For what has now been eight quarters in a row — that’s two years — IBM System i revenues have dropped in year-over-year comparisons. You would think at some point that the platform’s revenue would have hit the bottom of the valley with nowhere else to go but up, but that simply has not been the case.
At least System i doesn’t have to feel alone this time. Mainframe revenues dropped 31% compared with a year ago, even more than the 21% decline that System i experienced. Overall, IBM system revenues decreased, while software and services increased.
The question, of course, is why? Why does revenue continue to free-fall? There must be reasons other than a marketing problem tied to a couple of name changes. Some think IBM hasn’t been pricing and engineering System i correctly to target it at a different customer base than System p, IBM’s Unix boxes.
It is good to see that IBM has reported System i revenues separately. When IBM decided to split System i into two divisions, it wasn’t clear whether it would be able to avoid this reporting requirement. Whether it’s required or not and despite the poor news, IBM is still doing it.
Then again, do hardware revenues matter? It’s common in many places for vendors to give away hardware so they can sell the software and services. This happens with cell phones, Internet service and cable. You get the cable box for free, then you pay for your monthly service bill. You get your wireless router for free, but then pay for Internet service access. Is that the way it’s going to be for server hardware, or is this just an excuse for IBM’s dismal results?