Mainframe Sales Slump Trigger Workforce Cuts

Last week, CA joined BMC and even IBM itself in announcing cuts to its mainframe workforce

Just one day after IBM Corp. announced its largest-ever mainframe system, mainframe mainstay Computer Associates International Inc. (CA) announced a five percent reduction in its work force, triggered—at least in part—by slackening demand for mainframe software and services.

CA joins other Big Iron stalwarts, such as BMC Software Inc. and IBM Corp. itself, in trimming its mainframe-related workforce.

Earlier this year, for example, BMC announced a series of job cuts affecting an estimated 10 to 12 percent of its global work force. The causes, BMC officials said, were disappointing third-quarter results as well as weaker than expected projected fourth-quarter results.

IBM, for its part, has experienced a mainframe sales slowdown of its own. Big Iron revenues have declined by double digits over the last two quarters. In Q2, for example, zSeries MIPS shipments were down 19 percent (revenues plummeted 24 percent). IBM is also rumored to have reduced, at least in part, its own zSeries workforce.

All told, CA will cut about 800 jobs. The cause, says the mainframe software giant, is a slowdown in total bookings, which fell by nearly one-third during the most recent quarter, to $415 million.

There’s speculation that customers also deferred purchasing new mainframe hardware and services in expectation of the much-anticipated z9 release, but CA CEO John Swainson, himself an ex-IBM executive, conceded that this trend alone shouldn’t account for the shortfall.

“While we see this [z9 release] as being positive, we don't look for some sort of instantaneous jump just because they're shifting to a new big box,” said Swainson during a conference call last week.

Of course, IBM’s z990 mainframe didn’t exactly sell like gangbusters after it first started shipping in June 2003. Instead, z990 sales were slow to ramp up as IBM introduced larger capacity systems (up to 32-way) and an improved cryptographic facility over the next twelve months. In the end, however, the z990 did help drive record MIPS shipments.

In the z9’s case, that system is shipping feature complete: the first z9 servers will be available as 38-way machines starting in September, while IBM plans to make 54-way behemoths available in November. More importantly, the z9 will ship out of the box with robust cryptographic capabilities, including support for SHA-256 and optional Crypto Express2 PCI-X adapters accelerators.

As a result, IBM says, there’s built-in demand—even for a mainframe as big as the z9. “[T]his new product will be made available in the market this quarter, we actually see some strong early interest in the platform, largely because of some of these new features that I described in terms of the new security capabilities, some of the enhancements we’ve made around availability … and the ability to extend this system to leverage 54 processors,” says Rod Adkins, vice-president of development for IBM’s Systems and Technology group.

IBM expects mainframe sales will once again pick up. Last month, IBM CFO Mark Loughridge said that Big Blue anticipated single-digit mainframe revenue growth over the next several years.

Charles King, a principal with consultancy Pund-IT Inc., believes the mainframe still has a lot of life in it—dismal Q1 and Q2 sales notwithstanding.

“The zSeries’ growing support of additional operating systems … particularly Linux, has substantially helped to keep mainframes at the forward edge of business computing evolution,” he writes. “If it succeeds, IBM’s collaborative computing effort should establish the zSeries architecture as an essential part of emerging enterprise-class IT processes and services.”

About the Author

Stephen Swoyer is a Nashville, TN-based freelance journalist who writes about technology.

Must Read Articles