Reader Feedback On Big Blue Gives A Solid Installed Base Number
August 13, 2012 Hey, TPM:
I wonder how, or if, IBM counts the thousands of used servers that have been removed from the original account, but are still working perfectly for smaller companies. These are often running vertical application software supported by IBM partners (or not). Perhaps half of our customer base is now operating on used Model 520s due to IBM’s pricing structure for new System i servers. Most don’t keep an IBM hardware maintenance contract.
Obviously these customers don’t matter much to IBM (they barely care about entry level sales of new servers). But they are still an active part of the ecosystem.
That’s a very good question, and the honest answer is that I don’t know and IBM doesn’t know, either.
Way back in June 2005, I did a profile of the server ecosystems, across all servers and geographies, and tried to reckon how many of each kind of box might be out there. At that point, through the end of 2004 (which is what the numbers covered), I did a bunch of math using various data points I had about various operating systems and server types, and came up with an installed base of AS/400 and iSeries machines of 450,000, or about 2.4 percent of the 19.1 million machines installed worldwide. The Windows base had 9.6 million machines, by contrast, with about 2.5 million Linux boxes and 2 million Unix boxes. The AS/400-iSeries customer count was on the order of 220,000 unique companies.
As a general rule in the early years, on average AS/400 customers had around two machines, and for that 2004 data above, it is just a tad bit higher than two. You have to remember that this is on average. Given the reliability of the system, a very large number of customers had one machine and one machine only at first. Then, maybe they upgraded to a new box and kept the old one around for development. But there were still others that had multiple sites in the company and multiple machines. Retailer Sears used to buy AS/400s thousands at a time to distribute around its stores and financial services operations, for instance, raising the class average considerably.
By the end of 2004, server virtualization had been on the OS/400 and i5/OS platform for six years already, and a fairly large number of customers were using logical partitions to carve up server slices to give to developers, obviating the need for a second machine because of the isolation that an LPAR affords. As we learned in last week’s issue of The Four Hundred, Colin Parris, general manager of the Power Systems division within IBM’s Systems and Technology Group, says that there are 150,000 customers using OS/400, i5/OS, or IBM i today, and that is still a pretty large customer base in terms of customer count. It is also larger than the 120,000 or so I expected.
I think that virtualization has reduced AS/400, iSeries, System i, and Power Systems footprints because developers can use a slice of the production machine instead of keeping two machines around, and has the ability to use virtual private networking over the Internet to link remote offices back to data centers, where compute capacity is aggregated onto virtualized boxes. That’s a virtualization double-whammy on the machine count. So maybe there are now somewhere between 200,000 and 250,000 machines out there running OS/400 or its successor operating systems. If the old two-per-customer average holds, then it should be around 300,000 machines.
I’ve talked to a lot of ISVs and resellers over the past couple of years, and none of us think the active installed base for OS/400, i5/OS, and IBM i machines is anywhere near as large as these numbers suggest. I would not be at all surprised if only 20 percent or maybe 25 percent of the customer base–somewhere between 30,000 and 40,000 shops–are actually active. I mean something very precise by this, and it means keeping reasonably current with the operating system releases, and in this case it means being on IBM i 6.1 or 7.1 with a smattering of i5/OS V5R4 shops that are holding back because their software can’t make the jump because of program conversion issues. I am not counting V5R4 shops that stay back because they just don’t want to or need to spend money on systems and software upgrades or maintenance services from IBM. Call it 35,000 customers with 70,000 machines, just for argument’s sake, out of a base of 150,000 customers with maybe 250,000 machines. That means there are something like 115,000 customers worldwide with maybe 180,000 machines that are not on maintenance. I am not saying these numbers are correct, but it is a guess.
Here’s what I know. In 1988, IBM had 275,000 System/3X machines in the field on the eve of the AS/400 launch, and most customers had one machine so the system count was more or less the customer count. Most of those were System/36 boxes, not System/38s that are more like AS/400s. And by the mid-1990s, when IBM was trying to soak up that System/36 base with PowerPC-based Advanced 36 iron running SSP, the company called around to a bunch of analysts (including me) to try to get a sense of what the installed base was. We could guess, based on various data sources–mine was the vast installed base data from Computer Intelligence, which I had access to at the time and which I used as the basis for installed base models. The funny bit to me was that IBM didn’t know. Just like Hewlett-Packard or Dell can’t tell you how many of their respective ProLiant and PowerEdge servers are in the field because a very large percentage of them are off maintenance and running old releases of operating systems that do not call into HP or Dell.
I agree that customers using iSeries and System i iron are an important part of the IBM i ecosystem, and many of them read our newsletters. The more important question is what can IBM do to get these customers to move ahead, to update their systems and start building apps on their new platforms?
I wish someone at IBM was being paid to figure that out.