Clouds Hang Over IBM's Mainframe Future

Last Updated Jul 20, 2010 6:13 PM EDT

When IBM (IBM) announced its second quarter earnings, revenue was up only 2 percent -- not what analysts had expected. One of the business lines that took a beating was mainframe sales. The reason is that IBM's strategy to keep milking the old line of big iron is to position the massive computers as enterprise servers that are also perfect for corporations to use for internal clouds. The only problem is that IBM's pitch is 180 degrees opposite from where corporate computing is going and what could work best for clouds.

You can see the tensions within IBM by the results of its server sales. Revenue for System X servers, based on Intel x86 CPU architecture, was up by 30 percent, year-over-year. The Power Systems line, running Unix on IBM-proprietary microprocessors, were down 10 percent in revenue. System z mainframe products? Down 24 percent in revenue. It wasn't just revenue. The total System z computing power, measured in millions of instructions per second, that IBM shipped was down 14 percent year-over-year. Corporations are buying less mainframe capacity. IBM clearly has charged significantly less to close the deals that it did get, because the revenue had dropped significantly faster than the computing power.

IBM has tried to position mainframes as cloud servers. There's just one problem with that approach: It's so much spin that I'm surprised company executives don't lean when they stand.

One of the basic concepts of cloud computing -- of computer virtualization, for that matter -- is the ability to scale capacity as needed, and to better match total capacity to the work being done. Corporations want to drive up the percentage of infrastructure capacity being used at any one time. If a company finds that business needs drop during the day, it can always consolidate work on fewer servers and temporarily shut down the unnecessary systems. Try doing that when you've got multiple servers effectively thrown into one mainframe, which is either on or off. Similarly, if a company needed to expand capacity beyond its current capabilities, it could add servers as necessary. With mainframes, it's like ordering a Happy Meal when you only wanted a few french fries.

IBM will have less and less call for mainframes, and fewer plausible arguments as to why a customer might need them. Expect that 24 percent figure to keep trailing down, because corporations have neither the budgets nor the inclination to subsidize what should be a company's exhausted product line.

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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.