IBM to Ride Growth Waves on Current Iron in 2011

March 21, 2011 Timothy Prickett Morgan

I went up to IBM‘s annual Investor Day two weeks ago not only to spend some time with the people who created the Watson question-answer system, whom I have spoken to a number of times on the phone over the past several years, but also in the hopes of getting some insight into IBM’s plans for future x64, Power, and mainframe systems. Big Blue didn’t show too many of its cards, but did reveal a few things about what we can expect from the Software and Systems Group in 2011 and beyond.

First and foremost, Rod Adkins, the senior vice president of the Systems and Technology Group that was merged with Software Group last July, did what all of the other group and division managers did: talked about how they boosted profits over the past decade and how they would do it on roughly the same scale over the next five years. A neat trick, I think, considering the shrinking profit margins in the system business these days.

If you are expecting a lot of big server announcements from IBM in the first half of this year, don’t hold your breath. And you should probably keep breathing normally for the rest of 2011 while you are at it because 2011 is not shaping up to be a blockbuster for announcements like last year was for Big Blue. Adkins said that IBM was getting ready to ship its Power7 IH nodes, which I told you about here, for the “Blue Waters” supercomputer at the National Center for Supercomputing Applications at the University of Illinois, the place that gave us the Netscape browser, among other things. These Power7 IH nodes weigh over 300 pounds and have Power7 multichip modules that cram four eight-core chips onto a single ceramic package, and eight of these modules plus 1 TB of water-cooled memory and a very fast interconnection switch are all crammed onto a single 2U node that is 39 inches deep. This puppy would offer about 800,000 CPWs of aggregate OS/400 and i capacity, and by the way, you can’t have one. IBM i is not slated to run on it, but when you look at the Blue Waters nodes, you are looking at the future Power platform writ large. I would bet Sam Palmisano’s last dollar that a future general-purpose Power System will borrow many ideas from these nodes.

IBM, Adkins said, plans to update its Smart Analytic System appliances, which run a collection of WebSphere, Cognos, and SPSS software on Power (7600 series), System x (5600) and mainframe (9600) iron. These will be updated before the end of the first quarter, and as I have complained, they are still i-less. IBM plans to update the CloudBurst cloudy appliances it launched last year before the end of June rolls around as well, and while these machines don’t exclude IBM i, they don’t exactly embrace it, either. In the second half of 2011, IBM plans to put out a “Business Class” version of the System zEnterprise 196 mainframe. And while Adkins did not say this, I am 100 percent certain that IBM will field systems using the “Sandy Bridge” Xeon E3 and E5 and “Westmere-EX” Xeon E7 processors this year from Intel, and very likely systems that use the future “Bulldozer” Opterons from Advanced Micro Devices, too.

Adkins said that IBM is also working on a “flexible form factor for systems” that Adkins did not give any details about. (I thought the iDataPlex machines already did that? I guess not.) I have been saying for years that system boards should be more modular so you can scale up CPUs, memory, and I/O independently of each other instead of selling fixed configurations. Maybe IBM’s engineers finally got the funding to make this happen?

What Adkins was more excited about on Investor Day was, of course, money. Take a gander at this chart that Adkins flashed up on the screen:

IBMers are not just psyched about China, India, and the 18 other “growth market” countries because they are jet-setters. They would no doubt prefer to stay home and play golf or whatever executives of Fortune 500 companies do. But home, meaning North America and Western Europe, is not where the money is. The chip, server, and storage business is clearly important to Big Blue, driving 18 percent of sales in 2010. But as Adkins revealed, STK was 27 percent of IBM’s total sales in the top 20 growth markets on the planet outside of North America, Western Europe, and Japan. STG was a staggering 53 percent of revenues in China. With every dollar in hardware sales driving another dollar of other IBM services and software, according to Adkins, that basically means all of IBM’s business in China is tied to systems. This is what happens in greenfield markets where midrange and big iron systems are being installed for the first time.

In effect, it is 1975 for mainframes and 1990 for midrange gear in these growth markets. And IBM is putting as many feet on the street in these 20 countries as it can to chase these opportunities.

That, in short, is how IBM plans to boost the pre-tax income of Systems and Technology Group to around $2 billion by 2015. STG had $1.3bn in operating income in 2009, by comparison.

All I can say is that I sure hope someone in the Power Systems division is making sure the IBM i platform is getting pitched, particularly with manufacturing, distribution, and financial services companies where the platform has strength. If you own a software suite and you haven’t ported it to the languages spoken in these top 20 markets, what are you waiting for?