The revival of the mainframe, isn’t just due to IBM’s continuing investment in it. CA is stirring this pot as well, and with a high degree of enthusiasm. But before I describe what it’s doing, let’s first review the current state of the mainframe market.

• 70% of world’s business critical data still lives on the mainframe. It never left home.
• The mainframe dominates the high-end server market with over 35% of  market share by revenue.
• More than 60% of new mainframe capacity sold since 2000 is running “new-to-the-dinosaur” workloads (i.e., Linux, J2EE, ERP, etc.)
• No matter how you count it (by MIPS or revenue or units or customer base) the mainframe market has been growing very healthily. If you count by MIPS then growth has been in double digits for over a decade. (Until the onset of the recession when all server sales went south)
• The platform has acquired over 500 new customers since 2000 following a barren period in the mid-1990s. Migration away from the mainframe has tailed off.
• The Dinosaurs are back, and they ‘re angry.

Why are the Dinosaurs so Bouncy?

The important point to understand is that the mainframe is cheap highly efficient computing. It’s as simple as that. The primary barrier to the use of the mainframe is adoption costs. You have to hire mainframe expertise and it’s a little thin on the ground. And you can’t buy entry level servers for a few thousand dollars either.

Nevertheless, every mainframe IT executive I’ve come in contact with in the last ten years that closely monitors data center costs has told me that the mainframe is by far the least expensive server computing in the data center. One company I’ve heard of – a large bank – measures mainframe cost at about half the cost of commodity Intel servers!

Mainframe Linux is also responsible to some degree for the resurgence of the mainframe. It has been a huge boon. It is possible to configure a new Linux server (virtual server) in minutes on the mainframe, whereas it can take days if you wanted a new physical Linux or Windows server. Even in virtualized environments VMware has a long way to go before it matches the virtualization management capabilities of the mainframe. More importantly, with mainframe Linux, it is possible to run all the Internet applications (web server, CMS, database, etc.) on the mainframe – which meant extremely fast communications to back end systems or applications built in J2EE.

Linux mainframe usage is growing strongly. A recent CA sponsored survey of IT executives in large companies (revenue $2bn or more) showed that 93% of these companies are growing their use of mainframe Linux – nearly half of them at an annual rate of 20% to 40%.

CA: Taming the Dinosaur

If you are familiar with the mainframe it won’t be a surprise that CA is delighted with the robust health of the mainframe. After all it has a broad portfolio of mainframe products from which it harvests maintenance revenues. However, you may be surprised at the level to which it is investing research and marketing dollars in the once moribund platform.

Chris O’Malley, EVP and GM for CA’s mainframe Business Unit has coined the term Mainframe 2.0 to describe teh mainframe’s resurgence. Mainframe 2.0 is like Web 2.0 only a little more Jurassic. He speaks confidently about CA delivering mainframe products that are “best in class quality, support and platform exploitation.” There is some justification for his confidence.

Microsoft’s finals results for this fiscal year were dismal. Not disastrous, just dismal. There’s a great deal to look forward to in the coming months. Microsoft has Windows 7 nearly ready and it will probably drag in some much needed revenue once it is released. It probably wont diminish the dash to the Mac among consumers, but it may help to boost corporate PC revenues.

Reading the Entrails

So here’s the skinny. Microsoft, clawed in revenues of $13.10 billion and reported net income of $3.05 billion. Rewind to this time last year and the figures were revenue of $15.83 billion with net income of $4.30 billion. But that was when the PC market was buoyant. For the year as a whole, Microsoft recorded a 3 percent decline in revenue to $58.44 billion but an 18 percent drop in net income to $14.57 billion.

Being realistic, net income of $3.05 billion on revenue of $13.10 billion is a 23.28% profit. This is a long way away from red ink and blind panic, even if the previous year showed profit at 29.51%. Let’s also note that when revenues decline, profitability always goes with it. It’s the opposite of economies of scale – dis-economies of diminishing scale, if you like.

The point I’m making is that this is not a set of results to get real nervous about. The real problem for Microsoft is that the two competitors that currently have Microsoft caught in a pincer movement did much better in the same quarter. While Microsoft shrank by 17%, Google grew by 3% and Apple grew by 12%.

The Google Story

Microsoft’s problem with Google is that Bing on its own will not stop Google. Unfortunately for Microsoft, Bing is far too late. To be fair, Bing is a very good, perhaps even brilliant competitive move. It genuinely does beat Google in a number of ways. The problem that Microsoft has here though is the same one that Mozilla has in the browser market. Microsoft, it seems, forgot that the browser market was competitive and let Mozilla’s Firefox in.

Firefox was superior in many ways to Internet Explorer, but because if the bundling effect of IE with Windows, Firefox has only gradually increased market share – which is now around 20%. Microsoft will, I believe experience the same frustration with Bing. It should and probably will increase its share of the search market. Some of that increase may come at the expense of Google and that will impact Google revenues because 97% of what it reaps is from search advertising. But Bing is not going to make swift inroads. It launched very well and, despite the frequent TV adverts, has since declined. If Microsoft manages to continue the pace of innovation it has set, it may succeed in growing Bing gradually.

The problem is that there are too many factors that pull you back to Google. Google is very sticky – if you use iGoogle and GMaps, and GNews, and Gmail, and Gwhatever. In the mean time Google is chipping away at Microsoft’s email market in the corporation and it’s Office Apps market. in that area the boot is on the other foot. Google may do healthy business but there are many factors that make customers stick to Microsoft.

Right now, Microsoft is not hurting Google. Even if it managed to do that, Google looks very strong in the mobile market – a market which has great potential for more advertising revenue and in which Microsoft is  weak.

The Apple Story

Apple is now utterly dominant in the premium PC market with more than 91% of the business in the US. The simple fact is that among the opinion leaders and the power users, nobody wants Windows any more. They are voting with their wallets.

There is no obvious way back from this for Microsoft. Adverts that try to promote Windows as a better deal may cause the buyer to pause a little, but they are not halting the move to the Mac. The growth in the Mac market is deceptive in many ways. One of them is that Macs last longer so the renewal rate is lower and this masks some of the growth in the user base. Another factor is the phenomenon Apple Stores. Every new one that opens up boost Apple’s market share in the country and city where it opens.

Microsoft has decided to take the fight to Apple by opening its own stores. But unless they are going to sell those excellent X-Boxes I really don’t see the point. there is no real shortage of places to buy PCs. Also it could easily be a PR disaster.

For Fear Of Reaping The Whirlwind

You know what I think is going to happen when those Microsoft stores open? People are going to start treating them like Apple Stores. They are going to walk in with their virus infected, software degraded PCs and netbooks. And they will ask the sorry shop assistants to fix them. And if the Microsoft decides not to offer support from its new cool shops, it’s going to run into severe negative publicity.

In conclusion…

Microsoft is shrinking, and I expect that it will continue to shrink. Its diminishing began with the recession, but it will not end when the recession ends. It’s caught in between a cloud and cool place.

There is a significant amount of nervousness surrounding the prospect of using cloud services. Part of this can be put down to unfamiliarity with using cloud-based capability, but some of it is goes much deeper than that. Companies may well be willing to try out the cloud with non-critical processing activity, but when it comes to mission critical applications there’s a natural nervousness. The question is: Do you really trust the service provider to ensure you get the level of service you need.

At its recent analyst conference,  CSC, the global systems integration company, was quick to emphasize this issue. It has invented the term “trusted cloud” to define the kind of environment that many organizations would want and will expect from a cloud service provider. It is now in the process of filling out the definition in detail.

There is an interesting process in play here, because CSC is well aware that the movement to the cloud will eventually diminish its revenues in some areas of activity. However it takes the view that the cloud also provides it with a very significant opportunity. The company is, after all, a Systems Integrator and it believes that the main problem with cloud adoption is going to be the integration of systems.

The Trusted Cloud

CSC defines “the trusted cloud” as consisting of cloud data centers that are able to provide services that are:

• Secure
• Transparent in respect of customer control and results of processing
• Include evidence-based confidence that systems within its environment operate as advertised.

This makes sense. There are many concerns that an organization might have in moving systems into, say, an Infrastructure as a Service (IaaS) environment, but the primary ones are simply whether the IaaS service is secure, whether it provides a full customer interface so that you can see how everything functions and whether it definitely meets the services levels it is supposed to be providing.

While companies clearly trust running their web sites to ISPs (who are cloud providers by another name) they are much less likely to trust their core  systems to the cloud unless they have a very high level of trust in the service provided. Nevertheless, it is a fact that highly secure cloud data centers exist.

CSC has several and in particular it has one in Culpeper, Virginia that is “military secure”, or to put it another way, as secure as it gets. In a way, a highly secure and well managed service is what outsourcing specialists and managed service providers offer. That’s there business. But they don’t normally offer a cloud customer interface that puts the customer directly in control. That’s what is being added by the move to cloud computing.

The Cloud Spectrum

It’s important to understand that there is a spectrum of services that will be offered from the cloud. At one end of the spectrum you will have the commodity services like email, office apps and cheap on-line back-up. At the other end of the spectrum we have outsourcing, which is moving to provide a versatile management interface to the customer so that it’s possible to outsource a portion of a data center without losing management control and retaining the ability to integrate effectively with what remains in-house.

CSC is right in emphasizing systems integration. It is clear that standards will emerge in time so that the customer will be able to select between cloud services without the necessity of making significant technical changes to either software or data. At the moment, there are no established standards so those organizations wishing to move systems into the cloud need to be concerned, not just about the points noted but also integration standards between what is in the cloud and what isn’t.

It seems as though the world of corporate IT will step into the cloud through the use of private clouds. They’ll prototype cloud environments and also to have a place to retreat to if any move into the cloud proves trickier than expected. But ultimately I doubt whether the problem of systems integration will be solved by standards. In a significant number of instances I suspect, the need to engineer system performance will override everything else. The concern will not be whether the service level delivered by system components in the cloud is adequate but whether the business service level of the end-to-end business process holds up.

The cloud customer needs to be able to integrate all systems and software running in the cloud with all other corporate systems and manage the whole as a single unit. This kind of orchestration of systems is a new challenge in many areas, and in the end, it goes by the name of systems integration.

This is a really good question and one I’m not entirely sure about the answer to. The question arises because Google has been suggesting that mobile app stores have no future – instead of downloadable apps, web sites will run all the apps. And so, with apologies to Philip K Dick…

We Can Remember It For You Wholesale (or Why App Stores Don’t Have A Future)

It takes money to run an App store and if it’s a successful one then running it will run up a great deal of cost, because the big data centers required to serve the customer dont come cheap. And yet the quintessential app store (Apple’s App Store) is not making a great deal of money, even though Apple has the handset to die for and there have been over a billion apps downloaded. So if Apple just skates a long making a few dollars here and there from its app store, lesser players are probably going to have an uneasy time of it.

Now consider the web itself. There is a vast number of web sites out there and they can all run just about any application you please in the browser. So surely web sites will simply undercut what anyone can do in an app and kill the app market stone dead.

Even worse, when you have an iPhone you can only use the apps sold to you by the app store, but if you have a browser you can run any web app that you want, whether it was intended to run on the iPhone or any other device. App stores are so limiting.

The truth is that Apple has started a trend with its app store and every mobile vendor-and-his-dog is desperate to jump on the bandwagon. Even the until-very-recently-laid-back trend chaser in Redmond has caught the disease. Only the twin Google genii have ntoiced that the whole app store thing is an utter mirage. So don’t expect an Android app store any time soon.

Do Androids Dream of Electric App Stores? (or Why App Stores Do Have A Future)

It’s a cute idea that web sits can run everything, but the reality is that devices are devices. The bulk of any application can indeed be run on a remote computer with just the interface running on the local device. But that’s the point really – the local device is just not a commodity.

Microsoft hypnotized the world into believing that PCs were commodities and it was a great business while it lasted. It lasted because of two factors. First the PC market went into an almost perpetual growth surge and thus one platform (Windows) became the richest source of applications and dominated by the numbers. (God is on the side of the big battalions.)

Secondly Microsoft prevented any of its OEMS (the PC vendors) from adding any value at the software level by force of monopoly. This meant that the PC vendors were crippled as regards innovation. Once the market started to become a replacement market (as it is in the US and most of Europe), Apple began to make a huge dent in it. The market is opening up because of this, with Linux starting to gain traction as well as Apple.

The mobile market is not the same. It grew in a much different way because mobile devices required a network service from the get-go just in order to be used. So the handsets were proliferated in the billions before there was even an app running on a mobile phone. It was always a differentiated market – in terms of devices. Yet Apple blew that market to pieces by delivering a handset that was completely new in concept – with touch screen plus motion sensitivity. By the way, there simply are no web applications that can use such capabilities.

An app store is a natural complement to a device or a set of devices over which a single vendor has control. Developers have been flocking to the iPhone because they can make a good living (or even a highly prosperous living) from the store. They are not lining up to build applications that run in the browser because there’s no revenue stream for them in that. If they build mash-ups which, say, link one web site to another, better to release that mash-up as an iPhone app than as a web site.

Where the developers go, the applications flow – and it’s applications that sell devices because a device is useless until it has applications.

The Minority Report (Why They Do and They Don’t)

Now that I’ve thunk about it in words, it seems to me that Google is right and wrong. First a good deal of compelling applications will run directly from web sites – but have you noticed that web clients (on client devices) are far more satisfying than the gmail or hotmail interface and have you noticed that, as far as a user is concerned, the interface IS the application.

App stores will survive and indeed thrive and vendors will use them to differentiate. There will also be an industry in web apps. Both are true.

I know I’m not, but I feel like I’m sitting on the fence. How uncomfortable!

I just got back to Texas from Ottawa. Ottawa seemed like such a civilized place, very much a cross between the UK and the US. There was a war memorial just outside the Fairmont Hotel which is very close ot the parliament building. It is guarded by a couple of soldiers – a little like various places in London, except that it’s hard to imagine why you’d guard a war memorial.

I watched the changing of the the guard. It consisted of an officer, a bagpipe player and two guards to swap for the guards that were being relieved. For reasons beyond my understanding the bagpipe player played Waltzing Matilda as the little military ensemble marched up to change the guard. It made no sense and yet it made perfect sense. Scottish bagpipes and the Australian national anthem in order to change the guard that is guarding a war memorial.

Strawberries, Cheeses and Airports

I had assumed that the reason that US strawberries are tasteless is that there’s some climatic problem unique to the Americas that makes strawberries that actually have a taste ungrowable. Not so. The Canadians grow strawberries just fine – as I discovered at a Canadian fruit market. They also sell a great selection of cheeses. The combination of French culture and British culture with a strong dash of American makes Canada a really impressive place in many ways.

I was there to attend the CA Analyst Symposium, about which I shall write next week, because there is quite a lot to say. But I was only there 3 days and I actually wanted to stay.

Ottawa airport felt a little like a joke when I cam in. Like a regional airport in America, despite the fact that Ottawa is the capital of Canada. However it is an immensely civilized airport. Going through customs feels like a welcoming experience – and this pertains in both directions. Come in to the US by Houston, New York, Chicago and San Francisco and it feels a little oppressive, but come in through Ottawa and it feels like you are being welcomed.

Ottawa is the first and only airport I’ve been to that caters to people with laptops – who must make up at least 10% of travelers. On all the seats by all the gates there are electrical points. It can’t be hard to arrange that, but its the only airport I’ve been to that provides such a luxury.

Goodbye Ottawa. I’ll be back.