In-Depth

IBM's New zSeries Attracts Midsize Market with Lower Cost, Greater Scalability

Big Blue continues its push of entry-level mainframes into midsize companies with aggressive pricing, 28 capacity levels

• By Linda Briggs
• 04/22/2004

IBM’s announcement in early April of a new mainframe, the IBM eServer zSeries z890, continues the company’s move since the introduction of the zSeries two years ago of pushing its entry-level mainframe series as affordable options for midsize companies.

IBM’s very first z800 customer, which signed on to the new platform in February 2002, illustrates the reason midsize businesses often find the zSeries attractive—and may be drawn to the new z890 as well. For Basin Electric Power Cooperative in Bismarck, North Dakota, scalability at a good price continues to make the zSeries an attractive option.

Basin Electric, a consumer-owned regional cooperative that employs about 1,700 people, purchased the IBM z800 in February 2002. According to Curtis Kovash, senior software systems analyst at the company, it was potential cost savings that convinced the power co-op to move from an older IBM 9672-R44 mainframe. IBM pushes the zSeries as offering mainframe processing power to midsize companies at an affordable price, and Kovash agrees. “We went from a 160-MIPs to a 200-MIPs machine and paid for it in less than two years,” Kovash said. The savings came from reduced software and hardware maintenance costs, though performance improved as well with the move: “Response time was cut almost in half.”

Basin Electric illustrates a common pattern with the zSeries—IBM customers running older mainframes who move to the z800 to save money. Often, they want to preserve the mainframe’s legendary performance, stability and security, but at a more attractive price.

IBM’s pricing scheme for the new z890s continue the trend toward pleasing the mid-market customer. The z890, which is based on technology in the larger and more expensive IBM z990, provides a significant increase in capacity over the z800, but in a more flexible way. It begins at a size that is 30 percent smaller in capacity than the smallest z800 server, but can increase over 28 capacity levels. IBM hasn’t released cost figures yet for the z890, but promises “aggressive positioning” on price.

According to Vernon Turner, an analyst with IDC in Framingham, Mass., IBM is hoping to use price to lure companies who may be considering various computing platforms. “They’re trying to get customers who are looking at the mainframe and still thinking it’s too expensive.” The fine granularity in processing power that the z890 offers is another selling point, he said, as IBM hopes to both provide an easy onramp to companies contemplating a mainframe, and to try “to hold onto the base and stop it from moving to other platforms.”

IBM is “definitely giving more bang for the buck,” confirms Charles King, research director at The Sageza Group, Inc. in Mountain View, Calif. “This thing is priced very aggressively.”

King said that the sort of price/performance pressures that have become commonplace in the Intel market are now happening at the mainframe level—and the result is lower prices on entry-level mainframes. “Who would have thought three or four years ago that a mainframe solution would be affordable to a mid-market company?” he asked.

IBM’s newest mainframe focuses on scalability—those 28 steps of incremental processing power are an attractive proposition for midsize companies needing occasional processing boosts. At the top of the line, the z890 offers almost twice the power of a top-of-the-line z800.

The z890’s ability to gradually ramp up its processing capabilities could be an appealing cost-saver, Kovash said. “One of the options [in the z890] I like is, there’s a lot more gradual jumps in there.”

So far, Basin Electric is licensing just one of its z800’s four processors, Kovash says. It averages between 50 and 80 percent usage of the z800’s 200 MIPs each day, depending on the size and volume of ad hoc queries from users. “When we start [consistently] hitting 70 percent optimization average for the day,” he said, “then we’re looking at a processor upgrade.” That’s relatively easy—“we just call IBM [and] pay them to dial into our system and turn on a new processor,” Kovash observes, but the move can be expensive. That’s because the licensing costs of various application software the co-op is running will jump significantly as well. That, in turn, means that moving up the processing ladder in more gradual increments could mean significant savings overall.

King confirms that z890s lower entry price and smaller initial processing power will probably attract existing mainframe customers like the power co-op. “Given the fact that the 890 will scale down to 26 MIPs, there are some real opportunities for traditional IBM mainframe customers with relatively modest requirements (and there are a lot of those folks out there) to really take advantage of the fact that the company is rolling these things out at what are essentially bargain-basement prices.”

To anticipate where IBM is heading with the zSeries, Smith said, watch IBM’s z900 series. “Keep an eye on the higher end to see where they’re going with the z800 series,” he suggests.