The IBM i Base Is Ready To Keep Investing In The Future

January 29, 2024 Timothy Prickett Morgan

We are at the beginning of a new year, and of course that means that it was time for us to participate in the annual IBM i Marketplace Survey webinar, which is sponsored by Fortra and which is now in its 10th year. We enjoy the webinar that Forta hosts to have a bunch of people from IBM and myself riff on what the survey results mean – and what they don’t mean.

Our host on the webinar was Tom Huntington, executive vice president of technical solutions at Fortra, and we were joined by Douglas Gibbs and Dan Sundt, who share IBM i product manager roles within the Power Systems organization at IBM, as well as Brandon Pederson, who is worldwide IBM i product marketing manager, and of course Steve Will, who is IBM i chief technology officer and chief architect as well as a distinguished engineer at Big Blue.

If you missed the webinar, you can see the survey results and listen to our commentary here, and if you want to read the written report accompanying the survey results, you can download that there.

As you know well, we like to do a more extended riff on the annual IBM i survey results, and this week I am kicking off our in-depth analysis and commentary with a look at the upgrade plans of those IBM i customers who took the survey last fall and whose answers are averaged together.

If the correlation between past survey results and past sales for Power Systems servers in general and for Power Systems running IBM i are any guide, then it looks like the IBM i market is going to have a pretty good 2024.

Let’s explain by taking a look at the hardware and software upgrade plans for IBM i shops in the past three surveys, whose reports were published in early 2022, 2023, and 2024 forecast what future plans customers had for those years. The survey does not look backwards and ask what customers did, but only looks forward to what they think they will do each year. It would be very useful to know such data, of course, because plans do not always materialize, whether it is a positive or negative course of action. But, we only have the forward looking statements, so that is what we will talk about. We also have our own estimates for Power Systems sales each year, which we can try to correlate with and which we report on elsewhere in this issue of The Four Hundred.

Here are the pie charts for the past three years of forecasts:

Click to enlarge, unless you have much better eyes than I do.

Chart text: Click to enlarge, unless you have much better eyes than I do.

The first thing you will note is that the forecasts change a bit every year, but given that the sample size for poll takers has been roughly around 300 respondents, it is hard to say whether or not this wiggling is statistically significant. Assuming it is not, then they are roughly the same forecasts. Assuming that they are, there is some wiggle in there that might portend a slight decline in Power Systems spending growth – but still plenty of growth.

The forecast for 2022 is more similar to that of 2024 than the forecast for 2023 was. In 2022, 23 percent of those polled said they would be upgrading their IBM i software, and 38 percent said they would be upgrading their Power Systems hardware; 23 percent said they would be upgrading both their IBM i software and their Power Systems hardware.

That 38 percent upgrade rate for hardware is very high, especially when you consider that many customers tell us they keep their Power Systems machinery in the field for five to seven years. That suggests that at any given time in the overall IBM i base, somewhere between 15 percent and 20 percent of customers upgrade their hardware in any given year. That hardware upgrade rate is therefore very high in 2022, and consistent with the past surveys, more or less. This suggests that the customers who take the IBM i Marketplace Survey upgrade more frequently than the IBM i base at large, and that as I have suggested for years, the survey represents the very active and growing part of the IBM i base.

Ditto for the IBM i software upgrade rate, which is a whopping 51 percent of those polled. (Some are only upgrading software and some are upgrading hardware and software.) They almost certainly were talking about doing Technology Refresh updates, not just moving to new releases or versions of the IBM i software platform. So you have to word a question very carefully to get a proper answer. . . . We think TR updates are as important as moving up the release levels for IBM i.

In the 2023 forecast, a stunning 41 percent said they would be upgrading their Power Systems iron, and 25 percent said they would only be upgrading their software and 60 percent said they would be upgrading their IBM i software. Again, these rates are very high.

In the 2024 forecast, the share of survey takers who say they are going to only upgrade their Power Systems hardware is higher than in the 2022 forecast, and nearly double that of that 2023 forecast, and the rate of combined hardware-software upgrades is 3 percent higher, too. But the share upgrading only their IBM i software is smaller than it has been in years. The total hardware upgrade share is 42 percent in the 2024 forecast compared to 41 percent in 2023, and that would seem to suggest that the appetite for more recent Power Systems iron – which can be Power9 or Power10 machinery, or even older, depending on what system customers are on today – is about the same as last year. And we think Power Systems server revenues (including those sold as the foundation of IBM’s storage arrays) rose by 6.5 percent in 2023 to $1.53 billion.

IBM is expecting for Power Systems and System Z upgrades “to wrap” as they often put it, meaning slow down as they are more than halfway through the Power10 and z16 product cycles and now looking ahead to the Power11 and z17 systems due perhaps sometime in the middle of 2025. But remember: Even if overall Power Systems revenues shrink in 2024, that does not mean that sales of Power Systems machinery running IBM i has to shrink. They can go up even if the overall Power Systems market trends down a few points.

The only want to accurately know what is going to happen, of course, is to watch what IBM i, AIX, and Linux customers do as 2024 unfolds. Many, many customers have put off upgrades and others are adding workloads to their machines, so we think there is a prospect for a good year for Power Systems overall.

The important thing is that the survey data is pointing in the right direction, even if it suggests a lot more upgrade activity than can be possible given the rate of upgrades. We think people are a lot more optimistic about changing than who actually get the change done. And we also think that tight and conservative budgets are the main blockade to following through on optimistic plans in many cases.

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