In the last five years, the new vertical/functional ISV (independent software vendor) market has clearly done better...
than the enterprise-application market, as SAP and Oracle revenues dipped sharply during the "Internet bust", while vertical/functional ISVs' revenues climbed steadily. These ISVs are characterized by specialization on a particular vertical market (car dealers, manufacturers) or function (human capital management) and by having a significant proportion of sales going to SMBs or workgroups/departments of large enterprises.
These ISVs are entering the third of three distinct stages:
- In stage one, ISVs focused on the existing technology of large-enterprise vendors, implementing new technologies based on what the large vendors are offering.
- In stage two, ISVs began to identify the unique characteristics of vertical industries, and to provide products directly targeting those needs.
- In stage three -- the stage we are presently entering -- applications and technology begin to flow from the vertical vendor to the large-enterprise vendor -- often by acquisition.
Vertical ISVs bring ease of application administration, high flexibility and customizability. These features are particularly valuable in markets such as healthcare and retailing, where development often takes place at the business level, based on components specialized for a particular industry or function.
Users should be clear on the benefits of buying packaged applications from ISVs in stage three:
IBM System z support for the new application providers
In attacking the newly prominent vertical/functional-ISV market, IBM's System z has to overcome two key barriers: lack of visibility among these ISVs and their customers, and an image of the mainframe as high-priced and arcane.
IBM's support for the new ISV market has four key components:
- A campaign to sign up these ISVs as "partners."
- Conversion of key IBM System z software to Web services.
- Introduction of the low-end Business Class machine.
- A focus on driving down total cost of ownership (TCO), including a strong story on administrative costs.
The partner campaign
IBM support for the new ISV market includes online tools for architectural and porting guidance, online courseware, online content, online/phone/email support, remote System z "loaner" access for development, worldwide Innovation Centers and technical personnel, pricing discounts, PartnerWorld industry network support, co-marketing and co-selling, and discounted advertising.
Conversion to Web services
IBM offers an extensive set of tools for Web-service conversion:
|Mainframe tools||IBM Enterprise COBOL for z/OS, IBM Enterprise PL/I for z/OS, WebSphere Developer for zSeries||IBM Debug Tool for z/OS and IBM Debug Tool Utilities and Advanced Functions for z/OS, IBM File Manager for z/OS||IBM Application Performance Analyzer for z/OS, IBM Fault Analyzer for z/OS, IBM CICS Transaction Server, IBM CICS Performance Analyzer for z/OS, IBM Tivoli Omegamon XE for CICS on z/OS, IBM IMS|
|WebSphere & Rational Tools and Platforms||IBM Rational Software Architect (RSA), IBM WebSphere Studio Asset Analyzer for Multiplatforms, WebSphere Business Modeler||Rational Application Developer (RAD) WebSphere Developer for zSeries (WDz), IBM WebSphere Integration Developer (WID), WebSphere Process Server, WebSphere Studio Asset Analyzer||WebSphere Developer for zSeries (WDz), IBM WebSphere Integration Developer (WID), WebSphere Business Modeler, WebSphere Process Server||IBM WebSphere Application Server for z/OS, IBM Tivoli Composite Application Monitor for Websphere and SOA (ITCAM), WebSphere Business Monitor|
|Other Tools||IBM Asset Transformation Workbench|
Click here for a detailed analysis of IBM's tools for Web-service conversion.
The system z9 BC offering
The new z9 BC extends the mainframe much lower in price than it has been. A 26-MIPS version is as low as $100K, with decreases as well in maintenance costs and specialty engine (zIIP, zAAP, IFL) costs.
The New TCO Story
IBM correctly breaks down costs of ownership into hardware license, software license, people (administration, implementation, and upgrade) and environmental (e.g., electricity and air conditioning) costs. Of these, environmental costs are often highly significant for data centers in major cities where space is at a premium, and often viewed as insignificant in other cases.
Instead of considering single-application TCO scenarios, IBM assesses cases where tens of applications are running, either on a single mainframe or on multiple distributed Linux/Unix or Wintel platforms. This, IBM notes, is a typical model in medium-sized to large enterprises, as well as where the new ISVs are providing their applications remotely as services. In these cases, the number of administrators required to run the operating systems, hardware, and networks of the distributed systems increases nearly linearly as the workload scales; while the mainframe's administrative costs barely increase at all (databases are a special case, but do not invalidate the overall trend). Thus, for the typical IT shop, mainframe people costs are often a fraction of the distributed systems' people costs.
Meanwhile, mainframe software license costs -- often cited as a concern in user surveys -- are now actually competitive with other platforms. A key reason for this is IBM's focus on driving these costs down. For example, IBM's database-administration tools have had the effect of driving the prices of competitors such as CA and Compuware down significantly; IBM software license costs decrease per unit of workload as the workload increases; and IBM has chosen to reduce both hardware and software-license costs for its specialty co-processors (zIIP for Java-related workloads, IFL to run Linux, and zAAP for WebSphere) -- so smart customers migrate transactional workloads to those co-processors.
While System z9 hardware prices may be still much larger than those of other platforms, hardware utilization can be decreased per MIP (millions of instructions per second) if savvy IT buyers buy (and place the new workloads on) the specialty processors. And lastly, IBM engineering means that the mainframe requires less electricity and air conditioning than many PCs running the same workload.
Moreover, IBM argues that the mainframe's TCO advantages should remain over time, as IBM aims to continue aggressive pricing that has driven down total costs by 50% over the last four years.
The outlook for System z in new markets
IBM notes 240 Linux ISV partners, more than 800 applications, and a 30 % growth rate. This indicates that IBM has at least begun to crack the vertical/functional ISV market.
There are two key remaining barriers to full System-z success in this market:
The rise of the vertical/functional ISV is good news for the ISV's customers, who now can find applications much more closely suited to their particular business's tasks and size, while retaining the enterprise application's ability to support corporate standards.
It also offers an opportunity to the new System z mainframe, as its new flexibility and low TCO, coupled with its long-time robustness, manageability, and scalability, make it in many ways ideal for ISVs seeking always-up platforms, platforms able to be maintained by untrained personnel, and flexibility to handle widely varying workloads.
Whether System z can take advantage of the opportunity presented by the changing face of ISVs by continuing to increase its low-end license-cost attractiveness and rapid-development capabilities remains to be seen; but certainly System z has made a promising start. As a result, many of these vertical/functional ISVs and their customers should take a new look at what the mainframe has to offer.
About the author: Kernochan is president of Infostructure Associates