IBM i Shops Walking A Flatter Upgrade Path In 2020?

January 20, 2020 Timothy Prickett Morgan

In general, there is a rough correlation between growth in online transaction processing workloads and related enterprise applications, and the growth in the overall economy. At some point in the past, when OLTP was relatively new and many companies were still doing batch processing, OLTP workloads grew many times faster than gross domestic product – much as many data analytics, storage, and machine learning workloads are doing today.

So when we see that IBM i shops are looking to upgrade in 2020 at a much higher level than we would expect based on historical and anecdotal trends, it gets our attention.

As you know, the sixth annual IBM i Marketplace Survey report was released by HelpSystems last week, and I participated in the webcast going over the survey results along with people from HelpSystems and IBM, as I have done for the past several years. Tom Huntington, the executive vice president of technical solutions at HelpSystems, hosted the webinar last Thursday, and we were joined by Alison Butterill, IBM i product offering manager, Ian Jarman, who had that job before and is now an executive in the IBM Lab Services division, and Brandon Pederson, who is worldwide IBM i product marketing manager. You can get a copy of the survey report and also listen to a replay of the webcast at this link. We will be interpreting the report results in a series of stories over the next several weeks, and we want to start with the plans that people have to upgrade their hardware and software in 2020.

Over 500 people took part in the survey behind this report, which is a pretty decent number for any IT survey, and we all thank you for doing that because it is only by finding out what customers are up to and what is important to them that we can steer into the future effectively.

There is a big difference between intent and action, and I always have to remind myself when looking at any survey that has participants looking ahead to the future. I have intended to have a hot tub of my own for at least as long as the System/38 has been in the market – I was 16 at the time and my best friend’s parents had one – but I have yet to actually get around to it because other things keep coming up that take my money. But if you ask me, to this day, the one thing I would splurge on, all that time, you would have gotten the same answer, even when I lived in New York City. I was always thinking about how I might get this done, either on the back deck of the apartment building or on the roof or even one of those Japanese tubs with the tall doors on them. Now that I live in the country, I want to revert to the giant mahogany wine barrel of my youth – well, my friend’s youth that I got to borrow occasionally – converted to a hot tub and on a deck out under the stars. We used it even when it snowed, which was particularly fun because of the incongruity of it all. Who knows? Maybe this is the year my bones will finally get boiled regularly. I certainly need it more now than I did then.

The question about upgrade plans has only been in the IBM i Marketplace Survey for the past two years, so we don’t have a lot of historical data to correlate upgrade intent with upgrade action. But over time we should see a trend. Here is what respondents said when asked about their 2019 upgrade plans in the fall of 2018:

We are interested in the hardware upgrade portion of this because that actually drives revenues for IBM and its channel partners in a way that software upgrades do not. (We will talk about software releases in a separate story.) As you can see, 11 percent of those responding to the survey in late 2018 looking ahead to 2019 said that they were going to upgrade their Power hardware, and another 31 percent said that they were going to upgrade their Power iron as well as the systems software, for a total of 46 percent – or nearly half the base – saying that they would upgrade.

Here is what the forecast for upgrades looks like based on the 2019 survey for the 2020 report just released and the 2020 year:

The appetite for iron is a bit more subdued, with only 7 percent saying they were planning to upgrade their hardware and only 28 percent saying they would upgrade both hardware and software. Interestingly, nearly 10 percent more of respondents expect to upgrade just their software this year, which suggests a few things. It does indeed suggest that the appetite for hardware might have been better in 2019 than it will be in 2020, and considering that 2019 was a growth year for the IBM i portion of Power Systems, then we have something to reckon against very roughly. It also suggests that among those customers who upgraded hardware last year or even the year before to a Power8 or Power9 machine, maybe they are going to upgrade their software. Plenty of customers skip every other release and use the Technology Refreshes to keep current with both security patches and functionality patches. (This happens with other operating systems, too.)

It also suggests we have to think pretty carefully about what the word “upgrade” means when we talk about hardware. Most of us probably hear “get a new system” when we hear the word upgrade in the context of the IBM i platform, and that is because most of the machines that are used by most of the base do not have upgrades – meaning a change in processor and sometimes memory technology that allows the preservation of the serial number on the box. But there are other kinds of upgrades, such as activating latent cores on a machine, if it is a midrange or high-end box with capacity on demand cores, or it may mean adding a second processor card or firing up IBM i on one or two more cores on a machines that has multiple cores on it.

But remember what I said about intent and action. I think a lot more people intend to upgrade than actually get around to doing it. As far as I can tell, most IBM i shops have their machines for quite a long time – four, five, six, and sometimes seven years – and that means hardware upgrades should be happening somewhere between 14 and 25 percent of the time across the base. Assuming an “upgrade” usually means a serial number swap. But if you add in COD and other changes to the processor, then maybe you could get a baseline 20 percent doing serial number swaps and another 10 percent doing other kinds of hardware performance increases to reach maybe 30 percent. We are just guessing, but we think there is still a gap between intent and action.

But intent is still, we think, a leading indicator for action, so it is useful. Looking ahead to 2020, if this is true, then this coming year is going to be a relatively lean one for Power hardware running IBM i – and this stands to reason because we are at least a year away from the launch of the Power10 processor and the initial Power9 bump is over. We will know more when IBM announces its financial results for the fourth quarter of 2019 later this week.

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