Thursday, 6 September 2012

Old dog, new tricks

The mainframe has clocked up 48 years of sales by adapting to new technologies and demands

IBM have moved on since then
To the less technologically inclined, IBM’s new Z enterprise EC12, launched August 28th, appears to resemble something closer to that of a large refrigerator than a piece of tec wizardry. Yet the mainframe is one of the industry's most enduring innovations.
Without knowing it, most readers probably used a mainframe computer today, albeit indirectly. From credit card payments to monitoring exports, the mainframe provides what is termed “mission crucial” processing, 7 days a week, 365 days a year.  

When IBM chairman, Thomas Watkins, bet the company’s future on the success of a new family of mainframes in the 1960s, only the most optimistic IBMers would have dared dream that the firm would still be introducing new versions in 2012. Two years is a long time in the tech world, fifty is an eternity.     

The mainframe has had its fair share of ups and downs. Starting in the 1980s, businesses started to desert “big iron” in droves. The idea that bundles of hardware in a metal shed could compete with the emergence of the new client/server model of computing struck many geeks as farfetched. The mainframe seemed Triassic compared to the PC.

With a tip of the hat to the dinosaur naysayers, IBM code named their then current crop of mainframe computers T-Rex. As data proliferated with the emergence of the internet, the mainframe found itself back in demand. While the server model abetted most data needs, the plea for more secure transactions, needed for e-payments, provided the mainframe with a lifeline.

Still, the mainframe story is one of inertia as much as innovation. Core customers, such as large banks, suffer from high switching costs. Rakesh Kumar of Gartner, a market-research firm, wonders, “If it is even possible” to change the current transaction process, “How would you even go about reorganising such a system?”

A captive market in the developed world and growing sales abroad, has allowed IBM to invest heavily in the new Z12 mainframe, knowing that a decent rate of return is all but assured;  “We have invested over $1 billion in the Z12” states Doug Balog, the system Z head.

The investment has led to some impressive features. The new mainframe is 25% quicker than its predecessor, the Z196. But it’s not just increased processing power that has tech-types salivating. The new model provides, “embedded analytics” where by patterns of data are analysed for fraudulent activity mid transaction. It also uses the, “fastest processor on the planet” cues Nick Sardino in an IBM promo on YouTube. 

Given its credentials, it won’t surprise readers that the Z12 ain’t cheap. But the $1 million starting price, often going much higher, still leads to dropped jaws. That however, says IBM, is a small price to pay relative to Z12’s benefits; the firm reckons it saved Eurocontrol, an air traffic control firm, around 50% in additional software costs.

For all its new features, the mainframe remains popular due to its reliability and security. “The Z12 is encrypted from the chip to the software” says Balog. This makes the mainframe crucial for IT infrastructure where masses of sensitive data are processed. “If you’re a bank or a credit card firm, you’ve not really got any other option” confesses Toni Sacconaghi of Bernstein Research.

While only around 4% of IBM global revenues come from direct mainframe sales, once additional hardware, storage, software and servicing have been factored in, the mainframe accounts for a quarter of revenue and nearly half the business’s profits.

Burgeoning demand from China has been instrumental to the resurgent mainframe. According to IBM, online banking transactions have tripled in the country since 2009, compelling companies like the Bank of China to invest in the mainframe. Sales of Big blue’s hardware are up 11% in emerging markets for the 2nd quarter according to a recent announcement by IBM’s finance director, X.

Like its chief patron, the mainframe has stayed relevant by evolving with new technologies; from the arrival of the PC to the smartphone. It would be a pleasant irony for big iron if its supposed slayer were the first to go. “PCs are a dying platform; more and more data is accessed via smartphones and tablets”. Who would have thought that in 1996?

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