The mainframe has been back in the news recently after Treasurer Joe Hockey announced during a radio interview in April 2014 that the Centrelink mainframe, which dates back to 1983, needs replacing and will cost Australia “billions".
“The mainframe for Centrelink, which provides services to millions of Australians is ageing and in bad shape. Centrelink and the Pentagon in the United States are the only two customers in the world of this one company that maintains the Centrelink mainframe, which is extraordinary,” Hockey told Neil Mitchell of 3AW.
Hockey was asked by Mitchell if the federal government can afford to fix the Centrelink mainframe.
“We have to, we have got no choice. The question is how we do it and how we ensure that we have better service delivery into the future,” he said.
Hockey admitted the cost of replacing the Centrelink mainframe would run into the “billions” and the money will come from tax payers.
“My overwhelming concern is that it is inhibiting the capacity of the government to some degree to roll out policy that properly addresses the problems in the economy and the [Federal] Budget,” he said.
While the government has decided to replace Centrelink's mainframe, many organisations are still holding onto theirs – and for good reasons. Banks, for example, are keeping the mainframe lights on to meet data security requirements that prevent the offshoring of customer information or, in some cases, placing some data into the cloud.
In 2012, Westpac mainframe chief engineer Glenn Bowden told CIO Australia that the banking group operates a total of 10 mainframes with six used by Westpac, two utilised by St. George and the other two mainframes located in New Zealand to serve its operations there.
Westpac’s mainframes are located in Sydney across two sites for disaster recovery and failover purposes.
According to Bowden, it has the “right number” of mainframes for the workflow that the bank handles with no plans to reduce mainframes or consider public cloud services.
“We have been running what I would consider an internal cloud on a mainframe for many years through the fact that we share environments across multiple machines,” he said at the time.Read more: Westpac NZ and Samsung collaborate on digital banking innovations
“I don’t think in the foreseeable future that we would look at external cloud for mainframes. It’s just not viable because of data and security issues.”
By the numbers
According to research by IDC Asia Pacific, the Australian mainframe market suffered a decline in revenue during 2013.
The analyst firm classes the mainframe as high-end enterprise servers that cost over US$250,000.
“Overall, the Australian high-end enterprise server market dropped below US$100 million in 2013. This was a drop of 45.5 per cent on 2012,” said IDC Asia Pacific's enterprise computing research manager, Amit Dalal.
He attributed this reduction to tougher financial times for the IT market in 2013.
However, Dalal said that IBM “continues to a leader” in the high-end enterprise server category with a 60 per cent revenue share during 2013. Oracle and HP made up the remaining 40 per cent revenue share.
Gartner United Kingdom's research vice president, Rakesh Kumar, confirmed that mainframes are still popular in Australia but that the market has been declining over the past three years.
“If you look at IBM's revenue from mainframe hardware sales it was US$220 million in 2010. In 2011, it dropped to $120 million and in 2013 it dropped to $100 million,” he said.
“2013 was a bad year as mainframes halved to $50 million. It is still popular but the last three years suggest that people are buying less mainframes or are moving off mainframes. At the same time we see a net increase in people buying x86 [server] hardware.”
According to Kumar, the move to x86 servers is “consistent” around the world but the drop in Australia seems to be stronger.
Part of the move to x86 servers in Australia has been driven by virtualization. Kumar explained that as people virtualize their x86 servers, they can manage costs better because they don’t have to run as many x86 hardware boxes.
“Therefore, they are able to remove some of the workloads from the mainframe and transfer these to x86.”
However, Kumar pointed out mainframe sales “tend to be cyclical".
“In 2013, IT spending was under a lot of pressure in Australia. People may have deferred spending on hardware for one or two more years so they have kept older mainframes for longer.”
Kumar explained that IBM remains the top dog in mainframes because it has designed mainframe applications that are 30 years old to run without any modification. These applications can run on new generation mainframe hardware without issue.
This also means that users only need to make one investment in applications and software but IBM has “locked them in” for hardware upgrades, he said.
However, some overseas IBM customers have decided to move some of their applications off the mainframe.
“Deutsche Bank in Germany is a huge IBM mainframe and data centre customer. They bought a bank called Post Bank 18 months ago and went public with the news that they were going to move a lot of core banking applications off the mainframe,” said Kumar.
“IBM has to be careful here. If you get a big customer like Deutsche Bank making public statements about moving away from the mainframe, the majority of other customers just below this tier may decide 'now is the right time to move off mainframes’.”
However, despite the increasing popularity of x86 servers and virtualization, Kumar said he does not see the mainframe going away any time soon.
“If anybody has a 30 year old mainframe environment, moving those applications on to a new platform is the biggest nightmare a CIO would face because they would need to take those apps and try and re-write them somewhere else. That’s just hideously expensive,” said Kumar.