IBM posted another down quarter this past Monday, maybe the thirteenth in a row; it’s easy to lose track. But yet again, the IBM z System provided a bright spot, a 15 percent increase compared with the year-ago period. Last quarter the z also came up a winner. Still the investment analysts went crazy, the stock tumbled, and wild scenarios, inspired by Dell’s acquisition of EMC no doubt, began circulating.
However, don’t expect IBM to be going away anytime soon. DancingDinosaur is a technology analyst and writer, absolutely not a financial analyst (his wife handles the checkbook). If you look at what has been going on in the past two years with z System and POWER from a technology standpoint these platforms are here for the long haul. Most of the top 100 companies rely on a mainframe. Linux on z has become a factor in roughly 70 percent of the leading shops. When DancingDinosaur last ran the numbers there still are about 5000-6000 active mainframe shops and the numbers aren’t dropping nearly as fast as some pundits would have you believe.
The z13 and LinuxONE are very powerful mainframes, the most powerful by any number of measures in the industry. And they are a dramatically different breed of enterprise platform, capable of concurrently running mixed workloads—OLTP, mobile, cloud, analytics—with top performance, scalability, and rock solid security. The Open Mainframe Project in conjunction with the Linux Foundation means that IBM no longer is going it alone with the mainframe. A similar joint effort with the Open POWER Consortium began delivering results within a year.
The Dell-EMC comparison is not a valid one. EMC’s primary business was storage and the business at the enterprise level has changed dramatically. It has changed for IBM too; the company’s revenues from System Storage decreased 19 percent. But storage was never as important to the company as the z, which had long been its cash cow, now diminished for sure but still worth the investment. The dozens and dozens of acquisitions EMC made never brought it much in terms of synergy. IBM, at least, has its strategic imperatives plan that is making measurable progress.
IBM’s strategic imperatives, in fact, were the only business that was doing as well as the z. Strategic imperatives revenue: up 27 percent year-to-year; Cloud revenue up more than 65 percent year-to-date. Total cloud revenue hit $9.4 billion over the trailing 12 months. Cloud delivered as a service had an annual run rate of $4.5 billion vs. $3.1 billion in third-quarter 2014. Business analytics revenue was up 19 percent year-to-date. Be interesting to see what cognitive computing and Watson can produce.
Besides storage, the other dim spot in the IBM platform story is Power Systems. Revenues from Power Systems were down 3 percent compared with the 2014 period. DancingDinosaur, long a fan of Power Systems, anticipates the platform will turn positive next quarter or the first quarter of 2016 as some of the new technology and products coming, in part, from the Open POWER Consortium begin to attract new customers and ring up sales. The new Power Systems LC Server family should attract interest for hybrid Cloud, Hyperscale Data Centers, and Open Solutions, hopefully bringing new customers. With online pricing starting around $6600 the LC machines should be quite competitive against x86 boxes of comparable capabilities.
DancingDinosaur is Alan Radding, a veteran information technology analyst and writer. Please follow DancingDinosaur on Twitter, @mainframeblog. See more of his IT writing at technologywriter.com and here.