Reports of the death of the mainframe have long been exaggerated. Most business data is stored on mainframes and a new breed of mainframe running on Linux is becoming popular.
However, in a series of surveys users have claimed that mainframe licensing costs are too high and the software too expensive.
Users of older mainframes are "locked in" to the machines, because years of investment in the technology means an upgrade would be prohibitively expensive and risky to the business. Another option is to outsource the running of a mainframe to a supplier.
IBM is encouraging users to buy mainframes running on Linux by offering discounts for its newer models, such as the eServer zSeries 990, launched in May 2003.
For example, earlier this month, German national rail company Deutsche Bahn announced it was migrating to Linux-based mainframes to run its critical business applications. Deutsche Bahn moved 55,000 Lotus Notes users to an IBM eServer zSeries 990 mainframe running Novell's SuSE Linux Enterprise Server 8. It plans to migrate other enterprise-wide applications, such as SAP systems, from Unix onto the Linux mainframe by the end of the year.
Last December, Dundee City Council replaced 11 servers with one IBM zSeries 800 mainframe running SuSE Linux on 25 virtual servers to run council systems including payroll, housing, social services and web services.
The new type of mainframe dates back to 2002 when IBM invested £529m in its family of zSeries mainframes, revamping the line with the zSeries 800. IBM slashed its pricing by almost 90%, driving it into the mainstream and enabling it to compete with Sun, Hewlett-Packard and Compaq.
IBM's z800 provided an upgrade path to the z900, with a Linux-only model driving down costs even further.
IBM has increasingly adopted Linux in its products, reducing mainframe costs. As a result, industry insiders said the z800 was the most important announcement the firm had made in the past 30 years.
However, there are signs that mainframes have had their heyday and are now on the decline, mainly because of the high costs of third-party application licences, maintenance and support.
A survey of IT directors , commissioned by software firm Macro 4 found that 44% were unhappy with mainframe costs, which they thought were high and unpredictable.
The survey, carried out last year, found that the problem was most severe in the retail and logistics sectors. David Chalmers, product strategy director at Macro 4, said, "High costs combined with unpredictability are bad news for IT directors looking to establish consistency and value for money. Software licensing costs are a blocking factor in most cost-cutting initiatives."
Research from analyst firm Gartner echoed this point. It found that 52% of mainframe owners cited high third-party software costs as inhibiting their organisation's mainframe growth, and 15% said the second biggest inhibitor was the management perception that the mainframe is outdated.
The high cost of running mainframes will force most companies with small or medium-sized mainframe installations to move to alternative platforms in the next five years, according to analyst firm Meta Group. Only organisations with large mainframe sites will continue to view these as essential, because of the prohibitive cost of moving to a newer system.
Meta said users could stay on old mainframes, move to a new mainframe (typically Linux-based), or run certain business operations on a smaller server, for example, Windows 2003. However, this would require IT staff to rewrite some of the code on the old mainframe.
The main attraction of upgrading to a Linux-based mainframe is the potential to cut costs. Robin Bloor, president of Bloor Research, said, "Linux on the mainframe has a lower total cost of ownership than Linux on anything else, if you take into account that managing Linux on the mainframe is easier and the virtualisation capabilities enable a Linux instance to be very resource efficient."
Many companies have chosen the first option - to stay on their mainframes. "A proportion of firms with mainframe installations are finding that continuing upgrades and replacements is a very workable option," said Julie-Ann Williams, special interest group chairwoman at IBM user group Guideshare Europe.
Williams added that "remarkably few" companies had taken the second route: replacing home-grown mainframe applications with equivalent software packages.
"Most mainframe applications are so complex and tailored to organisational requirements that an off-the-shelf package can rarely reproduce the information which can be simply obtained using the old mainframe applications," she said.
But Gary Sullivan, vice-president for datacentre services at consultancy firm Capgemini, said replacing some mainframe functions with packaged applications running on servers had briefly been a popular tactic.
"Some years ago, organisations did not properly consider total cost of ownership and IBM was pricing itself out of certain markets. This meant that mid-range servers appeared attractive, resulting in most enterprise resource planning and customer relationship management products not running on mainframes. IBM has woken up to this challenge with hardware and software pricing models that make the mainframe an equally viable solution."
Sullivan singled out the IBM z800 eServers as a range of mainframes that could match any organisation's processor requirements. "A truly scalable processor range [using on-demand computing technology] with a number of on-demand offers make this platform a much more compelling proposition, with its applicability not being limited to just legacy systems," he said. On-demand computing, also known as utility computing, allows an enterprise access to bandwidth, computing, storage and other resources as they require it.
Given the continued pressure on IT directors to reduce running costs, upgrading mainframes to run on Linux appears to be a logical move. However, upgrading a mainframe will be one of the most risky IT projects, given that they are the main repository of information in many organisations.
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The outsourcing option
Some companies are outsourcing the management and running of their mainframes to reduce costs.
Julie-Ann Williams, chairwoman at IBM user group Guideshare Europe, said, "The main reason for this is an impression by management that they will be able to save costs. A number who try, take it back in-house when it turns out they do not really make savings."
Gary Sullivan, vice-president for datacentre services at Capgemini, said drivers behind outsourcing the mainframe include skills shortages, company acquisitions, shedding a non-core business process and the view that the mainframe is a legacy platform.
He said, "Outsourcers will typically be able to offer material cost advantages because of scale, relative to an in-house function.
"Outsourcing is a well-proven means of delivering IT services. When clients consider any form of outsourcing, they need to develop a clear understanding of how to ensure they receive cost-effective services through the term of any agreement."
Sullivan advised companies to use external benchmarking via organisations such as Gartner to ensure the charges align with current and future market rates.
The mainframe market
Mainframe leader IBM will see 22% to 25% full-year growth in zSeries revenue for 2004. Forrester anticipates more modest IBM zSeries growth in 2005.
IBM will continue to have a dominant market position, offering stiff competition to rivals Sun, Hewlett-Packard, Fuijitsu Siemens and Unisys; with Microsoft partnering a number of these to compete against IBM's z/OS operating system in the datacentre.
Source: Forrester Research