Rudd bucks boost IBM mainframe business

Stimulus package and economic downturn result in stellar year for mainframes

Golden screwdrivers, Rudd-bucks and a handful of new customers equal two successful years for IBM's mainframe business in Australia.

Despite the economic downturn freezing many IT projects and causing a dramatic decrease in server spending at the start of the year, Big Blue's System Z platform has quietly notched up two stellar years.

In Q1 of 2009 the overall Australian server market had its worst quarter on record with units shipped declining 38.9 per cent and revenue sliding 38.8 per cent year-on-year, according to IDC. In the second quarter, revenues rebounded strongly with an 87 per cent rise on Q1.

During this period IBM took the lead market share by revenues with 43.9 per cent. HP (25.9 per cent) and Sun Microsystems (17.5 per cent) follow. IDC services research manager, Matt Oostveen, attributed the result to the System Z platform and its ability to defy "many market predictions that scale out computing models in the form of highly virtualised x86 servers would be the final blow to the 45-year-old brand".

Fellow analyst firm Gartner also pointed to the mainframe as having a solid performance (31.8 per cent growth year-on-year for Q2 2009) across the Asia-Pacific region, driven largely by new deals in Australia and South Korea.

While IBM wouldn't reveal who its new customers are, it told Computerworld it has roughly 50 clients with 150 mainframe boxes between them (excluding IBM Global Services). And of this, six per cent are new customers over the last 24 months. In general, financial services and government agencies are known to be mainframe users; the Australian Tax Office (ATO) and a subsidiary of the National Australia Bank, the Bank of New Zealand, are two well-known customers.

"The numbers speak for themselves. We have seen significant growth from 07 to 08, and 08 to 09 and certainly the first half of 09. As the numbers published by IDC will indicate we have seen tremendous growth again," IBM systems and technology group executive, Stuart Lewis, said. "The market continues to be strong and continues to be buoyant."

Globally, in 2008 System Z hardware revenue grew 12 per cent while System Z computing power, which is measured in millions of instructions per second (MIPS) rose 25 per cent. The latter figure represents capacity bought on-demand by customers who needed more computing power. Mainframe customers typically have access to a percentage of the device's in-built capacity and in a process referred to as the 'Golden Screwdriver' can upgrade as they need by calling IBM for access to more power or order it over the Internet.

Lewis agreed that although the economic downturn had meant the overall volume of money being transacted by mainframe clients had dropped, the introduction of the stimulus package by the Rudd Government and the fact mainframes often run at high utilisation rates, had increased the volume of transactions and contributed to IBM's Golden Screwdriver revenue. As part of the stimulus low-income earners received a cash hand out of up to $900 and as a result the ATO and many financial corporations saw an increase in transactions with customers going online and to ATMs to check if they had received what came to be called Rudd Bucks.

This, some suggest, is one of the key reasons IBM's mainframe business fared well throughout the economic downturn.

"I think it is fair to a point. I wouldn't say it is the fundamental reason," Lewis said. "There are certainly outcomes driven by the global financial crisis that has meant workloads have increased both for commercial clients and for our government clients. So turning on more processing power has been a common theme across clients."

IDC predicts non-x86 server spending in 2012 will reach US$489M, representing a 12.6 per cent increase from 2008 despite the economic downturn and proliferation of x86 servers.

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Tags mainframeGartnerIDCIBMserver

More about Bank of New ZealandBig BlueGartnerHewlett-Packard AustraliaHPIBM AustraliaIBM AustraliaIDC AustraliaIPSNational Australia BankSun Microsystems

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