IBM UK is still waiting for positive investment decisions and sees no indication of real growth in the economy. According to Arthur Parker, director of IBM’s Enterprise Systems division, the climate remains grey, although IBM’s mainframe performance is up significantly on the first quarter 1991. However, the gloom applies not only to the UK, and […]
IBM UK is still waiting for positive investment decisions and sees no indication of real growth in the economy. According to Arthur Parker, director of IBM’s Enterprise Systems division, the climate remains grey, although IBM’s mainframe performance is up significantly on the first quarter 1991. However, the gloom applies not only to the UK, and to IBM, but to the rest of the mainframe pack. It’s not so long ago that the plugcompatibles were crowing over the fall in IBM’s market share, down from over 90% in the mid-1980s to 63% in 1990. Yet IBM – in the US at least – is believed to have garnered over 80% of new installations. It had a cracking fourth quarter with the Model 900s and 820s, and according to Annex Research, those shipments accounted for over $2,100m of the total $4,700m US processor revenue. IBM’s recovery, if that it is, is due partly to economic and product cycles, and Parker cites UK demand for Amdahl Corp’s new mainframes as an example. Amdahl, in contrast to IBM, had a dull fourth quarter. 1991 was the end of the 5990 technology cycle, and by January, Amdahl had its lowest market share for many years, especially in the US.
However, the company started shipping in volume in the first quarter 1992, and of 15 systems sold in the UK, two were 5995Ms. Likewise, Amdahl benefited from pent-up demand, saying that it sold between 40 and 50 systems in the three months and that demand is outstripping supply. Nonethless, the plug- compatible manufacturers are complaining of discounting, saying that competition has never been so fierce. Price-performance, according to Parker, is determined by technology and pricing, but discounting is an issue, and if list pricing is high, then the level of discounting can be equally high. Which is slightly disingenuous since IBM UK does not publish prices, but it does set the agenda and, inevitably, the level of discounts. This recession has bitten deep and it is the first time that the computer industry, now a mature creature, has faced such an economic downturn. Consequently, discounts are increasingly aggressive in a time of recession, reduced budgets and a move towards downsizing. Parker denies that small systems pricing is an indication that mainframes have been too expensive, saying that the perception of downsizing as being easier and cheaper, is a false one. Networked personal computers may seem like a good buy, but there are hidden costs. For example, the issue of security – is there any, who is attending to it and how much does it add to costs? Parker is unwilling to be drawn at present, saying that IBM is still formulating a reaction to the downsizing arguments, and we can expect a more detailed response next month. Returning to mainframes, Parker acknowledges that consolidation will reduce the number of high-end installations, but he reckons that the number of 390 MIPS will continue to rise while users in the 9370 bracket might migrate to other systems. At the same time, it seems unlikely that users will move into mainframes unless external forces like large-scale mergers force fundamental changes.
By Janice McGinn
Corporations, the natural target for mainframe vendors, have been well penetrated and the boom years of the 1970s and 1980s look to be at an end. Conversions from ICL kit are almost non-existent, although migrations from Unisys to IBM architecture is ongoing. But most users, if they intend to stay in the mainframe world, will go with their existing investment. If so, IBM, Amdahl and Hitachi Ltd will be competing more fiercely just to maintain a share of a mature, but shrinking, market. Annex Research claims that the total market value for 1992 in the US will be $5,500m, less than the 1989 value of $6,000m. The European situation is no better, possibly worse than the US in some cases. Based on shipments during 1991, IBM is believed to have around 74% of the market, about 50% in the UK. Amdahl has just over 10%, Comparex has about 9.5%, Hitachi Data Systems has just over 5% and Olivetti comes in at 1.4%. But European figures are a movable feas
t and it is likely that only IBM has an accurate breakdown of market share, gauged according to mainframe software licences. Europe lagged the US in terms of shipments during 1991, and this hit some of the vendors particularly badly. Amdahl is heavily dependant on its UK revenues which accounted for about 50% of the European total in the period between 1987 and 1989, although that has now fallen to about 37%. The UK economy has been been in a more severe recession than the rest of Europe, so Amdahl UK’s revenues and profits have suffered more severely. IBM UK hasn’t had it easy, but the UK represents a smaller slice of its European pie.
In addition to the recession, some commentators argue that Europe has experienced a double whammy. European Community countries – both in government and commercial circles – inflated their spending over the past few years in preparation for the Single Market. But nothing goes on for ever, and those same economies that boomed in an earlier phase are absorbing their purchases and they have to be put to productive use before spending resumes. All five European vendors – IBM, Amdahl, Hitachi Data, Comparex Informationssysteme GmbH and Ing C Olivetti – the last three being Hitachi’s European distributors – have entered their new product cycles at different times, and this is reflected in their current market shares. Hitachi Data and BASF’s Comparex have benefited from launching their new technology earlier – although Hitachi Ltd’s recent results give no cause for celebration, and while the parent says that Hitachi Data is making reasonable margins, commentators continue to be sceptical. IBM is benefiting from volume shipments and if Amdahl meets demand and delivers what it has promised, it should see market share rise during 1993. The Japanese market is as difficult to quantify, and market share can only be guesstimated from the players’ financial results, and this is even less reliable than in Europe since Fujitsu Ltd and Hitachi Ltd have large proprietary bases. IBM’s share is significantly lower than in the US and it doesn’t stand out from the Japanese players in terms of the installed base of different operating systems. However, the role of the mainframe is changing and it is the changes as much as market share that will decide the mainframe players of the future.