Annex Bulletin 2005-17                      July 26, 2005

Excerpts from Confidential Client Edition

Annex clients click here



Updated 7/26/05, 4:45 PM EDT (adds "Executive Quotes, Photos")

Analysis of IBM’s New “Z9” High End Servers: A $1.2 Billion-Mainframe Bet

Polaris Eclipses T-Rex

New Mainframe, New Strategy – Quantum Leaps from Just Two Years Ago

NEW YORK, July 26 – Just over two years ago, Big Blue took a swipe at its large systems strategy critics who compared mainframes to dinosaurs.  IBM chose an in-your-face code name “T-Rex” for its then new $1 billion-z990 server (after the fearsome 20-foot tall, 15-ton Tyrannosaurus Rex, the “king of dinosaurs”).

Less than a year later, on mainframe’s 40th birthday (Apr 7, 2004), the T-Rex was followed by the “son of T-Rex” - the “z890.”  What ensued was the most successful IBM mainframe sales year in decades (see IBM Servers to Grow Again,” Feb 2005 and “IBM Server Renaissance”, Nov 2004). 

But success can be a pain… next year, when you have to do it all over again, and scale new heights.  As you saw from IBM’s latest report, after rising 45% the year before, mainframe revenues declined 24% in the second quarter as the customers awaited Big Blue’s next “big bang.” 


Why the Polaris code name?

Just like Polaris, the Northern Star that has been used for navigational purposes for centuries because all other stars appear to rotate around it, the new z9 intends to be the guiding light to safe harbors for wayward IT travelers in the 21st century.  As such, it may become the new center of each customer’s IT universe.

That’s because the z9 is a lot more than just a bigger, faster mainframe.  It plays right into the sweet spot of four important industry trends that we identified earlier this year – recentralization, reintegration and virtualization, and corporate customers’ increased anxiety over security, both physical and intellectual (see “Poughkeepsie Springand An iSeries Revival”). 

Strategy Triad

“There are three systems imperatives,” explained Irving Wladawsky-Berger, a veteran IBM vice president who is in charge of innovation at Big Blue, speaking in a pre-announcement briefing.  “Virtualize everything, commit to open and collaborate to innovate.”

He said that the demand for high-end systems has become global in nature.  And that requires that traditional transaction processing be augmented by a collaborative approach that more tightly and securely integrates technology, processes and personnel.


Per Ardua Ad Astra

One of the challenges that IBM and large enterprises face is a relative dearth of mainframe skills. 

“The people who know those disciplines and understand the mainframe structures are in their 50s,” said Kevin Sharkie, Aviva Australia’s CIO (Aviva is the largest insurance and finance company in Britain).  “And that is a problem; that is a global problem.” 

Given the scope of the problem, “per ardua at astra” (“through hardships we reach the stars”), the Royal Air Force motto, aptly applies to this predicament.


New Sources of Demand

And no wonder.  Besides the traditional legacy customers and applications, there is a whole new world of wealth out there waiting to be poured into the mainframe.

Peter Horowitz, for example, a Managing Director with BearingPoint, noted in a June 8 release that China’s banks are poised to potentially become some of the most influential financial institutions in the world over the next 10 years.  But they first need to know their customers and conduct better segmentation of the market.

“In many countries, servicing a client's assets and liabilities, simultaneously, is difficult given the integration needed for legacy systems and platforms.  China is positioned to leapfrog these platforms with an approach taking a complete view of a client's needs from the outset.”



IBM’s new mainframe, the z9, as impressive as it is on a “speeds and feeds” basis, is merely a part of a much bigger picture.  Big Blue is on a quest to redefine the axioms of corporate computing.  Not for the first time.  Not for the last time.  But again for the long haul.

And IBM is putting its money where its mouth is.  Some $1.2 billion went into the latest turn of the wheel of progress - the Polaris eclipsing the T-Rex.  Clearly, IBM believes its 41-year old has a bright future.

Smart money should not bet against Big Blue’s strategy.  We all did it once before when we buried the mainframe in the early 1990s.  And smart people are supposed to learn from history, not repeat it.


"That's all she wrote," we're afraid, for those of you who are NOT Annex Research clients, and who are now reading the complete Annex Bulletin (6 pages in print edition), along with all charts which back up our story.

Qualified media and friends of Annex may request a TEMPORARY User ID and Password by clicking here and explaining why they wish to have access to this particular Annex Bulletin.  Or call Bob Djurdjevic at 602-824-8111 (cell) to promise not to copy it or otherwise republish it.

To find our how you can become one of our clients, and read the rest of this and other Annex Bulletins, click on . Thank you.

Annex clients click here

Happy bargain hunting!

Bob Djurdjevic

For additional Annex Research reports, check out... 

2005 IT:  IBM: Polaris Eclipses T-Rex (July 2005); IBM Bounces Back (July 2005); Accenture: Smashing Records (July 2005); Merrill's New Bull (EDS) (May 2005);  IBM Trumps Trump (May 2005);  Tweaking Big Blue (May 2005); Hurd's First RBI (May 2005); Dell Rings the Bell (May 2005); Stock Buybacks: The Phantom Is Back (May 2005); EDS Misfiring on All Cylinders (May 2005);  HP Surges, Dell Slumps; Lenovo Completes IBM Deal (May 2005);  HP Surges, Dell Slumps; Lenovo Completes IBM Deal (May 2005);  Capgemini Jettisons Healthcare in N.A. (Apr 2005); HP: From India to Poland (Apr 2005); IBM: Slammed and Dunked (Apr 2005); Accenture: Roaring Ahead (Apr 2005);  Fujitsu Unveils New Servers (Mar 2005);  EDS Executive Suite; HP's New CEO (Mar 2005);  An iSeries Revival (Mar 2005); EDS Booster Club Fees Rise (Mar 2005);  An Upside-Down View (Mar 2005);   The Worst of Both Worlds (Mar 2005);   Octathlon 2005: Accenture Wins (Mar 2005);  IBM Global Services: Smaller, Shorter - Better? (Mar 2005);  IBM 5-yr Forecast: Quality over Quantity (Mar 2005); Rumor Lifts EDS', Fujitsu's Shares (Mar 2005); Capgemini: Turning the Corner (Feb 2005);  IBM Servers to Grow Again (Feb 2005);  Carly's Fickle Fans (Feb 2005);  CSC: Gearing Down on Purpose (Feb 2005);  EDS: Grossly Overpriced Stock (Feb 2005);  IBM Historical Update: 2004 Shot in the Arm (Feb 2005); New HeadTurners Series #1 (Feb 2005); IBM: A Crescendo Finale! (Jan 2005); Accenture: Strong Finish, Better Start (Jan 2005); Annex Coverage 2004: IT Services Dominate (Jan 2005)

2004 IT: EDS: The Titanium Stock (and other Wall Street tales) (Dec 2004); IBM PC: Good Riddance (Dec 2004); Fujitsu: Recovery Continues (Nov 2004);  IBM Server Renaissance (Nov 2004);  HP Hits Home Run (Nov 2004); Capgemini: Revenue, Stock Soars (Nov 2004); EDS: Jordan's Swan Song? (Nov 2004);  To Russia with Love and $ (Oct 2004); IBM: Slow Quarter No Longer (Oct 2004); Accenture: Revenues, Profits Up, Stock Down (Oct 2004); Capgemini: A Takeover Target? (Oct 2004); Sellout of America (Oct 2004); Spy Wars (Sep 2004); Outsourcing Boomerang (Sep 2004); EDS to Cut Up to 20,000 More Jobs (Sep 2004); Capgemini Stock Plummets on Unexpected Loss (Sep 2004); HP Savaged by Wall Street (Aug 2004); Moody's Lowers the Boon on EDS (July 2004); HP: Delivering Value Horizontally (June 2004); Accenture: Revving Up a Notch (June 2004); Beware Your CFO! (May 2004)IBM: Changing of the Guard (May 2004); Capgemini: Texas-size Home Run (May 2004); Following the Money (May 2004);  EDS: On a Wink and a Prayer (Apr 2004); HPS Wins by a Nose! (Octathlon 2004); Accenture: Burning the Track (Mar 2004);  IGS: "Crown Jewel" Restored? (Mar 2004); HP: Still No Cigar (Feb 2004); Cap Gemini: Another, Smaller Loss (Feb 2004); CSC: Good Quarter Gets Boos (Feb 2004); EDS: "Hot Air Jordan" Flaunts Flop as Feat (Feb 2004); IT Industry: Whither Goeth It? (Jan 2004); Cronyism Is Alive and Well at EDS" (Jan 2004)

Or just click on and use appropriate  keywords.

Volume XXI, Annex Bulletin 2005-17
July 26, 2005

Bob Djurdjevic, Editor
(c) Copyright 2005 by Annex Research, Inc. All rights reserved.

4440 E Camelback Rd #29, Phoenix, Arizona 85018
TEL/FAX: (602) 824-8111

The copyright-protected information contained in the ANNEX BULLETINS and ANNEX NEWSFLASHES is part of the Comprehensive Market Service (CMS).  It is intended for the exclusive use by those who have contracted for the entire CMS service.

Home | Headlines | Annex Bulletins | Index 2005 | About Founder | SearchFeedbackClips | Activism | Client quotes | Workshop | Columns | Subscribe