IBM mainframe dominance is mixed opportunity

Hardware giant working hard to prolong mainframe market beyond its sell-by date

Rakesh Kumar: "Mainframe software negotiation is a bit of a black art"

Let's face it, IBM is the mainframe market. The big question is to what extent the company can exploit its dominant market position to squeeze maximum revenue out of its customers for as long as possible.

To mitigate the inevitable effects of vendor lock-in and overcharging though, analysts are urging existing IBM mainframe customers to pay closer attention to the licensing fees they pay to maintain their legacy applications, arguing that the company is artificially prolonging the mainframe's life by making it easier and cheaper to develop new software for aging platforms.

A recent survey from research firm Gartner estimates that the cost of maintaining mainframe hardware and developer expertise has actually remained fairly stable over the past seven years, whereas software ownership costs have fluctuated wildly.

"Mainframe software negotiation is a bit of a black art. The devil is in the detail," Gartner analyst Rakesh Kumar told Computing. "Vendors are past masters at playing the game and are getting away with charging more than they should, but then end users are not doing asset management and contract negotiation in the way they used to, and should be putting more attention into it."

IBM is pretty much the only mainframe business left in town after its acquisition of PSI in 2008. The company now has more than 90 per cent of the global market, though HP, Fujitsu, Bull, NEC and Unisys continue to sell equivalent systems in certain regions like Europe and Japan.

Rakesh believes that the status quo is unlikely to change, pointing out that the inexorable advance of x86 server architecture into applications traditionally supported only by mainframes means the whole market has a limited sell by date anyway.

"There is nothing we can do about that [IBM's dominance], it is a fact of life," he said. "I don't think anyone else will come into the mainframe hardware market though there are others who can do the software. Most new applications are being written for x86 servers, so the returns are ever diminishing."

IBM has also sought to protect its dominance of the mainframe software market, and is currently engaged in legal disputes with other companies selling software that will work on IBM mainframe computers.

Open source software developer TurboHercules became the latest company to file an anti-trust complaint against IBM with the European Commission earlier this year. It alleges that IBM is illegally tying its mainframe operating system z/OS to its System z mainframe computers without giving customers the choice of using alternative software.

Both Neon Enterprise Software and T3 have filed similar complaints alleging anti-competitive behaviour in the past 18 months. Neon Enterprise Software is currently suing IBM, alleging that IBM has pressured System z customers to stop using Neon's zPrime software on its mainframes.

In January 2009, T3 complained to the EC that IBM had engaged in anti-competitive actions, including tying sales of its operating system to its mainframe hardware, and withholding patent licences and intellectual property.

And for all the furore about the relevance and availability of mainframe programming skills and job vacancies, Kumar believes that application development for specific mainframe platforms is actually becoming much easier, meaning experienced staff may be less in demand.

"This is where IBM has been smart, by seducing users with pricing models and attractive middleware like WebSphere and Cics, which means that software development on mainframes is much easier," he said. "The new development stuff does not need the same level of skill set – problem resolution is easier and the same level of Assembler-based skills of 20 years ago is not needed."

For those organisations that can see the value in maintaining mainframes for the next few years (cost comparisons with maintaining legacy applications on equivalent x86 architecture are either unavailable or too difficult to make, say experts), Kumar reckons now is a good time to invest in new hardware as IBM introduces new mainframe models.

"It is a very good time to negotiate the price on the old IBM Z10 model, which is more than big enough for most users," he said. "Let it run for another 18-24 months before moving towards the latest box - that would be a good investment in the short term."