Q&A With Doug Balog, Power Systems GM

October 7, 2013 Timothy Prickett Morgan

Doug Balog took over as general manager of the Power Systems division this past summer after having run IBM‘s System z mainframe business for a little more than a year. Balog has been in charge of development for the System x, BladeCenter, and TotalStorage disk arrays before that, and in fact he cut his teeth at Big Blue three decades ago working on chips for the System/390 mainframes and eventually was put in charge of OS/390 systems software development as the 1990s came to a close.

To say that Balog has a good feel for what goes into a system, from both a hardware and software perspective, is an understatement.

New Power Systems GM Doug Balog.

Balog takes the helm of the Power Systems business at a time when Big Blue is obviously happy to have gained a dominant position in the RISC/Unix market, selling more systems than Hewlett-Packard and Oracle combined. When Balog was managing code development for mainframe systems, Sun Microsystems, which has been part of Oracle for three years now, and Hewlett-Packard were the dominant systems suppliers in the Unix space, and when Unix dominated the market in terms of revenues. The world has changed. Back in 1999, Unix was a $25 billion business, making up a little less than half of the $57 billion in system sales worldwide. (That’s IDC data.) Server revenues were only $51.3 billion in 2012, even though volumes are way up, and Unix systems was just under $9 billion in revenues. IBM has a bigger piece of a smaller pie, and while it has held ground, it needs for Power Systems revenue and profits to grow, considering the many billions of dollars in investments it makes in chip factories, system manufacturing, and systems software.

These days, the IBM i business is considerably smaller, too, but there are still in excess of 150,000 customers using the platform, which shares the same iron with AIX and Linux. Sharing the hardware platform means sharing the costs, and it also means that IBM i has a longer future lifespan than it would have had it been standing alone.

So how is the Power Systems platform doing? What is in store for IBM i shops? Balog graciously took some time out of his schedule to talk to The Four Hundred about what is going on in the market and dropped some hints about upcoming announcements.

Timothy Prickett Morgan: I would love to know how the various operating system platforms are doing on top of the Power Systems platforms. We get a good feel from IDC and Gartner about how the AIX portion of the business is doing, but we get no idea at all about how IBM i and Linux are doing. Can you shed some light on this?

Doug Balog: The timing for that question is great. I was just up in Rochester last week at the Large User Group, so I had a chance to sit down with roughly a hundred of our top IBM i customers. As you likely know, they are as passionate as ever about the platform, which as the general manager of the platform is fantastic. You just can’t ask for anything better than that.

I had a chance to share with them the overall adjustments in our Power strategy, and I will tell you that in general, they were very receptive to it. First of all, what they see us doing is really committing to the Power business on a long-term basis. Not that they doubted it, but it is always good to hear from senior leaders in IBM that Power is an important platform. Our commitment to Power is strong, and we have recently made some financial commitments around Linux.

But more importantly, in addition to advancements in IBM i, we have a commitment to bring Linux innovation to the platform in a very serious way. They all got the point, and they see it in their own shops. New applications are being written on Linux and OpenStack, and without the Power platform being a first-class player there, winning new workloads is a struggle for them. So the option of running IBM i processes that are at the core of their businesses on the same platform that they would run Linux workloads that are perhaps enabling apps for mobile clients, providing social data feeds, taking advantage of analytics.

All of these things are good for the platform, and if it is good for the platform, then all boats float. That was my message to them.

Regarding the business, the IBM i platform continues to be a very stable business. We are celebrating our 25 years of i, and that is quite an achievement when change is coming at everyone faster and faster.

I made the joke at the LUG, and I don’t know if it landed well, that I was upgrading from having a close relationship with a 50-year-old to hanging out with a bunch of 25-year-olds. But the IBM i platform is still 25 years young.

TPM: Is there actually growth? Are you seeing an increase in shipments? Are the new Power7+ machines helping?

Doug Balog: We saw pretty solid performance of IBM i in the past two quarters, and it continues to be a loyal and very stable part of our business. We definitely saw in the first quarter an improvement in the software side of the IBM i business. I would say for the first half of the year it was pretty stable.

TPM: We have been able to mix workloads on Power Systems for a long time, but I never really saw AIX and Linux take off in IBM i shops.

Doug Balog: If you look across the spectrum, whether it is AIX or IBM i clients, I think that in the past one could argue that our efforts around Linux were interesting, but they viewed it as a hobby by us.

And what we have tried to do recently is clarify our strategy and make some significant investments around KVM and OpenStack. We have added a Linux porting center in Beijing, and they have grown beyond that to New York and Austin and now Montpelier in France. We will continue to expand those porting centers, and I think Japan is pointing out that they’d like one, too.

We have obviously made some very big commitments around OpenPower with the consortium that includes Google, Nvidia, Mellanox Technologies, and Tyan as the first founding members of this consortium. We are in the process of creating the governance model for the consortium, but we already have 40 other partners–some who are clients, some who are vendors–who want to participate in OpenPower.

And of course, more recently, we made our announcement of a $1 billion commitment to Linux on Power. We want Power to be a very serious player with Linux.

So, to answer your question, I expect for Linux on Power to be a significant part of our growth going forward.

TPM: Can Linux get as big of a slice of the Power business as it has in the server market at large? Linux is now north of 20 percent of revenues and heading toward 25 percent, compared to around 16 or 17 percent for Unix and just under 50 percent for Windows. For all I know, Linux on Power is already there.

Doug Balog: It is pretty small–it is in the single digits. If you look at our mainframe business, we have done a lot since we announced Linux on the mainframe nearly 15 years ago. Linux has been a growing part of the mainframe business, and in the past three consecutive quarters, the specialty engines, with Linux being a big part of that, have had more MIPS shipped than traditional MIPS. The Integrated Facility for Linux is, in fact, driving relevance and growth.

My goal is to have the same kind of trajectory on Linux on Power. We announced last quarter the notion of Power IFLs, and here in early October we will be officially announcing them. The ability to have that sort of fencing from a pricing standpoint and having the platform co-existence of Linux plus IBM i or Linux plus AIX has been a missed opportunity that we are going to rapidly jump into on our high-end Power Systems footprints.

The client reaction to this statement of direction has been very well received. Our existing Power clients are now seeing us bring innovation to the systems as well as making a commitment to the roadmap going forward.