On Tue, Aug 18, 2009 at 3:13 AM, Timothy Sipples <[email protected]> wrote:
> > Vendors -- including your company, I'm sure -- are in business to earn > revenues and profit. Customers have a strong interest in doing business > with vendors that can continue to (or even increase) research, development, > and other product investments. That's true of many types of products, > especially capital equipment like airliners and servers. Customers want and > need products that offer increasing business value. For example, if it's an > airliner, it should offer more fuel efficiency, more reliability, easier > training, better passenger comfort, and so on. If the manufacturer cannot > invest enough in product development, these improvements are much harder to > deliver. > For typical products with long life-times and low purchase frequency like airliners or consumer electronics that's probably true. For commodity products and services it may or may not be true. The jury is out. We are not used to thinking of tradional IT products as commodities, but they are rapidly becoming commodities if not already. It is undeniable that there is a growing worldwide corporate interest in consuming IT functionality as a service, rather than the traditional model of inhouse IT. The notion of a "product" gets quite blurred in that kind of a world, as do the assumptions about R&D investment and all of the down-stream effects. > Of course, customers also have a keen interest in declining unit prices, to > help drive their costs down. System z unit prices are not at all secret. > Whenever IBM reports something like "System z hardware revenues up X%, MIPS > up X+Y%," that provides enough information right there to figure out that > unit costs are declining (and by approximately how much). > Customers have a vested interest in obtaining the lowest possible cost per business function. The menu of "function" for typical data center things has not changed significantly in gross terms in a long time. So any new "value" is very hard to prove and that's a key reason we have not seen much in the way of new product in the MF space in a very long time. Anyone is free to disagree with this assessment of underlying cause and effect, but it is undeniably congruent with what we actually see across the software industry. Prices across the System z ecosystem have been declining steadily for many years. In classical economic theory, this would normally be expected to yield an increase in consumption, however that has not been the case. The number of customers and the number of footprints has continued to decline at a steady clip. The economists conclusion would be that, even with these price declines, the alternatives are perceived to be more attractive and/or cost effective. This is also congruent with the universal perception that the mainframe is an expensive platform. While it is probably nice that IBM has finally recognized this (with these solution packs) it feels a lot like a day late and a dollar short. > > The number of data centers in shrinking industry-wide, actually. True. And quite drastically in some cases. > Spending per site > is increasing independent of the mainframe component. > That's somewhat true but it is also a trailing indicator driven largely by the consolidation that has been going on. There is ENORMOUS pressure on global IT to reduce their overal spending in line with the reduction in the number of datacenters. It would be extreme wishful thinking to hope that overall spending per site is just going to continue to increase. The total spend on inhouse IT is in the cross-hairs right now and that's where the drive for service-izing is coming from. That whole area of "* as a service" is just in a nascent state right now but it is seeing an explosion in adoption. I have no doubt we're going to see a flattening of datacenter spending over the next few years. It will be interesting to see what happens in the mainframe space. My suspicion is that there will be even less resources available for development at ISVs and at IBM, so we will see more M&A consolidation and contraction until we hit some sort of market equilibrium. The key questions that the big brains in the ISV (and presumably IBM) planning organizations are wrestling with are "how big will the customer base be when we hit that equilibrium and can we still make a living at that point?" We live in interesting times huh? -- This email might be from the artist formerly known as CC (or not) You be the judge. ---------------------------------------------------------------------- For IBM-MAIN subscribe / signoff / archive access instructions, send email to [email protected] with the message: GET IBM-MAIN INFO Search the archives at http://bama.ua.edu/archives/ibm-main.html
