What IBM i Shops Are Thinking About Right Now

October 30, 2023 Ron Venzin

If you listen to the national and global media, it is hard to figure out what is really going on in the world at the strategic and tactical levels of individual companies. The global happenings are like climate trends, but each company generates its own weather and reacts to the weather generated by the customers and competitors in its own market. Or markets, as the case may be.

Because we all live in the weather as we are trying to keep an eye on the climate – people really do talk about the economic climate but no one talks about the more immediate business weather – we have to remind ourselves not too worry too much about what the Wall Street Journal, or Bloomberg, or The Economist say about the long-term trends because business conditions can change, for the better and sometimes for the worse, very quickly. But business, in the aggregate that makes up an economy, never goes to zero. It is important to realize this.

So we spend a lot of time listening to our existing IBM i customers and we spend a lot of time getting more IBM i customers so we can listen to them. And over time, this has increased the statistical significance and relevance of what we are doing and we can have an increasingly better sense of what is going on in our economy, which is inextricably linked to your economies.

And so for this column, we thought we would share the observations we have gleaned from our customers as we have all kinds of uncertainty in politics and economics around the world.

I travel a lot to meet with customers, and I am always asking the same questions: “What do you see? What do you think?” I haven’t seen anyone say that they are destroying their IT budgets, or that they are even cutting their budgets, because of the economy. I don’t see anybody thinking that the economy is going to tank. And, admittedly, it could be we could all be dead wrong, but in a very real sense an economy is a self-fulfilling prophecy. If you think it is bad, then your knee-jerk reactions can make it proportionally worse. It takes a lot of knee-jerking business weather to have an effect on the economic climate, mind you, but it does happen. Sometimes intentionally, as when central banks raise interest rates. But then again, sometimes the job market is so strong that inflation can defy the gravity.

What I am seeing among the IBM i shops I talk to is cautious, but not great, optimism. Most of the people I talk to believe their business is going to continue to grow in 2024, but at a slower pace than it has in recent years. But they don’t see a decline in business. This should be a comfort to us all.

I think there’s going to be greater opportunity out there for us in IBM i Land. For instance, people don’t understand their spending in the public cloud, or don’t know how to control it. In our Power Systems world, everyone knows backups. Everyone knows high availability. Everyone knows disaster recovery. And now these IT shops are looking around and worrying about how their applications and data on Amazon Web Services or Microsoft Azure or Google Cloud are being backed up. A lot of people were just doing snapshots. Well, those snapshots start adding up. So we are looking at how to help these customers with managed services for backup and high availability, security and updates, and monitoring in the public cloud like we offer for on premises and cloud instances of Power Systems.

Based on what I am hearing, I also think that there is going to be more consolidation in the IBM i industry. And there will be two kinds. The first is that more and more IBM i customers are going to move to hosting or cloud for their compute and storage, which is going to consolidate a lot of customer footprints into fewer physical facilities and on shared capacity systems at various kinds of service providers. The second kind of consolidation will be consolidation of business partners in the IBM i community, which has obviously had a dramatic effect on that community as conglomerates have evolved with ever-widening portfolios of software and services. There is still cash available for those who can find private equity backers, but consolidation is not going to happen because companies merge. If company founders who have worked for three or four or five decades are nearing retirement, they are going to want to cash out, and it is very hard for IBM i businesses to raise the capital they would need – on their own – to do acquisitions. And even those who could get some cash to do a deal a few years ago will find the higher interest rates limit how much money they can borrow to do an acquisition.

Those of us who can make acquisitions are positioning ourselves to be helpful if the economy grows a little or slides a little. If it grows, we still think that IBM i shops are going to increasingly rely on managed services for programming, system monitoring and management, or cloud or hosting capacity because of the retiring of so many IBM i professionals in the coming years. And if the economy shrinks, then we will be able to demonstrate how we can help companies save money by offloading this work to us.

Either way, everybody wins. That is the kind of scenario we love.

Looking ahead, we also think that IBM will increase prices in 2024. Everyone has heard the rumors, and we think there could be price hikes on hardware, systems software, and support. Where there is smoke, there is fire, and we have seen a lot of smoke on this issue. And it makes sense, and frankly, we are surprised that IBM has not raised prices already in the Power Systems line.

We are not, however, going to raise our managed services or cloud prices in 2024. We have got to keep some sanity in this world. We want to help our customers, what I don’t want to be doing is making it so that it’s even more difficult to do that with higher prices.

Ron Venzin is chief executive officer at Focal Point Solutions Group.

This content was sponsored by Focal Point Solutions Group.

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