The IBM i Power10 Upgrade Cycle Forecast Looks Favorable

February 6, 2023 Timothy Prickett Morgan

As we talked about last week in going over IBM’s financial results for the fourth quarter, the Power Systems business increased its revenues by 6.5 percent in 2022 thanks to a Power10 upgrade cycle that started in the fall of 2021 with high-end machines and built momentum in the summer of 2022 as the entry and midrange Power10 machines were delivered in the market.

In general, IBM tells Wall Street to expect that its overall Infrastructure business group will have flat revenues, with some quarters up during the beginning of an upgrade cycle and down at the end of it. Which is all very reasonable considering that IBM’s customer base for System z and Power Systems is probably not growing much, even if the consumption of processing power among their respective bases has grown steadily – and in the case of the mainframe, incredibly linearly steadily – quarter by quarter, year by year.

In last year’s IBM i Marketplace Survey, sponsored by Fortra (formerly HelpSystems formerly Help/Systems), the survey asked about the usual upgrade plans and then added a second question to drill down on the plan for upgrading to Power10-based systems, which had just been announced a month before the survey was opened up. (With the IBM i Marketplace Surveys, questions are asked in October of one year and the report is issued in January of the following year with the date of the report matching that latter year. So the 2023 report really reflects sentiment four months earlier as 2022 was coming to a close. You have to keep that in mind. It is not sentiment as 2023 was getting under way.)

In this year’s report, 6 percent of the more than 300 respondent said that they would be upgrading only their hardware this year, and that could mean adding new processor features to Power8 or Power9 machines, buying vintage Power7 and Power7+ machines on the secondhand market, or buying new Power9 or Power10 machines from IBM or its resellers. It is intentionally meant to be vague. As you can see in the chart below, since we added data from the prior three reports in red to the pie chart, this percentage is consistent with but a little lower than, the average over the past four years.

Another 25 percent of respondents said they would only be upgrading their software this year, and that presumably means (but is not limited to) an operating system release or version upgrade. This share of the base was a little higher than average by a fraction of a percent, which is probably not statistically significant given the relatively small number of people who answer the poll this year compared to past years. Responses usually come from more around 500 people. In 2021, for instance, there were 733 total respondents and 472 complete respondents. In this survey, there seemed to me a lot more large shops, based on company size and the prevalence of IBM System z mainframes as a much higher share of total platforms than we typically see.

The interesting bit is that another 35 percent of those polled said they would be upgrading both the hardware and the software in their IBM i platforms in 2023, which is 6 percent or 7 percent higher than average, and only 34 percent of customers who were polled said they would not be upgrading anything.

Basically, two-thirds of the IBM i base is going to be upgrading something this year, and 41 percent of them are going to be doing hardware and 60 percent are going to be doing software. It is important to remember that this measures desire and intent, not actual budget and installation. But the indications are that it will be a very busy years for IBM i shops if the global economy does not go into a tailspin. Which we do not think it will, even if it can get turbulent.

Now, let’s drill down into Power10. At the end of 2021, when only the high-end “Denali” Power E1080 systems were available, 73 percent of respondents said they were considering a move to Power10 and 27 percent said no they were not. (This data appeared in the 2022 report.

In the October 2022 survey that underpins the 2023 report, the question was asked a bit differently and a little more accurately. Of those polled, 74 percent said they were considering an upgrade to Power10 and another 16 percent said they have either upgraded or were in the process of upgrading to Power10 machinery. That is a total of 90 percent of respondents who are considering an upgrade, compared to only 73 percent in the year ago poll and report. That is a very big swing of 17 percent in total. Again, intent is not a purchase order, but this is a very good indication that customers – at least those who are members of the active part of the IBM i base that reads newsletters, participates in polls, attends vendor and IBM webinars, and keeps their hardware and software relatively up to date – are ready to upgrade.

Say that the active portion of the base is around 30,000 unique shops of the 120,000 or so unique IBM i customers in the world. Many of these customers have local high availability clustering (somewhere around a quarter of the total base, but concentrated among these active customers), so we could be talking about somewhere around 35,000 IBM i-based Power Systems sold this year, and at an average cost of $50,000 a pop, that is $1.65 billion driven by the IBM i upgrade cycle. That would be a bumper amount of sales, more than we have seen from the IBM i base in many, many years.

We do not think that portion of the IBM i base will upgrade. We think it looks like it might be closer to 12,000 customers, or about 10 percent of the total base, with the majority of the Power10 buyers coming from the active part of the base. (The 30,000.)

AIX drives the largest part of Power Systems sales and Linux is north of 20 percent as far as we know. It seems far more likely that IBM i-based sales will grow from maybe $500 million in 2022 to $600 million in 2023, and Linux will hold steady at around $300 million (with HPC-based Linux machines falling and SAP HANA based Linux machines growing). If Power Systems sales will be down a little (call it 7 percent), that implies that the AIX base has done a lot of upgrading already in 2022 and will decline by around 30 percent in 2023.

In other words, it looks like it might be IBM i’s turn to drive more Power Systems sales than AIX this year, if our guesstimates are correct.

This Issue Sponsored By

Table of Contents

Content archive

Recent Posts

Subscribe

Pages

Search