OS more powerful and more useful. Examples include IBM Data Studio, SPSS Modeler Server Scoring Adapter, Spatial Support, International Components for Unicode, and Text Search.
• Go graphical! You can manage your z/OS system much more easily with graphical interfaces for every major subsystem and component. Grab the z/OS Management Facility and the Explorer for z/OS first. From the Explorer for z/OS you can then use (or directly install) plug-ins for CICS, IMS, IBM's application development tools, IBM's problem determination tools, and other products.
• The XML Toolkit for z/OS (5655-J51) adds to the XML System Services that's already part of z/OS.
• IBM offers many more z/OS-related downloads including the IBM Encryption Facility for z/OS Client, Logrec Viewer, LookAt, z/OS UNIX System Service Tools and Toys, and many others.
• Be sure to install the Alternate Library for REXX to run compiled REXX programs on your z/OS and z/VM systems. Compiled programs won't run as efficiently as when the regular licensed REXX library is installed, but at least they'll run.
• The z/OS Ported Tools (5655-M23) include OpenSSH, IBM HTTP Server, and many other useful products. (Rocket Software also offers several ported tools.)
• Got z/TPF? IBM has you covered. How about z/VSE? Yes, there are freebies for you, too. Or maybe z/VM? Covered.

Other Freebies (Mostly for z/OS)

• You can find oodles of interesting tools, utilities, and applications for z/OS in the CBT Tape collection.
• David Alcock offers some interesting z/OS tools at Planet MVS.
• The recently departed Gilbert Saint-Flour leaves behind some great z/OS freeware.
• Here's Mark Zelden's collection.
• ColeSoft has some handy tools.
• Doug Nadel has lots more. (The latest version of TASID is normally found at IBM's Web site, though.)
• AT&T Research offers a z/OS version of ksh (the KornShell).
• Dignus offers some freebies.
• Stanford University's WYLBUR for MVS (z/OS) is freely available.
• Rizzuto IT has many tools available.
• Lionel Dyck has more.
• Andy Robertson has got a collection.
• Leonard Woren offers lots of free tools.
• Michael Joseph Cleary has a few tools in his catalog.
• Nicholas Sun offers the MVS Workbench and Files Organizer.
• Cardett Associates has a couple free tools for DB2 for z/OS.
• DCMS offers their TBOX Power Tools for z/OS free of charge.
• Nigel Pentland has some RACF-related downloads. (So does IBM.)
• SimoTime Enterprises has lots of sample code for z/OS available.
• "Taltyman" has more freebies, including a version of the game Yahtzee for z/OS.
• Dovetailed Technologies hosts an open source software directory for z/OS. The directory is still in the draft phase but may be useful. Contributors to the directory are welcome.

I'm sure I'm only providing a partial list of mainframe freebies, but it's a start. Have fun!

Server Hardware Trends: A Commodity Market Plus IBM

The New York Times summarized the latest IDC and Gartner server marketshare reports, highlighting the rise of the non-branded custom-built commodity server makers that supply big Internet firms such as Facebook. "Others" is now the #3 server "vendor" on a hardware revenue basis and #1 on a volume basis. (On a revenue basis, IBM is #1 and HP is #2.)

These long running trends are fascinating, and I've described them before in various ways. I think it's important, though, to distinguish between IBM and HP because they have very different positions in the overall market. IBM is now the only remaining credible vendor of "high-end" servers. We've seen time and time again in many markets — retailing, to pick an excellent example — that getting stuck in the middle is a bad place to be because competitors are both attacking from below and above. The attack from below is based fundamentally on price, particularly acquisition price. Those are the "Others." The attack from above is based on value, sustained high levels of research and development to deliver innovation, and best-of-breed capabilities and qualities. That's IBM. In the middle is HP, the JCPenney of the server market. In a few more quarters Dell will probably be right there, too, but we'll see.

I very much like IBM's position given these market trends, and I'm not too worried about the slight hardware revenue dip IDC and Gartner reported given the structure of that dip. IBM's high-end got higher, to put it succinctly, and there's some good evidence IBM's margins improved. Moreover, most of IBM's revenues associated with its servers are not measured by its hardware revenues alone, and that's unique to IBM. When HP sells servers they typically don't include much else from HP that customers buy. In contrast, it's very rare that an IBM server gets sold without substantial IBM content that customers buy.

I don't know exactly how big the high-end server market will be, but it will continue to be a terrific business amidst the continuing explosion of information, long-term economic trends, and increasing quality demands. As long as IBM keeps finding ways to differentiate and to innovate up and down their solution set, the company will do fine, and more importantly so will its many and growing numbers of customers. However, while IBM is very much pursuing its high-end strategy with gusto, IBM is also eager to push into volume markets as well — IBM in the role of Target (and/or Costco) to offer an alternative to Walmart, metaphorically speaking. I'm referring of course to IBM's OpenPOWER Consortium with Google, NVIDIA, and others.

So these Gartner and IDC reports are really not good news for HP in particular. As I've said before I don't know how HP gets out of its shrinking box. HP's CEO Meg Whitman has a tough job.

The Reality of "Rehosting"

IBM has a point of view

RBS NatWest May Need a Mainframe Operator

June was an awful month for the British banking industry: revelations that Barclays and other banks have been fiddling with the LIBOR survey, cheating borrowers out of billions; several banks offering restitution to small business customers who bought poorly explained rate hedging contracts that were written primarily for the sole benefit of the banks; and a massive breakdown in the payment processing flows at NatWest and Ulster Bank (both owned by RBS). Some bank customers couldn't access their money for days due to the failures.

RBS hasn't said anything about the root cause of the problem that affected so many customers — and which has cost the bank a substantial sum. However, The Register has published two reports (here and here) which explain the causes. The reports are thinly sourced, so caveat emptor. If the reports are correct, RBS applied an upgrade to their CA-7 scheduling software. The upgrade did not go well, but fortunately they had a safety net: they could back out the upgrade. Unfortunately the operator who backed out the upgrade also erased the roster of scheduled jobs, and it took days to recover from that operator error.

The Register also goes on to explain that RBS as recently as February advertised for one or more India-based CA-7 operators. The Register pointedly asked RBS whether the particular operator(s) who botched the back out of the upgrade is(are) based in India. RBS has declined to comment, but I'm sure that information will be revealed in due course since British banking regulators will conduct a full investigation.

Let me make an editorial comment here. Some of the most talented IT staff in the world are located in India. That said, RBS apparently wasn't interested in hiring the most talented staff. RBS's management was evidently interested in hiring the cheapest. I don't think a CA-7 operator, particularly one with the awesome responsibility of delivering banking service levels, ought to be paid £11,000 or less per annum.

I'm curious to know the truth, and hopefully the truth will be revealed and/or confirmed. In the meantime, remember that "you get what you pay for" — or what you don't pay for.

New Mainframe Thinking at Canada's Department of National Defence

John Palmer pens an interesting article about the Canadian military's approach to enterprise computing in a publication aimed at government purchasing departments. DND's new IBM mainframes are vital in reducing costs for taxpayers, and they're also extremely well suited to Canada's new shared services approach to computing. They also happen to be rock solid reliable and secure — rather important attributes to a military organization.

My Mainframe-Related Pet Peeves

In no particular order:

1. "Green screens" are good enough. No, they're not. Do you force your users to submit their input and receive their output via punched cards? User interfaces change and evolve, and appearance often matters. Stanford's IBM mainframe served the world's first interactive Web application. If you haven't provided Web user interfaces on your mainframe to serve users' demands, what on earth are you waiting for?
2. Everyone must use Web interfaces. Some users prefer to continue with their familiar, fast, and efficient 3270 terminal user interfaces. Let them coexist. One size does not fit all.
3. We haven't implemented encryption yet. Every mainframe has built-in encryption support. Why are sensitive account numbers, Social Security numbers, credit card numbers, financial details, and passwords still flying around your network, internal or/and external, "in the clear"? Turn encryption on. Just do it.
4. FTP overuse. FTP is not an application integration solution! Connect two applications using FTP and you've automatically converted two or more business process steps into a "we might get around to it, eventually, if you're lucky" business process. Do you think your customers want that? And why are you copying all that sensitive data anyway? To make it easier for bad guys to get?
5. We don't allow TCP/IP connections to our mainframe "for security reasons." Congratulations, that "security" policy inevitably leads to the least possible secure environment you can imagine as the business finds every possible workaround to keep doing business — a true security nightmare. Let the z/OS Security Server and RACF do their jobs, please.
6. "Open" platforms and storage. If you connect exactly the same storage unit on your SAN (that you're already using for everything else) to a z/VSE system in exactly the same way, does that suddenly make your storage unit "closed"? If you're one of the people responsible for typing in activation keys to make sure Microsoft Windows can actually function, are you the same person who thinks that z/OS and Linux on z, both which eschew keys, are "closed"? Words should have consistent meanings. Many IT vendors have thoroughly debased the word "open," and some of us have fallen for that particular word game. It's past time they stop — and that all of us wise up.
7. "Mainframes are expensive." You know what's expensive? Not knowing the value of your financial holdings during a financial crisis because you've scattered bits of your portfolio records into little servers — that's expensive. Letting unreleased Michael Jackson records escape before you can monetize them. Billions of dollars of credit card fraud. Building yet another massive data center. Paying for 60 more licenses of Brand O middleware (this week). Adding another 20 staff to your payroll (this week) to support the IT mess you've implemented. You know what's not expensive? Mainframes. Stuff that works well isn't expensive.
8. "But that would require us to add MIPS...." So what? Business growth is never free, but it's darn inexpensive if it's a mainframe that's growing. And do you see MIPS listed as a currency, next to the yen, dollar, euro, and pound? It's not. IBM has different prices for different workloads.
9. Mainframe chargeback regimes. Everybody does them wrong. It's only a question of how wrong. Just because a mainframe, as a standard feature, lets you count and apportion various technical quantities like CPU-seconds doesn't mean they have much cost accounting significance. You certainly shouldn't be putting prices on those technical quantities while everything else in your data center (and beyond) remains uncounted, nor should those prices be different than true marginal costs (which can often be zero or near-zero).

Do you have any more I should add to the list?

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.

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?"

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.

More Insight into IBM's New z114

Rob Enderle's reaction to IBM's introduction of the new z114 mainframe is quite interesting and thought-provoking. In short, he notices that major IT vendors have flipped roles, with Oracle (and Microsoft, I would argue) now emulating IBM's worst behaviors from the 1980s, undermining trust among formerly loyal customers and partners. Enderle also observes something I reported in my reaction to the z114's introduction, that IBM is passing along its cost savings (and perhaps more than that) to its customers — clear evidence that IBM is focused like a laser on growing the mainframe ecosystem. Said another way, Sun customers are to be milked, and IBM customers (current and prospective) are to be delighted.

Another way IBM is delighting current and prospective mainframe customers is on the software side. As most people in IT purchasing know, software licensing and maintenance fees are increasing quickly, in general. I point to these key drivers:

1. Commercial software is a close substitute for labor. (You can either buy software or build it.) Given long-run global trends in labor and in business sophistication, we would expect commercial software to take a progressively bigger role in IT projects with correspondingly bigger shares of the project budgets.
2. There has been quite a bit of consolidation in the software industry generally. Less competition tends to result in higher prices. Interestingly, there has been increasing mainframe software diversity in recent years.
3. Virtualization tends to drive down the number of CPU cores required to perform the same work. Software vendors have been racing to claw back their licensing and maintenance fees as customers have virtualized their software products, most of which are licensed per core.
4. In some industries there's unexpected growth that's driving additional infrastructure expense (including software). For example, I'm hearing from a lot of banks that smartphones (such as Apple's iPhone) are driving up transaction volumes and infrastructure requirements.
5. As software becomes more sophisticated, new entrants face tougher challenges getting established. If there's less competitive threat from potential new entrants, then prices will tend to be higher.

That said, IBM is consistently driving down mainframe software unit costs, something that's quite rare or even unique in the industry. The z114 continues that evolution, with even more attractive software licensing terms. IBM dropped prices for z/OS and other mainframe-unique software products. You'll probably see a reduction in z/OS-related software charges ranging from 5% to 18% just by moving from a z10 BC to a z114. Interestingly, IBM's most aggressive z/OS pricing is for single z114 customers. Coincidentally my favorite mainframe configuration is the "single machine virtual cluster" Sysplex approach, and IBM's new pricing is especially friendly to that mainframe-unique, parsimonious way of delivering exceptional reliability and availability.

At the same time, IBM dropped its prices for its Linux-based software products. Pricing per core fell from 120 "value units" to 100, a decrease of almost 17% compared to the z10 BC. Core performance is up substantially, so that means IBM reduced unit prices roughly 29% (by my quick calculation) compared to the z10 BC.

There's no question this IBM behavior is customer-friendly, and it goes a long way toward explaining why IBM is enjoying such phenomenal mainframe growth. I hope more IT shops understand this stuff, and soon.

IBM Announces 2Q2011 Earnings: Mainframe Up Big Again

The IBM mainframe keeps roaring ahead and gaining marketshare, with IBM reporting that System z hardware revenues increased 61 percent in the second quarter (versus the year ago quarter). MIPS, that classic measurement of mainframe capacity, increased 86 percent. (See this post for more insight.) IBM's CFO Mark Loughridge noted that IBM has added 68 new mainframe customers in the past year. About a third of those are in IBM's "growth markets" (i.e. outside North America, Western Europe, and Japan) — "planting the flag," he said. Loughridge also remarked that System z had its best four quarter period in five years.

IBM does not report other System z-related revenues separately, such as mainframe software and services, but in the aggregate those parts of IBM's business also performed strongly.

A year ago (last September) the zEnterprise 196 started shipping, so the next quarter's performance will be judged against that strong quarter. However, the new zEnterprise 114 starts shipping this quarter.

Introducing the zEnterprise 114 (Updated)

It's new mainframe day! IBM has announced the zEnterprise 114, a particularly clever mainframe package which replaces the System z10 BC. The z114 is the little brother to last year's z196 super-mainframe, but keep in mind the z114 is in every way a real mainframe. A single z114 can handle more processing than IBM's fully configured top-of-the-line mainframe from just a few years ago. In no particular order, here's a list of the z114's improvements that I particularly like:

• For the first time that I can remember, and certainly for the first time since 64-bit z/Architecture debuted, all of IBM's mainframe models feature flexible, modular processor configurations. That is, you can order a z114 with either one or two processor "drawers" installed. I love that flexibility, particularly because it means that IBM has found a very smart way to lower the costs of entry into the mainframe world, so more businesses and governments can buy their first mainframe and enjoy its benefits. You can order an M05 hardware model and then, when/if you need more than 5 configurable cores, you can upgrade to an M10. (And you can still continue upgrading to z196 machines when/if needed.)
• Processor power and capacity are, of course, improved. That wasn't at all a problem with the System z10 BC, but it's always nice to see more performance in the smaller mainframe package. Uniprocessor performance is up 18%, for example. Clock speed is up to 3.8 GHz, which is a rather high-end number. Maximum z/OS capacity per z114 machine is up well past 3,000 MIPS, not including specialty engines.
• Coupling facility capacity is up a lot, too. If you need a dedicated coupling facility machine, the z114 is more likely to meet or exceed requirements.
• The z114 supports more memory than the z10 BC, but most of that increase is allocated to memory protection in the form of RAIM (Redundant Array of Independent Memory). Yes, the "little" mainframe gets exactly the same mainframe-unique memory protection that its big brother got last year — and which no other server has.
• Likewise, the z114 M10 provides a mandatory minimum of two spare cores, just like its big brother. The M10 also offers processor drawer redundancy. In the incredibly unlikely event a drawer or a core fails, the system stays up and running. If that capability is valuable, you can order the M10. For the rest of us (which is most of us), the M05 is perfectly fine and still better than its predecessors. Adding or replacing a processor drawer requires a planned outage, at least for now. Considering that everyone did perfectly well without that feature for decades, until the System z9 EC in late 2005, I think IBM can be forgiven for not getting that bit of work done just yet. (I think it's a moot issue anyway if you have a physical Sysplex.)
• You can run the z114 on high-voltage DC power or on AC, with or without a raised floor, and with top or bottom cable exit. In other words, you can put a z114 pretty much anywhere, including inside a mobile data center.
• Yes, you can add the zEnterprise BladeCenter Extension (zBX) to your z114. You can run the IBM Smart Analytics Optimizer, DataPower blades, all the other blade features — all centrally managed by the z114.
• You can order z114 machines now, and you can take delivery in September. Model upgrades from System z9 BC and z10 BC machines are available at the same time.
• IBM introduced "Advanced Entry Workload License Charges" (AEWLC) to go with the new z114, aimed specifically at smaller mainframe customers running single, standalone machines (with or without internal Sysplex clusters). Otherwise, AWLC is available for physical z114 Sysplexes, so that's good, too. AEWLC, AWLC, and IWP represent the technology dividends: you can enjoy the same performance and throughput for a substantially lower software license charge, or you can enjoy substantially more performance and throughput for the same software license charge compared to the System z10 BC. All I hear about is that everybody else everywhere else is increasing software license charges and maintenance charges. For well over a decade IBM has been slashing software prices on its mainframes, so you get way more bang for the buck (or euro or yen). I really hope people understand this stuff by now.

All goodness. Nice job, IBM.

UPDATE: IBM has issued a press release highlighting the new z114 mainframe. Indeed, IBM says that the z114 has a U.S. "starting price of under $75,000." That's the lowest price ever for an IBM mainframe and a big 25% reduction from the previous entry price. Also, according to Timothy Prickett Morgan at The Register, on an equal performance comparison IFLs (Linux processors) on the z114 are priced 37.5% lower. There are big price reductions across the board, though, for both hardware and software. It's clear IBM is determined to convince many new customers to buy their first mainframes.

The Register: "Reconsider the Mainframe"

The Register just published a new paper: "Reconsider the Mainframe." The authors encourage IT organizations to understand the modern mainframe's leading capabilities, and they also summarize the key organizational issues preventing proper consideration of the mainframe's role. Many of those same issues hinder quality IT service delivery generally.

There are a lot of false myths and superstitions about mainframes. I think this paper helps dispel at least some of them.

Reports of Oracle's New Hardware Maintenance Terms

I have been reading in the trade press that Sun customers are not happy with Oracle's acquisition because they're seeing sharp increases in support costs. Now I'm getting more details from readers detailing the problems. For example, Sun's hardware maintenance was available but selectable per machine, as with nearly every hardware vendor's practice (including IBM's). That is, you could choose specific machines for 24 hour coverage, for business hours coverage, and for zero coverage. That makes sense: some machines are more critical than others, and you could pay for whatever maintenance coverage you need per machine serial number.

In contrast, Oracle thinks that hardware maintenance should be like software maintenance: all or nothing. If you want 24 hour coverage, you have to buy it for every Oracle (Sun) machine you own in your entire organization. And the maintenance price per machine isn't any lower. If anything, it's higher after Oracle's acquisition of Sun. Maintenance price increases might be more tolerable if Oracle had better support than Sun, but that's certainly not true.

Oracle's strategy seems to be to extract as much revenue as possible from Sun customers as they exit the platform. I suppose that's one way to run a business, but, fortunately, Sun customers have alternatives, including IBM Power and zEnterprise servers.

Microsoft Overpays for Skype?

Microsoft is paying $8.5 billion to acquire Skype, the voice and video chat service. Plenty of investors and analysts, including The New York Times, think Microsoft is overpaying. I tend to agree. That's an extraordinary amount of money, and it's also hard for me to see how Microsoft recoups its investment.

If you think about computing at the most basic level, there are only three dimensions: processing (CPU), storage (memory, disk, etc.), and input/output (networking, communications, etc.) It's a historical accident, really, that the price of processing and storage collapsed earlier and faster than the price of global networking. Skype is a byproduct of the collapse in networking costs. What used to be extremely expensive -- a long distance call between, say, New York and Istanbul -- is now almost free. Skype competes against the classic telephone networks which were (and in some cases still are) national monopolies. A few countries have tried to ban Skype in a futile attempt to protect those monopoly rents.

The asymmetric price collapse in these three dimensions of computing helped foster the PC revolution, "client/server" computing, and similar styles of computing. The motivation was simple: processing (especially) and storage were very cheap, and networking was very expensive, so why not deploy those two computing dimensions everywhere and de-centralize? And that cost-driven pattern caused many people to question the whole premise of mainframe computing, in particular. With more years of hindsight, though, we now know better.

If you can capitalize on and, better yet, lead a rapid change in economics, shaking up an entire industry, that's a great business to be in while the adjustment happens. However, is Skype "sticky"? Do consumers find Skype essential? I don't think so. Google Voice and Chat, Yahoo! Messenger, Apple FaceTime, Fring, Lotus Sametime (now available for System z), and scores of other services offer the same or better options. As I write this blog entry, I'm listening to a colleague in Russia talk with a colleague in Australia, and I'm not using Skype, but I am using voice over IP. Therein lies the problem: it's easy for somebody else to enter the same market.

Another problem is that most people still buy mobile carrier-subsidized handsets. Microsoft has been trying to break into the mobile device market with Windows Phone and inked a big deal with Nokia. Microsoft is openly talking about putting Skype in every Windows Phone device. That's fine technically, but the mobile carriers will hate the idea and will be extremely resistant to distributing Windows Phone mobile devices. Maybe the mobile carriers are fighting a losing battle, but that battle isn't over yet, and Microsoft has an investment to recoup.

Bypassing Microsoft, Again?

The Wall Street Journal, America's traditional stock market observer, notes that IBM is creeping up on Microsoft (stock symbol MSFT) in terms of "market capitalization." Market capitalization is one measure of the value of the company: the number of shares outstanding multiplied by the current share price.

At the close of trading last week, IBM had a market capitalization of $205.2 billion, while Microsoft had a market capitalization only $9.2 billion higher. (The gap was even narrower earlier in the week.) As the Journal also points out, IBM already has a higher "enterprise value," which includes net debt. Apple (AAPL) passed Microsoft about a year ago, but Microsoft has had a higher market capitalization than IBM for just over 15 years.

Remarkably, IBM has transformed its business multiple times. For example, today's modern mainframe is both the descendant of IBM's biggest business transformation gamble (the birth of the System/360) and right in the thick of the next (cloud computing). Under ex-CEO Bill Gates's stewardship, Microsoft transformed itself once, from the primary supplier of BASIC programming language interpreters for microcomputers into the establishment of two franchise businesses: Windows and Office — with a big assist (MS-DOS) from IBM along the way. Transformation and evolution are hard, but Microsoft is full of talented people who just might figure out where the company should go.

UPDATE #1: As of May 17, the difference in market capitalization between the two companies has fallen to about $4 billion. If present trends continue, IBM could pass Microsoft in just a few more weeks.

UPDATE #2: Maybe I was a little too conservative in my assessment. At the close of trading on Tuesday, May 17, Microsoft had a market capitalization only $260 million higher than IBM's. Will IBM pass Microsoft in market capitalization this week? It's quite possible.

IBM Announces 1Q2011 Earnings: Mainframe Up Big Again

After IBM reported a blockbuster 4th quarter for its System z mainframe hardware business, IBM delivered another impressive quarter. The company's System z revenues grew a whopping 41 percent year over year in the first quarter. MIPS shipments grew 34 percent, the biggest first quarter growth rate since 2004.

Wow.

As I've mentioned previously, that's just the hardware business. IBM and numerous other vendors, small and large, make up the mainframe supplier ecosystem. IBM does not report System z-related software and services revenues separately in its financial statement. Nonetheless, the hardware report means that System z aggressively gained marketshare.

So about that difference between revenue growth and MIPS growth: does that mean the price per MIPS is rising? The short answer: probably not. IBM started shipping the z BladeCenter Extension (zBX) in September, 2010. That's the hardware that houses blade servers for direct attachment to the z196 mainframe. In the past you would buy the main chassis (containing your MIPS), and you might buy a BladeCenter chassis plus some blade servers. IBM would count the MIPS as System z hardware revenue, and IBM would count the BladeCenter and blades sales as Power, System x, and/or software sales. Now, when you buy a zBX, that revenue gets reported as System z revenue, even though you're not buying IBM MIPS. (Power and X86 blades aren't measured in IBM MIPS. They're measured using other metrics, like rPerfs.) In other words, the definition of the mainframe has expanded and now includes both IBM MIPS and non-IBM MIPS (like rPerfs).

IBM's other server product lines did quite well, too, gaining marketshare. And once again IBM is reporting what you might call a "flight to high-end servers." As virtualization and cloud computing become ever more dominant, and as other server vendors struggle, IBM seems to be reaping the benefits with its System z and high-end Power product lines, in particular.

Case in point: Canada's Payment Solution Providers. PSP is consolidating its entire HP- and Oracle-based infrastructure onto a System z10 BC with z/OS and DB2. Why? Security (including easier PCI compliance), scalability, and cost savings. PSP provides cloud-based credit card services.

Did Forbes Get the Math Wrong?

While I'm on the subject of mathematics, Quentin Hardy wrote a short item at Forbes.com comparing the performance of IBM's stock starting from the date when IBM CEO Sam Palmisano took the helm in 2002. IBM's stock price is up about 57%. He then points out that IBM's stock price rise is less than HP, Oracle, EMC, and Accenture but more than Intel, Microsoft, the Dow Jones Index, and the S&P 500 Index during the same period. And then he points out that 57% is less than 59%, the total yield on a 10-year U.S. Treasury bond during that period.

Notice any problem with this analysis? Yes, that's right: IBM has paid stockholders an unbroken stream of dividends for nearly a century, and those dividends increased under Palmisano's tenure. Last quarter IBM paid $0.65 per share in dividends. That's about 1.6% per year based on recent stock prices. Current dividend yields are approximately 0.6% for Oracle, 0.8% for HP, 0.0% for EMC, 1.7% for Accenture, 3.4% for Intel, and 2.5% for Microsoft. The 10-year U.S. Treasury bond paid no additional dividend: the 59% yield is the entire yield.

Still notice any problem? Capital gains on stocks are taxed much differently than yields on bonds under U.S. tax law. The tax rate on U.S. Treasury bond interest is roughly double the long-term capital gains tax rate, at least for taxpayers who are likely to own both.

I realize Mr. Hardy was only writing a brief "isn't it interesting?" sort of article, but if you're going to judge a CEO's performance strictly based on financial results delivered to stockholders, shouldn't you actually compare, you know, financial results delivered to stockholders?

Many IT professionals also get the math wrong too often. For example, for over a decade IBM has been delivering "technology dividends" with every new mainframe model. Yet for some reason these dividends aren't always well understood. IBM mainframes also help you avoid myriad IT taxes, legally — taxes such as underutilized resources, excess networking costs, security breaches, and power/space/cooling inefficiencies, among others. Just treat your investment well to enjoy the highest yields and the best rewards.

IBM Announces 4Q2010 Earnings: Mainframe Up Big

IBM announced its 4^th quarter earnings for 2010. The overall financial results beat expectations, and IBM's CFO indicated that the company is on track toward its 2015 financial plan.

System z hardware had a tremendously impressive quarter as virtually all press accounts headlined: up 69 percent year to year on a revenue basis. IBM shipped 58 percent more MIPS capacity in the quarter. IBM's 4Q2010 was the first full quarter of availability for the new zEnterprise 196 model which contains the world's fastest CPU cores. IBM started shipping some of the blade server features for the z196 during the quarter as well. Sharp mainframe hardware revenue growth slightly outpaced also high MIPS growth. Server revenues grew strongly overall as well, though not quite at the blistering pace as IBM's mainframe hardware. IBM's CFO, Mark Loughridge, noted that IBM gained server marketshare again, and he said that IBM broke its previous record for migrations from Sun and HP.

IBM does not break out System z-related software, services, and financing elements of its business. However, Loughridge noted that IBM won 24 new System z customers during the quarter. Also, during the question and answer session with financial analysts (as transcribed by Seeking Alpha), IBM's CFO specifically commented on the strong System z performance and indicated that IBM expects continued momentum into 2011.

An Ode to Software Licensing

I'll have some new zEnterprise details to share soon. In the meantime, I stumbled across this YouTube video which is at least mildly entertaining. (Ignore the advertisements at the end.)

While few people were paying attention, software licensing has become extremely complex and much more costly outside the mainframe. Many businesses are having a lot of trouble managing their non-mainframe software licensing. In contrast, Workload License Charges (WLC) is one of the best changes IBM has ever made, in my opinion.