From IBM System User, a sister publication.

The resurgent interest in the mainframe among corporates and the rapid succession of product enhancements from IBM Corp and the other mainframe vendors will not be sustainable beyond the end of 1998, according to predictions by US analysts, Gartner Group. For the past two years, IBM and the other mainframe vendors have enjoyed a surge in the amount of mainframe capacity shipped. In 1996, IBM saw shipments of processing MIPS rise by 40% and for the first time Hitachi Data Systems shipped more than 100,000 MIPS in a year. Although more MIPS are being shipped, the bulk of these are replacement MIPS, said Dave Norris, an analyst with Gartner, speaking at the UK Computer Measurement Group mainframe user group in Torquay this week. The real question is what happens after the installed inventory is replaced, which will happen in late 1998. The MIPS shipped will then shrink dramatically. Norris predicts that the MIPS growth rate will then drop from 40% to 25% shared between all vendors.

By David Johnson

At the same time, Norris can see no slowing down in the rate of price erosion for mainframe hardware. Since 1994, there has been a 30% drop in price per MIPS per year and I see that continuing for at least the next three years, he said. As a result, Norris believes that from late 1998, the revenue streams for mainframe vendors will begin to decline significantly as the the ship rate drops. This will, in turn, lead to a slowdown in hardware development, he says, as companies can no longer fund development from hardware revenues. He points to IBM’s projected performance increases for the System 390 as evidence. The third generation of CMOS – complementary metal oxide semiconductor – delivered almost double the performance of the second generation. The fourth generation, due to be announced imminently, is expected to bring only a 50% improvement, however, and subsequent enhancements will be in the 20% to 30% range. But IBM is in a better position than the other mainframe vendors, he says. IBM will start to fund hardware development from software and services revenues. However, some vendors have no software or services revenues and those companies will probably exit the market, he said.