Reseller Mainline to Acquire Competitor Cornerstone

Published: May 29, 2008

by Timothy Prickett Morgan

The consolidation crunch in the server reseller space continued last week as Mainline Information Systems of Tallahassee, Florida, acquired fellow reseller Cornerstone Systems, of Irvine, California. The combination of the two firms brings together two of IBM's largest server resellers and two companies with particular expertise in mainframes and Power-based servers.

Both companies have unashamedly referred to themselves as "True Blue" resellers, and focus exclusively on IBM's servers, operating systems, databases, and middleware or software that is officially pushed by IBM itself, such as Linux or VMware 's ESX Server hypervisor for X64 iron. Mainline has also used the capacity on demand features on IBM's mainframe and Power systems to deliver utility-style pricing for systems to its customers, something a lot of resellers have not figured out how to do--and which is very difficult with X64 machines because these processors (whether they are from Intel or Advanced Micro Devices) have not yet been architected for capacity on demand, even if they do have power conservation techniques such as frequency scaling. (Yes, this is a serious shortcoming.)

Mainline has long been IBM's biggest reseller of System z mainframes, which still have that name, and Cornerstone is another big mainframe player, too. And as such, the two companies pitched the acquisition as a win-win for the mainframe customer base. But that doesn't mean Power Systems and, to a lesser extent, X64 servers are not part of the merged company's customer base. Mainline has for years been one of the largest resellers of AS/400, iSeries, and System i gear, too, for instance. Both Mainline and Cornerstone are premier business partners, which is the highest ranking you can get from Big Blue aside from the master IBM system resellers, Arrow Electronics and Avnet, who in turn distribute gear to resellers such as Mainline and Cornerstone.

"As 'True Blue' partners, both Mainline and Cornerstone provide comprehensive technology solutions based only on industry-leading IBM platforms," explained Rick Kearney, Mainline's president and chief executive officer, in a statement announcing the deal to buy Cornerstone. "This acquisition allows us to combine nearly four decades of experience, the expertise of the industry’s best System z technical professionals, along with nearly 700 employees who focus on delivering infrastructure solutions, such as business continuance, virtualization, security, and optimization to our clients."

Mainline was founded in 1989 as an IBM partner focusing on the AS/400 in the wake of the launch of the platform, and gradually expanded to cover IBM's other platforms and carved out a niche with the mainframe platform when other smaller players were driven out of the market by certification requirements, the implosion of the two big mainframe lessors (El Camino Resources and Comdicso), and the withdrawal of Amdahl and Hitachi from the market in the late 1990s. Throughout all of that wrenching change, Mainline kept its mainframe practice expanding.

Cornerstone, founded in 1990 by owner Herb Chittum and the company's current president, similarly carved out a niche in the mainframe space while also peddling the entire IBM systems portfolio, and interestingly is a reseller of Fundamental Software's FLEX-ES mainframe emulation software on IBM's own System x servers, which it sells as the zFrame product line. Cornerstone has installed over 800 mainframes since its founding (that's a lot) and has plunked in over 100 FLEX-ES zFrame machines in the past year, according to the company Web site. Cornerstone Systems is not to be confused with CornerStone Business Systems, an OS/400 consulting company with expertise in modernizing legacy applications on that platform.

Kearney and Chittum said in the statement that they will spend the next few weeks putting together an integration plan for the companies, and they intend to keep on the staff at both firms and operating their existing facilities, which do not have any geographical overlap. Cornerstone has 95 employees, while Mainline has more than 600 employees.

The amazing thing is that neither Mainline nor Cornerstone have been snapped up yet by Sirius Computer Solutions, the largest reseller of System i and System p (now Power Systems) iron among IBM's partners and the second largest (after Mainline) seller of mainframe iron. Sirius, which is based in San Antonio, was founded in 1980 and in November 2006 got an equity investment from private equity firm Thoma Cressey Bravo, which has invested over $100 million into various System i-related companies, notably high availability software maker Vision Solutions and its iTera and Lakeview Technology acquisitions and Sirius and its several recent reseller acquisitions.

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Partnerships! Partnerships! Partnerships!

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