More Reader Feedback On Big Blue Gives A Solid Installed Base Number

August 27, 2012 Hey, TPM

Well I, for one, am glad IBM put an actual figure to their active customer base, machines, and/or customers. At least it is 150,000 active paying businesses using the AS/400-i and gives me some credence for continuing to develop on them. I have five AS/400-i’s laying around and too many PCs. None of them are on maintenance, so the active figure maybe a tad low on those with used machines and no maintenance. And yes, I actively use only two of those i machines, and for development only.

–TS

To be precise, and as I said in my previous comment on reader feedback on the 150,000 number that IBM is telling us, that 150,000 refers to the total number of unique customers in the world that Big Blue says have at least one AS/400, iSeries, System i, or Power Systems-IBM i box running somewhere in their organization. That number peaked in 1998 at 275,000, about the same peak as the System/3X machines that predated them and about a decade later, in fact. By the end of 2004, it had fallen to around 220,000 customers, and since that time over the past seven years, we’ve lost 70,000 more.

My guess–and it is just a guess based on past thin data and what I think the effects of data center consolidation in the early 1990s and server consolidation in the wake of logical partitioning virtualization since 1998–is that there are actually only around 35,000 customers with 70,000 machines who are active in the customer base, leaving another 115,000 customers worldwide with maybe 180,000 machines that are not on maintenance. Like your two.

If IBM can’t get you to buy a new Power7 or Power7+ machine, maybe it can sell you some modern capacity on a SmartCloud backed by Power7 iron and running modern releases? At the right price, would you do that?

–TPM

Well, to answer the last question, yes I would, but not at this time.

As far as the rest, I’m a little confused and I’m guessing others may be, too. I assumed that you were addressing the maintenance side of the equation and not disputing IBM’s actual 150,000 number. Further, how can that number be a guess when they know how many active licenses that they sell to an i/400 machine? So I thought your figures were the additional machines that IBM doesn’t know that are still part of the customer base. If you’re saying that you think it’s only 35,000 customers and not 150,000 customers, that’s a huge discrepancy. So it is still unclear and I am still not entirely sure how the 150,000 number can be disputed since they get paid for those licenses.

As an aside from a business perspective, if in fact the number was literally 35,000, I think IBM might just throw in the towel and announce end of life on OS/400/i OS. Why even bother to continue to develop it? That makes no economic sense as a few hundred million in “gross” income for global company like IBM may indeed be a deal breaker.

Thanks.

–TS

Well if there is confusion, then I am glad there is some back and forth here then.

OS/400, i5/OS, and IBM i are sold as perpetual licenses. Once you buy it and you are happy that it is stable, you don’t have to pay IBM another penny if you don’t want to in order to use the machine. You don’t ever have to be in contact with IBM or your reseller again. IBM and resellers know who they sold gear to, but only a fraction of them are on active maintenance where Big Blue can see them. This has always been the case.

The same holds true for the Solaris base, which has 60,000 customers using it in the world and very likely a big percentage of them are not paying Oracle one red cent. They have Solaris, so they are customers, but in my mind they are not active. Any more than customers using Windows 2000 and soon Windows 2003 are active Microsoft customers in the sense I am talking about if they are not paying Big Bill for enterprise support. But, these Solaris and Windows shops are using the platforms just the same and at some point they paid for a perpetual license, just like you did on your PC, even if they aren’t willing to pay for more than that.

Whatever the number of active customers IBM has really is–meaning those on IBM i 6.1 or 7.1 or willing to move there before support runs out on V5R4 in September 2013–the fact remains that IBM still makes a lot of money and profit from putting IBM i on Power Systems, which it creates for AIX anyway. I think it is important to distinguish active customers from total customers. The good news is both numbers are a little bit bigger than I and many others thought.

–TPM

Thanks Tim, and yes agreed you can run forever on the cheap. However, I think that to the extent IBM can clarify that figure by all means pressure them, but for me I would assume that the 150,000 figure is just that, active, meaning they pay some sort of active “i” subscription, service and/or software and that’s the only way IBM could pose a legitimate number.

Further, I cannot see how an active base much smaller than 50,000 and diminishing warrants IBM’s time. It would be nothing more than simply a foot in the door. As it were without actively pursuing i/400 upgrades those customers would be likely to jump if forced, so I’m betting that the synergy between continued upgrades to i/400 cannot be faked, which gives more credence to the 150,000 number. Not to mention the synergy/security the active base feels at a larger size keeping the fires stoked. My guess would be active plus used running core business software is much higher.

Now how active they are in pursuing other vendor alternatives outside of IBM and core ERP may be a point of contention. The reality maybe that third-party vendors see the active “paying” base much smaller in their world causing skewed numbers/analysis. After all IBM isn’t the only vendor that sees large user bases content to run on 10-year-old OSes (a.k.a., Windows 2003 and lord knows how many aged Unixes), all happily not paying a dime.

–TS

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