The Humongous Investment In IBM i People
February 8, 2021 Timothy Prickett Morgan
It has been common knowledge since the Application System/400 minicomputer platform was launched in June 1988 that the vast majority of customers buying these machines either developed their own code in RPG or COBOL – mostly RPG, except in banking and insurance, which had a mainframe heritage and preferred COBOL – or had access to the source code from third parties and heavily customized it to the point where they were self-maintaining the applications at some point. In many cases, they used a mix of homegrown and third party modules and did the integration themselves.
This history continues, and is demonstrated in the seventh annual IBM i Marketplace Survey performed by HelpSystems. If you missed it, you can check it out at the link above and hear what Tom Huntington, the executive vice president of technical solutions at HelpSystems; Alison Butterill, IBM i product offering manager; Ian Jarman, business unit executive for Power Systems Lab Services; and Brandon Pederson, worldwide IBM i product marketing manager; and myself all had to say about the survey results. One of the slides referred to the following question: Which business applications are you running on IBM i?
As you can see, 76 percent of the customers surveyed said they had homegrown applications written in house, and depending on what you reckon is the size of the IBM i customer base – the estimates range from 120,000 to 150,000 unique customer sites – that is somewhere between 91,200 sites to 114,000 sites who do their own thing when it comes to applications. But we have no idea of the size of the investment in these applications. But we can tell you one thing after doing a little math of our own: This investment in people to manage IBM i systems and code applications absolutely and utterly dwarfs spending on Power Systems servers and storage and is orders of magnitude larger than spending on third-party application software, as far as we can tell.
We base this assertion on some math we did against two charts showing the distribution of administrators and programmers in the base among the companies that participated in the IBM i Marketplace Survey. Take a look:
In the places where there was a range of people, we took the average across that range and then multiplied it by the low and high ranges of the IBM i installed base count. If you do that, then there is somewhere between 310,800 and 388,500 system administrators on the IBM i platform, and somewhere between 930,000 and 1.16 million IBM i programmers. If you assume the average administrator makes $55,000 and the average programmer makes $65,000, and then add on costs like office space, health insurance, and such on top, then the investment by IBM i shops in people is somewhere between $96.9 billion and $121.2 billion. This assumes that the distribution of employee counts shown in the study by HelpSystems is representative of the installed base overall.
If you contend, as we do, that this data represents the upper echelon of IBM i shops who are active and who are relatively current on their systems – call it the top 20 percent of the base by how modern they are – and the others are smaller shops with a single programmer/admin who manages stuff and does the programming, too, then the investment in people is a lot less. But still huge. By my math, there is between $7.2 billion and $9 billion in employee investments in the 80 percent of the base that is not particularly active and somewhere between $19.4 billion and $24.2 billion among the 20 percent who are active, and when you add that all up, it is somewhere between 344,000 and 430,000 people for a total of $26.6 billion and $33.2 billion in total employee compensation and costs.
Add in sales of hardware, software, and services on the order of maybe $5 billion a year (including reseller mark ups), and the IBM i ecosystem, very much dominated by the value of the applications and represented by the annual pay of everyone in aggregate, is somewhere between $32 billion and $38 billion. Call it a cool $35 billion.
This is a very valuable business, clearly. And IBM’s revenues for Power Systems running IBM i do not even come close to reflecting that full value. It is vital to remember this.