Earlier in the year, IBM executives were confidently forecasting that the market would pick up once February 29 was behind us. This simply hasn't happened. The Meta Group is just one consultancy that has gone back and revised its sales estimates for the year downwards as a result.
Sales have been so slack that IBM has had to engage in heavy discounting, which hasn't helped turnover. Hitachi has been even worse affected: it was just not profitable selling Triniums at prevailing rates (currently around £7,000 per MSU (MVS Service Unit) for the latest models, less for older ones). As a result, its two European distributors, Hitachi Data Systems and Comparex, withdrew from the mainframe market in March. HDS says it will be back at the end of next year with Hitachi's next generation Hercules range, but it looks as if Comparex's withdrawal is permanent.
At the low end of the market, IBM's Multiprise 3000 has been beset by technical problems, to the extent that shipments were stopped for a period of six days in February while remedial work was carried out.
There has been little in the way of fresh technical developments to offset the general gloom. The emphasis of the half-yearly OS/390 upgrade in February was on e-commerce, with improvements to Java capabilities, and new features to make porting Unix applications to OS/390 easier. Version 2 Release 9 also includes facilities, making it easier for Windows workstations to use an OS/390 printer.
A keynote was the announcement that IBM had forged a relationship with e-business software company Siebel Systems, leading to the latter's systems becoming available on S/390. Siebel, a CRM market leader, had previously relied on Unix and NT platforms.
The other major announcements of the year to date have all concerned Linux. IBM is keen to enable System 390 for Unix server consolidation using Linux, and is also keen to capitalise on the enthusiasm of the new breed of dot coms and ASPs for the open source operating system.
Accordingly, in January IBM made Linux for S/390 available over the web at no cost. In May, IBM Global Services announced a range of services and support, and customers can also go to external Linux providers SuSE and TurboLinux.
In August, IBM made another round of announcements, including a hardware feature that allows users to add processor capability exclusively for Linux use, at reduced prices, and without increasing the price of the software used on the rest of the machine. Another new feature allows running of multiple Linux systems on the same machine.
According to Gartner Group analyst Samina Malik: 'The Linux initiative is important. It will make S/390 appeal to more customers.'
But none of these efforts to migrate the mainframe into the brave new world of e-business have yet produced much fruit. Mainframe sales revenues have now fallen for four consecutive quarters.
There are some mitigating circumstances. The four quarters from the third of 1998 to the second of 1999 all saw boom business before the imposition of the Year 2000 freeze, so the comparisons are tough.
And it appears that the failure of business to pick up this year is partly because company managements are being more thoughtful and considered about their e-business initiatives this year, and many new developments have not yet been implemented.
According to Meta Group analyst Rajesh Kumar: 'After Y2K, people put everything on hold, and then when they came back to revisit their projects they've kept them on hold.' And according to Gartner's Samina Malik: 'A lot of currently planned e-commerce projects are due to be implemented later in the year.'
Finally, there is usually a slackening of business before the launch of a new product line. 'A lot of people are holding off mainframe purchases because of Freeway,' says Meta Group's Kumar.
Nonetheless, this does not explain away the disappointing results entirely. A good quarter last year should mean that growth this year is down, not that it has turned into a 29 per cent decline (as happened in the first quarter).
Furthermore, sales of high-end Unix systems have been good during the first half of 2000. This is the one sector of the server market where demand has allowed prices to hold steady. Why hasn't that happened with mainframes? IBM has no answer.
So IBM is desperately hoping that Freeway, as the first generation 64-bit machines are codenamed, will sell like hot cakes when they do finally see the light of day.
Freeway is also sometimes referred to as G7, though it is likely it will be known by a different name from either when it is launched. The move to a 64-bit architecture is a major change - certainly every bit as major as the arrival of ESA (Enterprise Systems Architecture) in February 1988, and arguably the biggest change since the introduction of XA (Extended Addressing - the change from 24-bit to the present 31-bit addressing) exactly 19 years ago to the month.
As with both ESA and XA, the full impact of 64-bit addressing will not be felt for several years. Initially Freeway will only feature real 64-bit addressing - virtual 64-bit addressing, a much more major change, will come in gradually thereafter. This will require extensive changes to subsystems such as Cics and DB2, as well as OS/390.
IBM is likely to unveil the full range of Freeway facilities itself gradually, in line with recent practice. With G6, for example, the full range of facilities was rolled out in four stages (in May and September 1999, and January and June 2000).
One change we are certainly expecting will address the vexed question of software pricing. IBM recognises the need to adapt software pricing more to the perceived value of the software, and also to make it more obviously competitive with Unix and NT software pricing. How Big Blue will do this is not yet clear; rumoured innovations include user based pricing, software cycle consumption pricing, and LPAR based pricing. All three may happen, though the major change is likely to be a substantial extension of the current usage based pricing structure.
IBM is also expected to introduce a software licence management capability which will conform to Open Group's XLSM standard published in March last year. This is likely to appear in OS/390 V2 R11, scheduled for release in spring 2001.
Another feature we can expect is support for substantially more LPARs than the present 15. Logical partitioning is one of the biggest differentiators between mainframes and other large servers, but the gap has been narrowing with the arrival of partitioning features on systems such as the Sun Enterprise 10000 and two other systems in IBM's portfolio, the AS/400 and the ex-Sequent Numa-Q range. Logical partitioning allows you to run different workloads, each optimised for best performance on the same machine, a major mainframe strength.
The logic technology is likely to be an evolution of the CMOS-7S copper technology introduced with G6. Newer Silicon-on-Insulator technology, already used in the latest AS/400s, will probably be held back until the second generation 64-bit machines in 2001.
Whether all this will produce a bonanza fourth quarter remains to be seen. Martin Tarr, IBM enterprise servers director, believes it will: 'We expect to have a strong fourth quarter.' But the analysts are less convinced. Meta Group's Kumar believes the software pricing issue is the key; if IBM gets that wrong 'the fundamental problems will be increasing'. Gartner Group's Malik believes ISV support is crucial: 'That is such a huge factor in determining whether it will gain any momentum.'
S/390 timetable in 2000
January - Linux for S/390 available over the web
February - OS/390 V2 R9 available, with improvements to Java capabilities, and features for easier porting of Unix applications
March - Hitachi temporarily withdraws from S/390 market; Amdahl introduces Millennium 2000C and E ranges
May - IBM Global Services announces support for Linux on S/390
August - Additional Linux features (S/390 Integrated Facility for Linux, and S/390 Virtual Image Facility) introduced
September - availability of OS/390 V2 R10 with 64-bit support
October - planned launch of 64-bit Freeway range