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  • Economic Meltdown Puts Pressure on Jack Henry

    May 11, 2009 Timothy Prickett Morgan

    One of the bellwethers of the financial services industry as well as the IBM midrange is Jack Henry and Associates. And as you might expect, the company’s third quarter of fiscal 2009 was not a particularly good one. But JHA did no worse than a lot of other software companies, and compared to some, it has managed to do better considering the downturn in the global economy in general and in the banking sector in particular.

    For the quarter ended March 31, JHA reported license sales declined by 31 percent to $12.7 million, and hardware sales (which includes Power Systems i boxes as well as specialized equipment used by banks and other financial services firms) fell by 22 percent to $15.8 million. But as is the case at many software houses these days, there has been a relatively stable supply of support and services money, and in the case of JHA, the increase in services revenues, which rose by 2 percent to $151.8 million, almost made up for the declines in software license and hardware sales. I said almost. Despite the herculean effort, JHA’s overall sales still fell by 4 percent to $180.4 million in the quarter. And even with lots of belt-tightening across the board, the company’s net income still fell by 7 percent to $24.8 million. Considering the magnitude of the drop in software and hardware sales, it is a testament to JHA that its profits were not slammed, like so many other IT firms have been.

    JHA has eaten into its cash, however, which is now at $26.4 million, down from $40.6 million a year ago. And as far as I am concerned, this is no big deal because a pile of cash is just for what JHA is using it for: to get through the rough spots and to make strategic investments when the economy goes into a slump. JHA spent $3 million making acquisitions so far in fiscal 2009 and capitalized software development to the tune of $18.9 million with its cash. The company also bought 3.1 million of its own shares so far in the nine months, for $58.4 million, shelled out 12.2 million on a revolving line of credit, and paid $19.8 million in dividends.

    “We continued to see significant headwinds during the quarter on discretionary spending related to hardware and license fees,” explained Jack Prim, chief executive officer at JHA, in a statement accompanying the financial results. “The cost controls that we implemented at the end of the fourth quarter with the full participation of our employee base helped buffer these shortfalls to some extent and allowed us to maintain strong gross and operating margins. We indicated last quarter that we had additional potential cost control measures available and we are moving forward to implement some of these additional measures. While the near term economic outlook remains cloudy we will continue to manage the business in what we believe to be the best long term interests of stockholders, customers, and employees.”

    In economic weather like this, sometimes that is all that you can do.

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    Tags: Tags: mtfh_rc, Volume 18, Number 18 -- May 11, 2009

    Sponsored by
    UCG Technologies – Vault400

    Do the Math When Looking at IBM i Hosting for Cost Savings

    COVID-19 has accelerated certain business trends that were already gaining strength prior to the start of the pandemic. E-commerce, telehealth, and video conferencing are some of the most obvious examples. One example that may not be as obvious to the general public but has a profound impact on business is the shift in strategy of IBM i infrastructure from traditional, on-premises environments to some form of remote configuration. These remote configurations and all of their variations are broadly referred to in the community as IBM i hosting.

    “Hosting” in this context can mean different things to different people, and in general, hosting refers to one of two scenarios. In the first scenario, hosting can refer to a client owned machine that is housed in a co-location facility (commonly called a co-lo for short) where the data center provides traditional system administrator services, relieving the client of administrative and operational responsibilities. In the second scenario, hosting can refer to an MSP owned machine in which partition resources are provided to the client in an on-demand capacity. This scenario allows the client to completely outsource all aspects of Power Systems hardware and the IBM i operating system and database.

    The scenario that is best for each business depends on a number of factors and is largely up for debate. In most cases, pursuing hosting purely as a cost saving strategy is a dead end. Furthermore, when you consider all of the costs associated with maintaining and IBM i environment, it is typically not a cost-effective option for the small to midsize market. The most cost-effective approach for these organizations is often a combination of a client owned and maintained system (either on-prem or in a co-lo) with cloud backup and disaster-recovery-as-a-service. Only in some cases of larger enterprise companies can a hosting strategy start to become a potentially cost-effective option.

    However, cost savings is just one part of the story. As IBM i expertise becomes scarce and IT resources run tight, the only option for some firms may be to pursue hosting in some capacity. Whatever the driving force for pursing hosting may be, the key point is that it is not just simply an option for running your workload in a different location. There are many details to consider and it is to the best interest of the client to work with an experienced MSP in weighing the benefits and drawbacks of each option. As COVID-19 rolls on, time will tell if IBM i hosting strategies will follow the other strong business trends of the pandemic.

    When we say do the math in the title above, it literally means that you need to do the math for your particular scenario. It is not about us doing the math for you, making a case for either staying on premises or for moving to the cloud. There is not one answer, but just different levels of cost to be reckoned which yield different answers. Most IBM i shops have fairly static workloads, at least measured against the larger mix of stuff on the public clouds of the world. How do you measure the value of controlling your own IT fate? That will only be fully recognized at the moment when it is sorely missed the most.

    CONTINUE READING ARTICLE

    Please visit ucgtechnologies.com/IBM-POWER9-systems for more information.

    800.211.8798 | info@ucgtechnologies.com

    Article featured in IT Jungle on April 5, 2021

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    What Happened to my i5/OS Crypto Access Provider? JDA Previews New GUI for MMS at User Conference

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TFH Volume: 18 Issue: 18

This Issue Sponsored By

    Table of Contents

    • Sundry Spring Power Systems Storage Enhancements
    • IBM Wheels and Deals on Power 570s and 595s in Q2
    • Micro Focus to Buy Borland, Compuware Unit for Testing Tools
    • As I See It: Ah, Vacation!
    • Middleware Sales Are Slipping, But Could Rebound First
    • Power-BladeCenter Combo Gets Tweaks for i Shops
    • Data Integration Specialist XAware Acquired by Sparxent
    • Economic Meltdown Puts Pressure on Jack Henry
    • Performance Tuning and Automation Form a Potent Pair
    • SAP Boots Business ByDesign SaaS Apps to 2010?

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