IBM, master of the mainframe, recently reported that revenue for its z Systems mainframe business dropped 40 percent in the second quarter of 2016. While Big Blue said this is to be expected as it is moving toward the end of the company’s mainframe product cycle, when sales of the big iron slow down as customers look ahead to the next newer, better machine, this eWEEK interview takes a look at how the slowdown impacts others in the mainframe ecosystem.
Chris O’Malley, CEO of Compuware, which provides software for mainframe users and application developers, said his company’s fortunes are less and less tied to the IBM product cycle, adding that the introduction of DevOps and Agile development methodologies into the mainframe environment has spurred business for the software maker. Just when you think the mainframe may be going away, somebody finds a new way to make it more relevant. Compuware’s tagline is “The Mainframe Software Partner for the Next 50 Years.”
As IBM goes, so goes the mainframe business. Big Blue recently reported a 40 percent decline in its z Systems mainframe business, what does that indicate to you?
As it relates to the mainframe, the big news is that there was no news. The mainframe continues to be a backbone of the worldwide economy, and customers that have been historically dependent on the platform continue to be. When you look at the numbers they spoke about regarding the mainframe, they were all in line with expectations and in line with the release cycle for the z13. While everybody’s thinking that the mainframe might someday turn the corner and become part of the past, it continues, unlike any other technology in history, to sustain itself and to be able to grow. The big thing is there was no big news; everything was in line with expectations.
How does the hardware cycle—the IBM mainframe release cycle—affect Compuware’s business?
As time goes on it’s less and less, because the way they sell the technology is they sell bigger boxes than customers necessarily need at a given moment, but they can grow into them. They pay IBM based on usage. So it’s kind of a false positive when they do really well at the beginning of a cycle, because we don’t become the benefactor of that until the consumption occurs. So our business comes from those customers where their transaction lines go up or their mobile and digital business increasingly creates transactions on the mainframe that are creating growth. It’s only when those things occur that gives us opportunity.
So you saw in their numbers that they are at the end of the cycle. The IBM z Systems revenue was down some 40 percent, which was in line for this point in the cycle. But our new bookings for this quarter were up 23 percent. So we’re less connected to what you would see from them. But we’re showing that customers are seeing needs on the platform and are trying to address them. Otherwise, you don’t create that kind of growth in any kind of business in this day and age.
What opportunities do you see for Compuware going forward on the mainframe?
Over the last seven quarters we’ve become a DevOps company and we made all these aggressive promises that on the first business day of every quarter we would come out with all of these new capabilities and updates to our existing or classic offerings and integration with our DevOps tool chain. And we’ve kept that promise. We’ve gotten to the point now where we’ve mainstreamed mainframe code and data in a way that preferred DevOps tools from SonarSource and Atlassian and Splunk and XebiaLabs can now be used relative to mainframe development and mainframe operations as an equal class citizen to any other platform that our customers are building any apps on.
So we’ve solved those problems and customers are trying to move, as time goes on, away from things like waterfall development methodologies into Agile. And they’re trying to create a culture that’s not siloed to these different platforms—a mainframe culture, a distributed culture, a mobile culture; they want just one culture. They want one Agile set of processes regardless of platform, and they want one set of tools regardless of platform.
DevOps, Agile Breathe New Life Into the Mainframe: Compuware
So we’ve delivered on all that now in ways that, as customers see it, the mainframe’s going to be around for another 10 years because they see that IP—the code and the data that’s in there—has got to be an integral part of their digital strategy. They see a need for investing in creating a transformed set of tools on the mainframe, and that opens an opportunity for us. It disrupts our competitors. The incumbents like IBM and CA that have these older, outdated technologies that are feature bloated and over-engineered all with a presumption of doing things in a waterfall state are put at risk as customers make these aggressive transitions. But that creates an opportunity for us.
The lifeblood of growth is innovation. And we’ve innovated over the last seven quarters. We’ve done more in the last seven quarters in terms of bringing in innovation to the mainframe platform than all the other vendors combined probably over the last five years. And it shows that customers need it and want it relative to our financial performance.
The areas of DevOps and Agile methods have been slow to gain traction within large enterprises. That’s what has disadvantaged a lot of those companies because they’re slow to get on the digital bandwagon and use mobile channels. But we’re seeing a significant change in terms of attitude and disposition. So that’s what’s really becoming the genesis of our success in a way that we haven’t seen on the mainframe. When’s the last time a mainframe vendor told you they grew in bookings by 23 percent? Those are big numbers. We’re seeing activity like we haven’t seen before in this space.
What are your thoughts on the major “incumbents” like IBM trying to transform themselves? Can they pull it off and be the same company they are today (sizewise and otherwise)?
They’re trying to change a tire on a moving car; it’s a hard effort to retool in a way that they’re trying to do. They’ve got these strategic imperatives that are dominated by cognitive and analytics—with Watson being the centerpiece, as well as the cloud and the movement of an increasing amount of work to the cloud. It was interesting that one of the comments made by IBM’s CFO after their earnings results was that they’re seeing it unlikely that system-of-record work would be going to the cloud and that it would rather be system-of-engagement work that goes to the cloud. That’s another way of saying that people are going to leave a lot of stuff on the mainframe and that the workloads that are going to the cloud on the distributed side are those things that are necessary for mobile.
With the strategic imperatives that they’re pursuing, they’re trying to basically take the resources they have internally or go get new ones to pump up the volume in those areas. The risk that you run is that you so overly disrupt the core elements of the business that have made you incredibly successful for the last 100-plus years that IBM’s been in existence. Because they don’t have the luxury of being able to go after a different customer set for those strategic imperatives, they’re going to go back and sell Watson and analytics to the exact same customers.
So in this transition it’s incredibly important that they remain good stewards of what made them what they are in the eyes of their customers. And the centerpiece of that is the mainframe and continuing to make sure that those release cycles do occur and they keep up with market demand. Mobile and digital are driving huge back-end requirements. And IBM can’t be so disruptive of itself that it loses sight of its focus on the mainframe. But it looks like the performance of those imperatives is in line. It’s a tough transition for a company of that scale.