IBM Boasts that Without Big Blue, Unix Would Be Declining
by Timothy Prickett Morgan
When you are an IT manager working for a manufacturer, distributor, financial services, or other kind of company that uses one or another platform, you usually do not get high-level access to the general managers who run the businesses that provide your platforms. Like many of you, I spend quite a bit of time criticizing IT suppliers--sometimes as a customer, usually as an analyst--but it is important to remember that businesses are made of people and, in addition to making money, are made to support people.
Last week, I went to the big System z9 mainframe announcement that IBM hosted at the W Hotel in midtown Manhattan. I had already been briefed about the System z9 announcements a week earlier because IT Jungle was launching a new newsletter, Big Iron. I don't claim to understand why IBM does what it does, but I think the fact that IT Jungle was going to be giving the mainframe (both its own zSeries machines as well as gear from Unisys and a few clone alternatives) its own spotlight played in our favor in getting the kind of briefings that are usually reserved for the general business press only. It was an interesting announcement, and I look forward to providing in-depth coverage on the mainframe as we grow Big Iron from its humble beginnings. While I certainly went to the System z9 announcement to hear what Big Blue would say about the new server, I had other motives. Basically, I went downtown to see Adalio Sanchez, general manager of the pSeries division, and Mark Shearer, general manager of the iSeries division. If he had a chance, I was slotted to talk to Erich Clementi, the general manager of the zSeries division, too.
I was in something of a good mood on July 26, the day of the IBM announcement, because that day marked the beginning of our publishing company's fifth year. Four years ago, in the wake of the collapse of the former Midrange Computing, I had a few thousand dollars, a dream, a strong desire to make a job for myself in a pretty terrible IT publishing market, an equally strong desire to provide jobs for my colleagues, and a skill (well, maybe not . . . ) in IT journalism and analysis that wasn't much good in other areas. My colleagues and I have worked hard to get IT Jungle to where it is today, and we are working hard to improve the content that we deliver. I was also in a good mood because I got to commute downtown with my wife, who works in the Met Life building above Grand Central Station, and after the event I knew I was going to see her for lunch. I am not big on commuting, but my wife is my favorite person on the planet and I never get to have lunch with her. Even after 10 years of being together, she is still my favorite person on the planet; she is demonstrably fond of me, too. I always was a swan for things I love--I have been writing about the AS/400 since July 1989 and the RS/6000 since February 1990, when IBM got into the Unix racket for real, and I have no intention of stopping either, just as two examples--so that stands to reason concerning me. I cannot explain my wife's reaction to me, but I try not to mess with a good thing.
Going into a big IBM event in a good mood does not in any way cloud my critical analysis of what is going on around me. These events are nearly impossible to produce, there is not enough time to explain in detail what is being announced, and the whole process is exhausting for everyone involved. All I know is that I am glad that I am not responsible for putting them on.
The demo center in the hotel was blazing hot, and everyone complained about that to a certain comic effect. Then 120 journalists were moved into an air-conditioned room that was as cold as a meat locker, which felt good for the first hour but was a bit tough for the second hour. When one IBMer asked me about the event, I responded genuinely, saying that it was a bit like going to church. I had to sit in my seat, pay attention to the sermons, and not fidget or in any way interrupt the ceremonies. (I'm a Type A wombat, so sitting still is actually physically painful to me.) I added that the difference was that in church I was never required to take notes, nor would I be lauded or criticized for the sermon I wrote based on the sermons I had just heard. I don't think that was the answer the IBMer was looking for, and so I went further and explained that I liked big iron and I was very happy to have talked to the development manager for the System z9, Mark Anzani. He's a hard-core hardware nut, and I like that, I explained. That drew a smile at least.
After the two-hour press event and after I talked to Shearer a bit, I talked to Sanchez, who I have never met before. My opening comment to him did not draw much of a smile. More of an extended blink, really. After I sat down next to Sanchez at a table where he was talking to a reporter from Reuters and another one from eWeek, I asked: "So what's it like to have the easiest job at IBM these days?" I may have said "easiest freaking job." I cannot precisely recall. I sure hope I didn't, but I wouldn't put it past me. At that point Sanchez just kind of stared at me for a second, trying to figure out who I was. The girl from Reuters choked on her sandwich. I thought my comment to Sanchez was funny, and, more importantly, kinda true. As Sanchez looked at me, the IBM spokesperson at the table introduced me as the most knowledgeable reporter in the Unix market, and seconds later, we all talked together for about 30 minutes about the Unix business.
In justifying my opening comment to Sanchez, I explained that there was no way anyone could convince me that Sanchez's job was anywhere near as tough as Shearer's was. I wasn't joking there, and Sanchez, being very careful with his words and body language, did not concede nor deny what is the obvious truth. IBM's Unix server business is doing great and is two to three times larger than the iSeries, which is growing again after some pretty tough years.
It is an understatement to say that IBM has come a long way in Unix since that morning in February 1990 when it finally put its seal of approval on Unix workstations and commercial Unix servers. Sanchez said that Unix is entering its third stage of development--Sun Microsystems defined the first generation in the late 1980s by creating the Unix workstation market, and Hewlett-Packard defined the second generation by pushing midrange Unix servers into data centers in the early 1990s. I'll expand on the history Sanchez went over, because he understandably could not go into a lot of detail at the meeting.
By the middle 1990s, IBM was getting more aggressive about both Unix workstations and servers and its relatively new PowerPC platform, and even partnered with Bull for that French server maker to create SMP servers based on the PowerPC architecture. Moreover, at the same time, Sun was pushing into servers and HP was pushing into workstations, and by 1997, just as the dot-com bubble had a massive inflationary phase (kinda like the fraction of a second after the Big Bang), all three vendors were on a more or less even footing in terms of what markets they were chasing. But they had very different installed bases. Sun dominated the telecom and financial services market, and became the de facto standard for Silicon Valley startups that used very big database servers and zillions of rack servers; HP was the preferred midrange Unix platform for hard-core SMP servers running more traditional ERP suites; and IBM was the preferred Unix vendor among existing IBM customers. And then IBM delivered its first Unix-based PowerPC servers in 1997, and everything changed. Suddenly, the RS6000 was an SMP box that could compete with Sun and HP in terms of scalability, performance, and price. IBM owes a lot to the AS/400 engineers in Rochester, Minnesota for these boxes, since they were the ones to get a working--and very well designed--64-bit PowerPC chip out the door after Motorola failed miserably with the PowerPC 630 and PowerPC 640 processors. From there, IBM got traction in Unix, and by the time Big Blue delivered the dual-core Power4 chips in October 2001, the dot-com bubble had burst and Sun's customer base imploded; HP had merged with Compaq, and was distracted by this as well as frazzled by the dot-com bubble bursting. And IBM jumped into the market with great iron and 50 percent discounts, and its sales force and reseller partners ate Unix market share like a hungry swarm of piranhas. And now, we are at a place in the history of the Unix market where the confluence of a bad economic recession from 2000 through 2002 caused many IT organization to contemplate the shift from Unix to Windows or Linux, or at the very least contemplate a shift from one Unix vendor to another offering a better deal or better system attributes.
We are also at a point where there are three main Unix vendors--IBM, Sun, and HP--and they are all about equal in size in terms of revenue market share, but only IBM is consistently growing. "We are changing the economic model of Unix," explained Sanchez. "It is not just about grow-grow-grow the size of the box, but efficient growth and use of the box. Getting 11 or 12 percent utilization is no longer acceptable." While Sanchez boasted that IBM could offer anywhere from 3 to 4 times the processing oomph per processor core as its competitors (which was stretching it a bit) for the equivalent price for a server (also a bit of a stretch considering how deeply all vendors discount in the Unix market to make their deals), he also said that this was not the point, that the ability to partition a server flexibly and drive up the utilization of the box and therefore the return on investment that IT shops make in iron is what is important. And this is what will define the third generation of Unix systems, says Sanchez, and given IBM's mainframe heritage and its well-regarded dynamic logical partitioning on the p5 line, he makes a good point. "The leaders in the third generation of Unix systems will be different from the leaders in the first two generations," he said with a smile.
The market share data is certainly on IBM's side of the argument. "The second quarter was the third quarter in a row that the Unix server market has grown, and IBM is driving that growth," he boasted. Because IBM, Sun, and HP have year ends in December, June, and October (respectively), it is tough to make comparisons on a quarter-by-quarter basis, so Sanchez looks at the rolling four-quarter averages of market share data, which he says shows that IBM passed by Sun and HP as the revenue market share leader in Unix in the third quarter of 2004. In the second quarter just ended, IBM had 36 percent revenue growth for the pSeries line (which includes AIX-based pSeries servers, AIX-based IntelliStation workstations, and the Linux-based OpenPower derivatives of the pSeries boxes). Sanchez said further that the Unix server business in the U.S. "has been on a roll," but conceded that Europe has "been a bit slower." That said, all three of IBM's geographies--the Americas, EMEA, and Asia/Pacific regions--experienced double-digit revenue growth in the second quarter. So growth in the States had to be pretty high--maybe as high as 50 percent--if growth worldwide aggregated to 36 percent. (That's my guess, not a statement from IBM.)
HP and Sun clearly do not have numbers like these--although they can remember having them a decade ago--and it seems unlikely that they will have such good numbers for some time to come because they are in the middle of transitions--HP from PA-RISC to Itanium, and Sun from Sparc-Solaris to Opteron-Solaris. They are both in a bad place, to be sure. And, in fact, their situations remind me of IBM in the mid-1990s, where it had more Unix excuses than Unix products. Now it is HP's and Sun's turn to make the excuses, I guess. Another IBMer earlier in the day said to me that Big Blue was "carrying the Unix business on its back these days," as if this was some kind of feat for which the company should be rewarded beyond revenues and profits. Perhaps a gold star is in order? Or maybe just an acknowledgement from the IT industry that IBM is indeed the bright spot in the Unix space?
"Unix isn't dead," Sanchez exclaimed. "Our Unix competitors are." Well, that makes a nice sound bite, and this is how general managers are supposed to talk. But Sanchez knows he cannot rest on his laurels--and said as much right after saying his competition was dead, because he knows they are not. But they sure have been getting whupped out there in a lot of accounts over the past few years. There is no denying that, and a lot of the time, it is IBM that is giving them the whupping.