• ITCandor Categories

  • Contact

    For all wrting and presenting opportunities please contact ITCandor and Martin Hingley at: mhingley@itcandor.com
  • Enter your email address to subscribe to this blog and receive notifications of new posts by email.

    Join 1,202 other followers

  • Top Posts

IBM System Z MIPS Shows Increased Centralisation And A Return To Growth

IBM MIPS Model Highlights

  • ITCandor estimates IBM System z shipped 640 systems, 6.2k IPs, 5.6B Mips at $880/Mips in 2010
  • Revenue grew by 14% to $4.9B and MIPS grew by 35%
  • Trends in the Mips model show a move towards centralisation
  • IBM offsets the high costs of developing mainframes by making chips for gaming consoles
  • Sales of mainframe and Unix machines will grow in 2011, finding a back-end role in private and hybrid Cloud Computing implementations

IBM gives us tantalising glimpses of its mainframe business by announcing growth rates each quarter for revenues and MIPS (Millions of Instruction Per Second). This leaves a research house like ITCandor with a puzzle to solve. This report offers our interpretation of these figures in absolute terms. We think it’s important to study this aspect of the server market because it can tell us a lot about trends in large users and in IBM’s own business. Please contact us if you need help in looking at this issue in more detail.

IBM System Z Revenues Are Heavily Seasonal And Dependent On Product Introductions

Figure 1 shows the development of IBM’s mainframe business. The revenue sizing (the columns) and revenue growth (the blue line) have been adjusted to show the annual development – what we term a ‘rolling 4 quarter analysis. This irons out the dramatic seasonality of System Z sales. Fourth quarter sales have averaged 36% of annual revenue across all years, but this is distorted by the dramatic collapse of business in Q4 2008. The highest fourth quarter ratios were 41% in 2003 and 42% in 2010 – both new shipping periods for major new lines.
We’ve also posted the names of the new model line introductions during the period, which typically match quarters of strong growth.

IBM System Z Mips, Units And IPs Are Important Measurements

IBM made a decision before the period we are looking at to adopt a price/Mips model akin to the PC and/or Unix server market, shifting the value (and cost to customers) of the mainframe business to its software sales. Its main business is transaction processing for banks and other financial companies of course, but it has offered a number of cheaper schemes for users of other workloads – promoting zIIPs and zAAPs and Linux for instance. Mainframes are very costly to design and manufacture. They also have a limited shelf life. IBM maintains its own chip production (the last server vendor to do so), offsetting the limited output of S/390 microprocessors (and PowerPC chips for System p) by making chips for gaming consoles and other purposes.
When looking at the development of this market we believe it’s important to capture and estimate a number of measurements. In particular:

  • Revenues – the growth of these is given by IBM each quarter, although the total is seldom referred to
  • Units – a relatively uninteresting issue, this is the number of systems sold (new or upgrades)
  • Mips – the growth of Mips is also given by IBM in its annual and quarterly financial reports: again the total is never referred to
  • IPs- Instruction Processors are the individual servers from which systems are made up: each IP has a specific Mips value and each unit is made up of one or more IP

Figure 2 shows our estimates for the growth of each of these measures by year from 2003 to 2010. We see a steady a number of interesting developments. In particular:

  • A decline in the price per Mips from 2006
  • Mips growth has followed the trend of revenue growth, although the constant decrease in price has put it above in all quarters
  • 2009 was the only year in which IBM experienced declines in Mips growth due mainly to the credit crunch
  • There has been a constant recent decline in both IPs and Units, underlining the increasing centralisation of the mainframe market
  • A strong return to growth in 2010 following the introduction of the zEnterprise

We’ve also summarised these figures for the last two years in Table 1.

Table 1 – IBM System Z Revenue, Mips, Price/Mips, Unit, IP and IP/Unit Estimates – 2009 And 2010



2010 Growth %

Revenue ($B)

$4,329 $4,922






Price (K)/MIPS









6,800 6,200



8.8 9.7


Source: ITCandor, January 2011

Some Conclusions – Understanding Specific Measurements Is Important To Put Mainframes In Context

The credit crunch accelerated a movement away from Unix and mainframe servers, but these machine types are far from dead. We believe IBM’s resurgence will be followed by an up-tick in the Unix market, as database, transaction processing and analytics workloads grow. We see a strong role for them especially as back-end systems in more sophisticated private and hybrid Cloud Computing environments.
We intend to develop our Mips model over time and would be delighted to talk to any of our readers who have similar or related research needs. As always please let us know by commenting on this article or using the contact details above.

ITCandor Acronym Buster

BIPS – Billions of Instructions per Second
IP – Instruction Processor (the building block of System z machines)
Mips – Millions of Instructions per Second
zAAP – z Application Assist Processor
zIIP – z Integrated Information Processor

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s