Some Insight Into The IBM i On Power Systems Base

December 3, 2018 Timothy Prickett Morgan

IBM is pretty secretive about its systems business, but is really no worse than its peers in this regard. Big Blue wants to get enough information out there to keep customers comfortable about the future, keep Wall Street happy about its revenues and prospects for the immediate future (meaning one to three quarters out), and keep its competitors from getting too much insight into how it is doing in the systems racket.

Every now and then, we get some insight into how the Power Systems business is doing, and as part of a discussion we had recently about upgrade and migration strategies to Power9 machines with Steve Sibley, vice president and offering manager of Cognitive Systems at IBM, we got a better feel for what is going on. Here is a snippet of that conversation that refers to what is going on in the IBM i base at the moment.

Timothy Prickett Morgan: It has been a long time since the pyramid of the IBM i base was tall, with a lot of customers across all the different kinds of machines as happened back int the AS/400 days. There are some pretty big IBM i shops, to be sure, but there are many, many more customers who are running applications on fairly modest machines with one, two, maybe sometimes three or four cores – that’s cores, not processors – for their main databases and the applications that ride on them

Steve Sibley: As you point out, most of our IBM i clients are in the P20 software tier and below, and that generally means a Power S924 and below in the current Power9 line, particularly with the performance of the Power S924 getting up into the 390,000 CPW range. I just talked to a client who looks it is going to move from a single node Power 770 down to a Power S924.

TPM: So what does the IBM i installed base look like right now? My understanding and my expectation is that there’s still Power5 and Power5+ machines, fewer Power6 and Power6+ machines, a fair amount of Power7 and Power7+ machines, and a fair amount of Power8 machines in the installed base. I don’t know what the distribution looks like across all Power Systems, but I’m talking about only IBM i systems here. Obviously, the older the machines, the better the deal to move on up to Power9 looks.

Steve Sibley: So, you understand this really well. We have made good progress moving more people off of Power5 systems. We know we had hundreds of thousands of clients on these machines back in the day. We really see a couple different trends. One is many of those clients are starting to move to the many managed service providers and hosters that we are enabling. This is happening to the market as a whole, and this is not just an IBM i trend, but small or medium businesses of all kinds are looking at a cloud or hosted environment. And so we’re seeing really good growth out of our hosting partners in that segment of the market.

Then there is the migration piece of this. The customers with entry Power Systems need one or two cores, and the economic equation really comes down to the price of the server. We have the Power 812 which is still in the market, and we have the Power 914. Both get down in that $10,000 range for the base server. But the economic payback is not quite as compelling with entry machines as it is for customers with bigger systems that are moving to new machines while at the same time reducing the number of cores they deploy. If you are moving to brand new technology like Power9 and you still need only a core, then your maintenance charges do not change a lot. So it comes down to a matter of staying current on the technology and encouraging customers to move off those old systems.

As you know, we have withdrawn support for Power5, Power6, and Power7 machines. The Power6 withdrawal is effective at the end of March of next year, and the Power withdrawal is effective at the end of September of next year. The Power5 withdrawal was announced before we got more systematic with our Global Technology Services team, and so that has different dates for different geographies. We’ve gotten a lot more systematic about withdrawals now. With Power6 and Power7, the withdrawal is one date for each of those different systems for all of the different geographies around the world. And not only that, we just announced in the marketing on the scale-out Power8 systems earlier this quarter, which will happen in the first quarter next year, and we announced the intention the end of services to be five years from that date as well. So we’re really trying to be you know more predictive and give our customers the ability to plan better. We have a nine- to 10-year lifecycle of any technology going forward. We will then sell those boxes maybe for four or five years, depending on when the next Power technology comes out. We will continue to do upgrades to those systems and support them for another five to six years and then they will withdraw them from service.

I was with a very large banking client who is retiring its last Power4 system this year, and we were joking with them a bit saying that they could keep that system until 2020 and it could vote. We’re trying to get people out of the mode of keeping systems longer than 10 years because it actually doesn’t make sense to hang on that long. You are paying for more than the box is worth.

TPM: I can’t tell you how many times I’ve been involved in conversations with lessors who invested in doing the leases for AS/400 and then Power Systems machines. I would get on the phone with the customer and tell them all the economic reasons why they should unplug that damn thing now. And they would tell me that they were paying $10,000 a month, and they didn’t care because the system just works.

Steve Sibley: This large bank we visited in Sweden last week, and its VP of IT actually came to us a year ago and we were already in process of rolling out some of these changes to withdrawals from marketing and support, and he told us that we have to be more systematic to force him to take action because if he can’t tell his teams and his lines of businesses they have to get off an old machine, they never will.

This is starting to be a factor, and we have seen good progress and in fact we’ve seen a really good uptake with Power9, and specifically in that IBM i segment of our business. We have seen good growth over the last few quarters in our IBM i business. Our customers aren’t leaving us. They’re just continuing to expand what they do into new workloads and new capabilities so that that part of our business will continue to be extraordinarily stable. And as we bring out new technology, we will see a bump in growth. You know those customers just you know continue to love the platform. They’ve started to put to open source software on top of it. They’re expanding it into analytics.

TPM: Is there a pattern to this? Do the smaller customers want to hang on longer, with the bigger shops with bigger enterprise-class boxes skipping every other generation or moving every third generation? Is there a pattern at all to these things?

Steve Sibley: There’s certainly a general pattern right and that is we do get a burst of small customers who upgrade with new technology. But it is the small guys do tend to hang on longer as you just described. The very large guys will upgrade you know what I would call now every generation. When we used to come out with Power+ boxes it was every other generation. But you know we are already talking to customers who are on Power8 and moving to Power9. And they often skip OS levels on IBM i. In fact, our Large User Group actually did a survey and the vast majority – 60 percent to 70 percent – were skipping OS levels as they stay current on hardware. They are starting to look at Power8 to Power9 now that we don’t have plus models anymore. We have implemented an N-1 strategy for things like serial number upgrades or enterprise pools capability things like that. So you know we are certainly encouraging customers you know you should have these boxes three to four years. That’s what most people find when they do leases anyway and then you should be looking to upgrade to the latest technology if your you know in that that area. From the low end you might stretch it out to five or six years because you’re not going to do a serial number upgrade anyway. That’s kind of what we see trend wise.

TPM: Do the big guys tend to lease their systems more than buy?

Steve Sibley: It varies a little bit by segment, but yes they do, but it also depends on geographies. In North America, we probably have about half of our systems on lease at the high end.

TPM: Is the tendency to lease lower at the low end of the IBM i on Power Systems line?

Steve Sibley: Yes, and part of that is a cultural statement and how companies think about leasing and how they treat it. So it is lower rate for leasing in the other geos outside of the United States. In Europe and the major Asia/pacific countries, I don’t know the exact numbers but it is probably 20 percent to 30 percent of customers.

Now with the Power E980, we had a really good start even though we only had nine days of availability of the Power E980 in the third quarter. We just went general availability on the four-node, fully loaded Power E980 three weeks ago, and now all of the configurations are now available.

TPM: Do you have customers who push all the way to the top of the Power9 line?

Steve Sibley: We have customers that are, but it will be interesting now with Power9 and the performance we have there in each core and socket. We have customers that certainly leverage our biggest systems with the most nodes. They are likely running multiple partitions on those systems as opposed to one single 192-core IBM i partition. You know we would be doing some very detailed performance you know optimization for customers of that size. We do have AIX customers that do that. No it’s not a lot. It is probably a couple handfuls that have a partition of that size. So most of these systems are running with multiple partitions on a single system. But it could be that a customer the other day that is running an IBM i right alongside SAP HANA, right, so they are running SAP on i and they are migrating their Business Warehouse initially to HANA and they’ll be looking at S/4 in the future but that they can run those on the same system side by side. Is it the best resource utilization in their environment which you can’t do on any other platform with them with SAP HANA.

TPM: How many customers are in this enterprise class – is it thousands or tens of thousands that have, let’s say Power 595 and above that? Throw them all in there.

Steve Sibley: Let’s talk about Power 770 and above. We have over a thousand systems running IBM i in this class.

TPM: And then how many of these machines with AIX and Linux, what does that part of the enterprise-class Power Systems base look like?

Steve Sibley: With SAP HANA in-memory databases, there are lots of Linux shops on Power Systems. We have 1,500 SAP HANA customers and the vast majority of those are on Power Systems running Linux, with Power E850s and above. And for AIX in general, the number of systems in this class, with Power 750s and above, is in the tens of thousands.

TPM: What happens when customers with big Power Systems machines have enterprise software from Oracle and others running on these machines and they want to you know reduce sockets, which means reducing cores, which they can do because each core is so much more powerful? Do they get stuck in the licensing trap where they end up paying for software at a higher software tier even with fewer cores?

Steve Sibley: In this particular case, they are in the same IBM i software tier. If you take Oracle, many of enterprise customers are starting to move to user-based or storage-based pricing, depending on what kind of technology they have What I see with customers is they either continue to bank those extra cores for future growth on Oracle so that they don’t have to go back and renegotiate. They can apply the capacity to other applications. They may end up paying less in licensing.

TPM: That works on the database and the applications, and they do per-user on the software so it doesn’t really affect them. They get more performance, but they are paying per user, so it doesn’t affect their licensing. So we should probably go back to that but I could only encourage people that they should shift to user base pricing whenever they can because now they will be free of that.

Steve Sibley: This should give them much more capability to do that. The opportunities are there for customers to push on their vendors a little bit on their price and save some money.

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