The i Upgrade Cycle Seems Par for the Course
July 14, 2008 Timothy Prickett Morgan
As we go to press, IBM has moved into its third quarter and has sold whatever System i and Power Systems with i5/OS or i 6.1 machinery that it could in the second quarter. Hopefully, the news will be good when IBM reports its financial results this week on July 17. We’ll see. The thing to keep in mind, of course, is that you have to know what par is for the i course. If you don’t, you can draw some wrong conclusions about the market and have expectations that can’t be met.
In early June, COMMON Europe released some of the data that it obtained from a global survey it had done of the COMMON (North America) and COMMON Europe (obviously, spanning the European Union) user groups devoted to the AS/400, iSeries, System i, and now Power Systems platforms. The organization touted the Top Concerns survey as its first global study, which also included responses from members of an i platform user group called Interaction Australasia. The Top Concerns survey went out to customers, 370 of whom replied to the survey, and also went out to resellers, independent software vendors, and other business partners in the global i community. COMMON North America started doing Top Concerns surveys of the AS/400 base back in the early 1990s as a means of getting end user input back into IBM in a formal way.
This time around, the respondents cited these items as their top concerns, ranked by their relative importance, as presented as options by the survey:
When asked to write in their own top concerns, i shops cites these two items as their own personal bones of contention:
None of this will come as any surprise to readers of The Four Hundred, of course.
In addition to asking for the top issues facing i shops, COMMON Europe also asked for a reaction to the Power Systems rebranding and repackaging from this spring, which merged the System i and System p product lines into a single product and into a single division at IBM for development (Power Systems) and two divisions for sales and marketing (Business Systems for entry and midrange boxes sold to SMB shops and Enterprise Systems for selling to IBM’s top accounts, regardless of platforms). COMMON Europe found that 43 percent of the i shops polled said they planned to upgrade to the new i 6.1 operating system in 2008, and 23 percent of those surveyed said they would move up to Power6-based Power Systems iron. Some 6 percent said they would be acquiring BladeCenter blade servers from IBM, which may or may not include JS12 or JS22 Power6 blades, which can support i 6.1 as well as AIX and Linux.
Those of you who surf the Internet looking for i-related news probably saw the blog posting from Mark Hall, a writer over at Computerworld, entitled Bye Bye i. In that blog, Hall bemoaned the ever-shrinking brand name of the AS/400 and its progeny, all shortened down to a single letter: i. This is something that we can all relate to. And citing the COMMON Europe Top Concerns survey statistics, Hall emphasized that a “mere 23 percent” of COMMON members planned to move to the latest Power Systems hardware. He didn’t mention the upgrade rate for i 6.1 and nor did he say anything about the expected uptake of BladeCenters among COMMON members.
First, a word of caution about using skinny data sets to predict the behavior of large customer bases: Don’t. To say anything meaningful, we need the data the various COMMONs might (or might not) have gathered, asking the same question over the past 15 years and then see how the answers concerning hardware and software upgrade plans actually correlated to the sales in the base at large–you know, real deals. My guess is that COMMON members, wherever they are in the world, are the doers, the shakers, and the movers, and they represent, by their very nature, the people most likely to absorb new technology fairly quickly. But maybe not. The point is, I do not know, and I know that I don’t know.
Now, just for fun, let’s assume that this 23 percent upgrade number for hardware upgrades and 40 percent number for operating system upgrades is representative of the more than 200,000 shops out there in the world. That would suggest IBM could look forward to at least 46,000 Power Systems sales in 2008, not counting those already sold before the survey, and to shipping at least 86,000 i 6.1 shipments. Shops with more than one machine who upgrade multiple boxes could, in theory, push those numbers even higher. I don’t think IBM will push out this much hardware and software, but maybe. If so, this would be a return to shipment levels we have not seen since the late 1999s.
And, more importantly, these would be phenomenal numbers for any server installed base, in terms of percentage uptake by the customer base. There are somewhere between 25 million and 30 million X86 and X64 servers in the world, and companies consume maybe 8 million boxes a year. Some of those are for incremental growth, some are for upgrades to older iron. If you assume that all of those X64 servers were upgrades and that only 25 million boxes were out there, you’d have an upgrade rate of 32 percent. If you assume 30 million boxes are out there–which I think is more likely at this point–then you are talking an upgrade rate of 26.7 percent. Now, can you imagine how much money Microsoft would make if 43 percent of all Windows shops out there in the world moved to Windows Server 2008? Let me assure you. That ain’t gonna happen. Windows Server 2008 will do well, thanks in large part to Hyper-V once Service Pack 1 is released for the stack. But it is going to take lots and lots of time.