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Mainframes and Markets

Will the mainframe's share of the computing market worldwide continue to shrink?

• By Linda Briggs
• 08/01/2002

IDC predicts that worldwide server sales overall will decline 14.5 percent in the second quarter, but will return to positive growth in the third and fourth quarters. Mainframe sales, however, which make up 13 percent of the global market today (based on revenue), will slowly decline to 8 percent of the total market by 2006.

Some of the first quarter shrinkage in the overall market can be blamed on Japan, which has been experiencing its own share of economic woes—and also relies heavily on the mainframe. But sales revenues for the U.S. mainframe market alone declined in the first quarter, IDC analyst Steve Josselyn says—by a significant 27 percent.

Downturns of any sort, mainframe purchasing included, are hardly a surprise in this market. The continued advances of small and mid-size servers that compete with mainframes for IT dollars are gradually eroding the mainframe market to some extent. So no real surprise there, either.

But is there any good news in all of this?

Well, a bit. First, the slump isn't in mainframe numbers alone—overall server sales are down. And the slide in mainframe numbers wasn't unexpected, Josselyn says—more than anything, it reflects the difficult economy. "Normally, in poor economic conditions, the first thing customers look at is those big capital expenditures," he points out.

"I don't think people are walking away from the mainframe," Josselyn observes. He sees more companies making choices based on a variety of factors—including a realization of the superior manageability in many cases of a consolidated environment. Because advances in today's mainframes have made it far easier to manage, a lower number of skilled technicians are needed—which can make it a great sell in today's economy.

The true bright spot in all of this might be IBM. First, sales of its zSeries mainframes last year, principally the z900, bucked the economic trends and remained strong through the second half of 2001, Josselyn notes. That speaks well for how IBM's z900 might sell once the economy picks up.

IDC predicts that IBM's mainframe sales overall—in contrast to its predicted worldwide market decline in mainframe spending—will at least remain flat for the next five years.

Also, sales numbers for IBM's new z800 computer, an "entry-level" mainframe that began shipping in late March, don't show up in IDC's numbers yet. The z800 is a lower-cost platform in IBM's zSeries line, and showed surprisingly strong sales right out of the gate—IBM reported selling 200 in the first two months. With an entry price around $375,000, the z800 creates a more competitive zSeries platform overall, according to Josselyn. It also helps draw new customers into the mainframe fold—IBM has predicted that most z800 buyers will be first-time mainframe customers.

In the end, mainframe sales, like every other economic indicator we've all been watching, will depend on the economy. Where do you see the mainframe market heading? Do you see a bright spot in all this? Let me know at LBriggs@esj.com.