isham research
Will IBM now shift zSeries revenues to hardware?
Over the past decade or so, IBM has gradually shifted mainframe revenues from hardware to software. The reason was obvious, if often not admitted - it faced competition in the hardware arena from Amdahl and Hitachi Data Systems and no competition in the operating system business. Hardware price erosion eventually forced its competitors to give up and IBM is now a monopoly supplier of MVS-compatible hardware.
Those with long memories might remember how things were before Amdahl came on the scene. One of the most famous graphics of the early 1980s was IBM's price/MIPS response - prices dropping by 80% or so over four years. Well, if you can get hold of a copy of that old chart - hold it in front of you and stand in front of a mirror. IBM has already signalled hardware price rises of more than 30% to some large users.
Of course, there is a positive side. If software prices are reduced to match and the user ends up paying the same per MIPS overall - then it's only the movement of 'wooden dollars' from budget to budget. And it may correct a serious problem - with hardware prices as low as they are and previously expected to decline still further, it might even have been difficult for IBM itself to justify developing the next generation of mainframes.