Where Have All The IBM i ISVs Gone?
September 22, 2014 Alex Woodie
American-style capitalism is a rough-and-tumble sport where new markets and businesses are seemingly created out of thin air, and disappear just as easily. The IBM‘s midrange marketplace, as a whole, has been remarkably resilient to change. But the list of vendors that have gone out of business or been acquired is long and getting longer every year, and today we’re likely down to fewer than 1,000 vendors.
There usually isn’t a lot of fanfare when a company goes out of business. No press releases are issued after the money has run out, and CEOs aren’t eager to get on the phone with journalists to discuss the gory details. Instead, the presence of “404 errors” in a Web browser may be the best indication that a previously viable company has ceased being an ongoing entity.
In the IBM i world, the population of resellers, consultants, and software vendors has consistently shrunk since 2000, when the market was at its zenith. At that time, the AS/400 drove more than $4 billion in sales for IBM and supported a healthy ecosystem of business partners. Big Blue no longer breaks out IBM i-on-Power-Systems sales figures, of course, so that metric no longer provides an accurate view on how healthy the market is. For comparisons’ sake, the entire Systems and Technology Group sells about $10 billion worth of hardware per year. That includes not only IBM i-on-Power-Systems, but also AIX-, and Linux-based Power Systems sales, System x servers (until that business is sold to Lenovo), and System z mainframes.
While IBM’s revenue from the IBM i marketplace is undoubtedly well below half what it was in the mid-to-late 1990s, the population of IBM i customers is, by most estimates, about half what it was. The AS/400 installed base probably maxed out at around 275,000 shops worldwide in 2000. Two years ago, Power Systems general manager Collin Parris said there were “over 150,000” organizations still using IBM i servers and its processors. The obvious conclusion of these two facts is that the IBM i installed base runs a lot of old hardware.
The installed base runs a lot of old software too, which is why IBM i software companies have had a rough time lately. The industry consolidation that began more than 10 years ago following Y2K and the dot-com bubble burst never really let up, and has continued right through the Great Recession and into the present day.
Over the past several years, private equity investors have led the charge to consolidate software vendors in stable-to-shrinking industries, such as the IBM i software market. Hence you see firms such as Audax Group, Golden Gate Capital Partners, and Candescent Partners–which have stakes in HelpSystems, Infor, and Quadrant Software, respectively–driving consolidation in the IBM i market.
Lately, HelpSystems has been the most active consolidator in the IBM i software space. In just the last month, it snapped up two formerly independent IBM i ISVs, including Coglin Mill and RJS Software Systems. Those buys add to a list of acquisitions that was already quite long and included Advanced Systems Concepts, Bytware, CCSS, PowerTech, Safestone Technologies, and ShowCase. Infor, which is the fourth or fifth largest provider of enterprise software, owns the biggest collection of IBM i-based ERP application software, including names such as Daly Wolcott, Lawson, Infinium, MAPICS, SSA, and System 21.
The consolidation of these previously separate organizations under private equity-backed umbrella groups may bring a tinge of sadness for those who are nostalgic for the AS/400’s heyday. But keep in mind that, while the original founders and developers have mostly moved on, the products continue to be sold, even if some of their new owners aren’t developing functionality as quickly as before. They are the survivors. There’s a long list of companies and products that basically disappeared off the face of the earth.
So who’s left? That’s a good question. At one point, in the late 1990s and early 2000s, IBM used to boast about the AS/400 having over 20,000 applications and 8,000 ISVs. By 2005, the number of ISVs had shrunk considerably, down to about 2,500 to 2,600 companies worldwide, a number we got from IBM’s then director of iSeries ecosystem development, Joyce Bordash, who told IT Jungle that the number of iSeries ISVs (remember, IBM i was called iSeries back then) had remained stable for several years.
One way to gauge the size of the IBM i ISV community is to see who’s participating in the rebate program that IBM uses as an incentive to get customers to buy new hardware. According to the latest iteration of the rebate program, which IBM detailed in this May 7, 2013 announcement letter, there were 131 ISVs active in the Power Systems rebate program. The rebate terms that are outlined in that 2013 announcement are still active.
Before you hang your hat on that lowly number 131, however, let’s take a closer look at it. Many of the most prominent IBM i ISVs are indeed represented here, including JD Edwards (via Oracle), Vision Solutions, TMW Systems, LANSA, Jack Henry, Manhattan Associates, Maxava, VAI, and Kronos, to name but a few. But there are clearly a lot of AIX and Linux vendors here too. Dassault makes great product lifecycle management (PLM) software, but it does not run on IBM i, and neither does the analytics software from the storied SAS Institute.
There are also a fair number of prominent IBM i ISVs that are not on the May 7 2013 rebate announcement (apparently because they’re not participating in the rebate program), including the aforementioned HelpSystems and Quadrant Software organizations. Two of the IBM i community’s most visible tools developers, Linoma Software and ProData Computer Services, are not on that list. Neither are ASNA, Profound Logic, nor looksoftware, which was recently gobbled up by Fresche Legacy (also not on the list).
To get a better idea of the state of the IBM i ISV community, we head toward the Global Solutions Directory, where ISVs are free to post their own listings on IBM’s searchable website. Currently, the GSD shows about 2,000 applications available for IBM i, which includes all levels of “i/OS,” i5/OS, and OS/400 going back to V5R4. Because ISVs are allowed to make create an entry for each product, the actual number of individual ISVs (based on a sample of the data) is less than 50 percent, or fewer than 1,000 ISVs.
One thousand vendors is probably closer to the actual truth. It’s not a great number, considering there were about 8,000 ISVs at the turn of the century and about 2,500 five years later. The numbers have continued to shrink. Some of that is through M&A activity, but some of it also is through attrition and the intense competitive forces now working their way through the market.