Over the last year, sales of IBM’s iSeries have improved significantly from the historically low levels that they reached during 2002. What makes this improvement interesting is a shift in the iSeries models that customers are purchasing and the workloads those servers are supporting.
Recently, I reviewed several IBM presentations on its server sales in general and iSeries sales in particular. Those presentations admit that while 2002 was one of the worst years on record for server sales, spending has stabilized over the course of 2003 and is even experiencing a modest recovery. As part of that recovery, iSeries sales have improved in every quarter of this year. To be specific, sales grew at a breathtaking 22% rate during the first quarter (largely due to the announcement of new models in January), 6% during the second quarter, and 5% during the third quarter. Overall, iSeries revenues during the first three quarters of 2003 are up 10% from the first three quarters of 2002. In addition, the number of iSeries servers sold during the first three quarters has increased by 12% over the same period a year ago.
Let’s Do the Numbers
While these growth figures are encouraging, they cannot erase the fact that current sales levels for the iSeries are lower than they were in the years prior to 2002. When I started analyzing IBM’s financial reports back in the mid-1990s, it was common for the computer giant to sell $3.5 to $4 billion of AS/400 hardware on an annual basis. (Since IBM does not provide revenue figures for its product lines, these and all other revenue figures are estimates that I have developed with help from financial analysts.) By 2001, that figure declined to $2.2 billion. Then, in 2002, iSeries sales plunged more than 22% to $1.7 billion. This rate of decline was significantly greater than that of the overall server market, which according to International Data Corporation (IDC) fell by 11.6% during the same period.
This information helps us to put current iSeries sales in context. While the 10% growth rate of the last three quarters is a welcome change, it does not return iSeries revenues to their 2001 levels, much less the levels of previous years. On the other hand, the iSeries is growing faster in 2003 than the overall server market, which IDC predicts will experience flat growth for the year. When seen in that light, the iSeries is staging a significant comeback. While its growth rate trails that for Intel servers, it is exceptionally strong for a non-Intel system.
As iSeries revenues have grown this year, buying patterns have emerged that signal a shift in the ways that customers are using the server. Here are some facts about iSeries sales from IBM that make these changes crystal clear.
- While unit sales of iSeries servers have grown by 12% over the last three quarters, growth has varied widely by model. While unit sales of entry-level and low-end servers have grown at rates in the low single digits, unit sales of high-end models have grown at rates that are more than an order of magnitude higher.
- In addition, IBM is reporting that the number of iSeries CPWs shipped during 2003 have increased by more than 40% over the last year.
- During 2003, 55% of all i825s and 74% of all i870 and i890 models shipped with support for logical partitions (LPARs).
- During the third quarter of this year, shipments of Integrated xSeries Adapters and Integrated xSeries Servers rose by more than 130% over the same quarter last year. Currently, one out of every three iSeries servers ships with IXA or IXS cards.
These figures indicate that the lion’s share of the growth in iSeries sales is coming from larger models. These servers are substantially more powerful than the models they replace, and they are arriving at customer sites with LPARs enabled. This all adds up to one thing: today’s customers are buying large iSeries models to consolidate multiple workloads. While the vast majority of those workloads are probably migrating from AS/400s, smaller but significant numbers are moving off Unix and Intel servers to an iSeries Linux partition or an IXA/IXS card. In addition, some customers are undoubtedly deploying new applications, though I bet that many of them are meant to Web-enable existing iSeries solutions.
What do all of these figures add up to? As I see it, they depict a server that will continue to rake in steady if unspectacular sales for years to come. For iSeries customers, the server will increasingly represent an extremely reliable platform to run their existing mission-critical workloads at utilization rates that are much higher than those for Intel servers. Most of these workloads already run on an AS/400 or iSeries, though a few will come from Unix and Intel systems. Migrations from Unix systems will likely increase next year when the iSeries gains support for the AIX operating system.
In short, the iSeries is rapidly becoming a mainframe for mid-sized companies. Like IBM’s larger zSeries, the iSeries adroitly manages multiple workloads and operating systems. While many customers consider it too expensive for non-critical applications, they trust it with their back-end systems and have no plans to migrate those systems elsewhere. And just as zSeries customers consolidated their mainframes in the 1990s to keep costs in line, iSeries customers are consolidating their AS/400s in the 2000s for the same reason.
I fully recognize that equating the iSeries with mainframes will not appeal to many iSeries customers. However, I would remind those customers that for two decades, mainframes have defied the critics who have predicted their imminent demise. In like manner, I expect that while the iSeries will never be the platform for new applications that it was in the late 1980s and early 1990s, it will remain a cornerstone of IT infrastructures for years to come.
Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology. You can reach him at
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