IBM i In The Land Of The Rising Sun
November 5, 2018 Timothy Prickett Morgan
It took Europe and Japan a long time to rebuild after the devastation of World War II, but it is absolutely no coincidence that the United States alone or in combination with its NATO allies invested an enormous amount of money in the rebuilding of both of these nations. Not only was it good business, providing American manufacturers new markets into which to sell their products, it was also a good kind of cultural exchange.
The predecessor of IBM, the Computing-Tabulating-Recording Company, sold its first punch card machine into the Japanese market back in 1925 at Nippon Pottery – yes, a manufacturer. In 1937, as the world was trying to climb out of the Great Depression, IBM got more formal about its business in the Land of the Rising Sun and created Japan Wattoson Statistics Accounting Machinery Company, which was eventually called IBM Japan Company. While we are focusing this discussion on Nippon, the combination of strong top-down, hierarchical cultures, deep technical and scientific proficiency, something of a clean slate, and massive manufacturing and distribution operations made both Japan and Germany natural places for mainframes and minicomputers to take off. And so they did.
These days, as best we can figure from talking to experts who know a thing or two about the IBM i business, the Japanese market comprises about 10 percent of the 150,000 unique customer sites that Big Blue counts as its IBM i customer base. While IBM provides no hard and fast figures, a lot of us who have done some back of the envelope estimating reckon that the United States has about 30 percent of those customers, or about 45,000 shops, followed by Europe with about 20 percent (30,000 customers), and still ahead of Canada with 5 percent (about 7,500 shops). The remaining 25 percent, or about 37,500 sites, are scattered around Asia/Pacific and South and Central America. That is another way of saying that the distribution of IBM i customers more or less matches the economic profile of the countries in the world and their relation to each other, with the United States, Europe, and Japan being a little bit heavier on the IBM i platform relative to their economic ranking and China and South America being a little bit lighter.
The size of the IBM i setup – whether it is all in one datacenter in a country or region or spread out over states, countries, or regions – tends to scale with the relative size of those economies, and that makes perfect sense.
These are very rough ways of looking at things, we realize, but that is how we have to do things in the absence of real data.
As is the case in other parts of the world, IBM sells a pretty good number of big NUMA boxes running IBM i (as well as AIX), there are far more smaller machines in the P05 and P10 IBM i software tiers that get sold. This is a midrange market, in terms of companies having from tens of millions of dollars of revenue to billions, but on average these companies still have relatively modest transaction processing requirements and what is considered a small machine can deliver hundreds of thousands of CPWs of aggregate performance that even a decade ago would have required a couple of racks of compute and peripherals. The length of time that companies have been computing is not an indicator of the size of the infrastructure, so even though many IBM i shops they started computing on IBM midrange gear maybe 30 years or even 40 years ago, they don’t need what we would call big iron today. Moore’s Law has not run out yet, and Moore’s Law far outpaces their computing and storage capacity increase requirements every year. Doubling performance every 36 months or so is still faster than growing at 3 percent to 5 percent per year, as gross domestic product does.
So, in this way at least, there doesn’t seem to be anything unique about the IBM i market in Japan. (If you know otherwise, do tell.)
“Japan is the third largest revenue producer for IBM i, behind North America and Europe,” explains Steve Will, the IBM i chief architect. It is good to get confirmation of this, of course, but Japan has been the third largest geography behind the North America and EMEA for as long as we can remember, so this is not surprising. What we don’t know is how much revenue gets from those 15,000 IBM i shops in Japan.
One thing we can tell you is that Japanese customers who use IBM i took a shining to open source software and encouraged Big Blue to get more open source systems software ported to the platform.
“The Japanese market played an instrumental role in asking for more Open Source offerings on IBM i,” says Alison Butterill, the product marketing manager for the IBM i platform at Big Blue. Will echoes this sentiment: “Japan started open source adoption on IBM i more strongly and earlier than the rest of the market, helping define the early direction of IBM i’s open source investments.”
As you might expect, Japanese companies are consensus builders and there are always complex interdependencies that make their way into business relationships that weaves a web out of economic connections – one with more strands than you would have within companies and across them in an economy in, say, the United States or Europe. This provides a kind of social cohesion that permeates business.
“IBM Japan works very closely with the IBM i and Power business partners, and this shows up in many ways, including an extremely well-attended and educational conference like NEXT 2018, formerly known as iSUC,” says Will. [Editor’s Note: That is a name that had to change, and a long time ago at that.] “Japanese businesses strongly encourage training young professionals, so the average age at the NEXT 2018 event is likely to be younger than at events in the United States and Europe, because more senior people bring their younger colleagues along.”
This is, in fact, how you learn.
That brings us to the reseller channel. Hold on for a second and take a deep breath. This will get complicated here for a second.
Not that long ago, JBCC was the big player in the market, with about 60 percent of the IBM i on Power Systems market. JBCC Holdings, its parent company, was founded back in 1964 as Japan Business Computer Corporation, and it developed its own microcomputers and OCR technology. JBCC Supply Corporation was formed when the AS/400 forefather of the IBM i platform was launched. Another master reseller is Iguazu Corporation, which was formed in 2006 in Tokyo, which eventually became part of JBCC. Most of the remaining 40 percent of IBM i machines a few years went through a master reseller called Growth D, which was founded in 2013 and which is a subsidiary of Toppan M&I Company, which is itself an IT consultancy founded back in 1994 that is located in Tokyo. About a year ago, JBCC sold about two-third of its IBM i business (including elements of JBCC Supply Corp and the Iguazu subsidiary) to Growth D, and now the market is split 20 percent to JBCC Holdings and 80 percent to the combination of Iguazu and Growth D, which took the Iguazu name. As far as we know, Iguazu has about 500 downstream partners, but only about 300 of them are involved with the IBM i platform, and only about 100 of these are relatively serious IBM i players with sizeable accounts and revenues from them.
For those of you who know the distribution channel in the United States, these companies are akin to Arrow Electronics, Avnet, and Tech Data.
We are in the process of interviewing two downstream resellers, Bell Data (which is a publishing partner of The Four Hundred in Japan) and Star-Computer, which is a downstream partner from Iguazu, to get a sense of what is going on in the streets and roads of Japan with the IBM i platform. We will discuss what we learn in a follow-up story, and try to talk to other ISVs, too. If you want to chat with me about your experiences in Japan with the IBM i market, just send me an email and we can chat.