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Monday, December 10, 2012

2012 - A Year End Review

As we reach then end of 2012 I just wanted to reflect a little on the momentum I have seen in the mainframe marketplace over the last 12 months and give a personal view on some of my highlights for 2012, not all of these will be mainframe related so bear with me...

2012 has been a big year for the UK:

We have won the Ryder Cup in spectacular fashion as part of European team great comeback, in my case watched on an iPad whilst in bed next to the wife trying not to wake her up but wanting to cheer so bad.

The 2012 London Olympics and Paralympics, what a great few weeks to showcase all that is good about the UK and UK sport, so many great performances.

The Tour de France and Bradley Wiggins' epic ride as part of Team Sky's dominant display.

Enough about sport (unless you are Australian and then please contact me for more).

In the IT industry it has been another dramatic year:

At my former employer HP they seem to have lurched from one disaster to another, not all it seems of their own making.  This amazing company will rise again of that I am sure.  You only have to get past the press and analyst melee and look at some of the fundamentals, the storage business is strong, they have a top-5 software business (despite Autonomy), printer ink is more profitable by weight than cocaine, they are number 2 in enterprise networking kit etc... Meg Whiman will turn it around, she just needs time and to also get the analyst community to focus on the the 'real' value of the company not what they may or may not do in Tablets...

Perhaps a quote from the iconic film Wall Street needs to be applied:

"Stick to the fundamentals. That's how IBM and Hilton were built. Good things, sometimes, take time."
Lou Mannheim

What a great segue into discussing IBM:

In my 2nd full year I have seen the good ship IBM sail on without any choppy water, we transition CEO's without fanfare or fuss in a slightly boringly efficient manner...

We have seen the EC12 launched, shame about the namebut z2101 would have been no better.  I am sure they could have done have been more creative, and perhaps we should look to our PureSystems colleagues when it comes to marketing and the fanfare they have managed to create...
In my own personal z world we have had a very interesting year:
  • We have recruited 3 new z Business Partners
  • Developed a zCloud proposition and demo facility
  • Won some interesting new name, new business with non-traditional clients
  • Built a strong foundation in a new vertical
  • Worked with some interesting non-z IBMers to drive us into new client engagements
  • Lost some valued colleagues (We miss you Mr. Gadbsy)
  • Recruited 3 new grads into the z business in the UK (making 8 in total)

So as I start to look towards 2013 (if my manager is reading I will close all my deals first I promise) then I see a strong future, and watch out for these key themes in 2013:

Analytics on z - why on earth move your freshest data to another platform to analyse it, keep you master data on z and analyse it there.

zCloud - for a Linux based cloud, look no further, we are the cheapest, most secure, highest scale and the most license efficient - dare to be different.

So don't eat too many mice pies or drink too much Eggnog, have a very Merry Christmas, Happy Holidays and very prosperous New Year and please join us early in the New Year for the next #Mainframedebate

Tuesday, October 16, 2012

Cloud Computing and the Cult of Intel and x86

So firstly apologies, I have been a bit lazy of late on my own personal ramblings, and have been cut and pasting rather than being original, well that is going to change...

Over the last couple weeks I have observed a worrying trend in my interactions with clients and on the Twittersphere i.e. the cult of x86 and it's hold over the world of Cloud quote a recent Twitter interaction, after asking a recent follower (you know who you are) for their views on cloud on z, I got the following response:

"Technically magnificent - totally impractical - won't run Intel Binary products. Chocolate teapot. (PS - I love Z and wish it were not so)"

 Well you can imagine my response!!!  For those with no imagination it went something like this:

 If cloud = intel and x86, then agree. What about Linux? (RHEL & SLES), we are seeing adoption for a Linux cloud on z

I met with a large global outsourcer recently who has an x86 based cloud offering (which is losing money by the way) and we positioned DBaaS to them based on Linux on z.  Well after much mudslinging and a verbal battle they begrudgingly agreed that databases don't usually play nice with x86 virtualization and that there may be an alternative, especially since the approach we proposed was approx 40% cheaper!!!

It amazes me in this cash strapped times, that when you present a solution that is patently cheaper and has numerous other benefits such as industry leading security, availability and scalability, that you still get push back.  So let’s explore why we get pushback for Cloud on the Mainframe:
  • Mainframe as a word has a dark meaning, in some languages it is a substitute word for old, in others it translates to proprietary.  Well my response to this is:
  •  $5bn of R&D investment since 2010, and $1bn in the latest EC12 alone does not equal an ‘old’ platform and as for proprietary how does a server that runs 7 different operating (2 of which are Linux) systems and 13 databases sound?
  •  Skills are hard to find – well there is some truth in this, but only because the box runs so damn efficiently that you don’t need and any army of IT Staff!!! I met with an energy supply company that has over 2 million active customers who has a mainframe team totalling one sys prog the other week and they only have their core billing system running on z, so nothing important…
  • x86 is what everybody else is doing – well where do I start, have you heard the one about the lemmings? Or the one about the PC manufacturers who thought that Apple would never get a hold in the home computing space…I can go on but you get the picture.
So let’s be clear for all those x86 cult members who have found their way to the darker recesses of the blogsphere, namely here, read this whitepaper:

And then contact me on Twitter at @StevenDickens3

Friday, October 5, 2012

Details of zTechnically Speaking in the UK

2012 zTechnically Speaking is a stream in the November IBM Smarter Computing conferences
which you and your colleagues in your organisation are invited to register and attend.

Roger Fowler/ Iain Neville from the IBM UK Hardware Technical Team will be covering the
recently announced zEnterprise zEC12 hardware which is a key part of IBM’s Smarter Computing
revolution. It is a great opportunity for anyone who wants to understand these recent announcements.

At the Manchester and Edinburgh events Jeff Biamonte will give an insight on zEnterprise chip design,
manufacture, direction and futures. Jeff is the Manager for the System z Processor Design & Verification
Group based at the IBM  Poughkeepsie, USA manufacturing plant.

At the London event Howard Rogers from Tesco will provide an insight to their 2012 zEnterprise
hardware refresh  replacing all their Escon connections with Ficon while keeping their legacy Escon equipment.

Speakers from IBM's z Software technical team will explain how recent IBM software announcements enable IBM middleware to exploit the new zEC12 technology to deliver data analytics and cloud services, with even greater security. 

During the breaks and lunch there will be a chance to see live zEnterprise systems and talk to experts
from IBM Software and Hardware Groups.  These events are planned to start around 9am and finish around 4:30pm. Agendas will be sent to registered attendees nearer the time.

I look forward to meeting you at a z Technically Speaking stream. These events are very popular so please register today to secure a place at your preferred location. There is no charge for these events so please feel free to invite a colleague, but remember these will be very popular and places are limited.

These are the scheduled events with the webpages for you to register:

Thursday, 1 November – DoubleTree by Hilton Hotel London 

Tuesday, 6 November – Manchester - The Lowry Arts and Entertainment Centre

Thursday, 8 November – Edinburgh - Sheraton Grand Hotel and Spa hotel

These are the webpages to Register for each event if you choose use cut and paste.

Please ensure you cut and paste both lines to work in your Browser




Thursday, October 4, 2012

Workload Placement and the economics of Cloud

Had a very interesting meeting with a global outsourcer yesterday where got under the covers of their rate card for private cloud so thought I would share some observations.

My presentation on workload characteristics was entirely focused on how all workloads are different and therefore require different platforms.  Whilst presenting, this point was widely acknowledged and accepted.  Then when we get into the general discussion about the suitability of z as a cloud platform the discussion focused on how can IBM make z just like other platforms so it is easy to size. 

Now I fully understand that z is a different religion and understanding how our I/O based approach relates to cloud is not easy to articulate or fully understand from an x86 standpoint, but when you acknowledge that all workloads are different can you not acknowledge that platforms differ to?

An analogy I used after the meeting was:

Imagine you commute to work by train and a colleague commutes to work by bike, which form of transport is better?  Obviously a lot of factors come into play, some of which could be:

  1. What is the weather like generally for each commute?
  2. How long are the commutes?
  3. How close do you both live to a train station?
  4. Which country do you live in?

If you live in Oslo next to a train station and your office is also next to a train station and the distance between the two is 50-miles, then the answer is clear.

If you colleague lives in Holland and is 10-miles from the nearest train station, and the commute is 10-miles on a bike, then the answer is clear.

Why can't the same principle apply to workloads?

If you take a look at Oracle as a Service on a private cloud as an example, then the answer is a train, and let me explain why....

  • Oracle does not play nice with VMWare... the default position of Oracle is don't virtualise our database unless you do it on our virtualisation software
  • Oracle typically charge for a license per every two cores of x86
  • A typical Oracle license will cost £25K over 3 years

So if you have 288 cores of x86 for instance then you need 144 licenses or put another way you need to give the Larry Ellison yacht Fund £3.6m over 3-years.

Now imagine a weird and wonderful black magic platform existed where you could handle the same workload on a 12 core machine, which need 12 Oracle licenses, which had no problems with its virtualisation layer supporting Oracle.  The math goes someithing like this:

12 cores = 12 licenses = 12 x £25,000 = £300,000

Or put another way Larry has to wait another year to buy that racing yacht.

Or to go back to my original analogy still want to ride to work?

Thursday, September 20, 2012

Sometimes you just have to cut and paste...

There are times when you can't improve on perfection, so when that occurs the best thing to do is cut and paste!

The Technology Economics of the Mainframe: Mainframe Computing Still Growing in Banking

Despite perceptions, mainframe computing continues to grow in banking. But from an economic standpoint, that may not be a bad thing.
August 14, 2012

Contrary to conventional wisdom, mainframe computing is growing. In fact, financial services has been passed by only a few sectors in terms of growth in mainframe MIPS, or million instructions per second. But maybe this is good news: Multiyear results show that "mainframe-heavy" organizations are more economically efficient in supporting business computational demands and have more upward scalability than distributed-server-heavy organizations.

Decisions about computer platform choices and options typically are made without consideration of true business impact from a cost-of-goods or other perspective. As a consequence of what we know about technology economics today, however, platform choices can be based on factual criteria and should not be decided as a "fashion statement."

During the 50-year history of what we now call "technology economics," it has always been clear that demand for computing is increasing and that upward expense pressure is a fact of life in what many have called the Information Age. Between 2006 and 2010, demand for processing cycles (MIPS, servers and the like) slowly approached an 18% annual growth rate in the big banks, while storage demand has been growing at 45% or more per year.

With infrastructure spending -- on computing power, networks, storage, help desks and so on -- historically accounting for 57% of overall IT expense, it is likely that it is the largest component of an organization's "IT Cost of Goods." As such, it is worthy of investigation and analysis.

Previous research that exlpored the dynamics of platform economics indicated that firms with a mainframe computing platform bias ("mainframe heavy") exhibited a lower IT Cost of Goods and overall IT costs in situations in which the mainframe was a suitable platform. Conversely, "server heavy" firms were at an economic disadvantage -- higher IT Cost of Goods and overall infrastructure costs. Additional research updates these earlier findings, continuing to chart the interaction (and value) of computing choices and real bottom-line business impacts.

Key cost of goods metrics were identified for the sectors under study. Within each sector, analyses were performed to determine average levels of both mainframe and distributed server usage relative to business volumes/revenue. Within each sector, two groups were identified -- "mainframe heavy" and "distributed-server heavy," relative to average levels of usage.
Within these two groups (by industry), IT Cost of Goods was computed and compared.
mainframe computing
The research database for this study contained data from 498 companies across 20 sectors, spanning the years 2008 to 2011. Data elements include the amount of computational resources along with key business performance parameters.

Across the 498 companies studied, on average, computational needs grew far faster than revenue. MIPS capacity grew at 2.33 times the rate of revenue growth, while distributed server deployments grew at 3.5 times the rate of revenue growth. Additionally, firms that had higher mainframe growth had 25% lower distributed server growth and exhibited approximately

67 percent more-effective cost containment than those with less mainframe intensity. The implication is that the required computational growth is roughly three times more economically efficient in a mainframe environment.

Further, organizations with high mainframe intensity had 39% more upward scalability in that they could support revenue growth with 61% less investment than those that were distributed-server-intense. And organizations with high mainframe intensity maintained their leverage in terms of lower IT Cost of Goods. Across sectors, the gap widened by 3%; in banking, the gap widened by 2%, with mainframe platforms maintaining an astounding 67% cost advantage at the unit cost-per-core transaction level.
This research reveals a pattern that indicates that mainframe-heavy organizations are more economically efficient in supporting the computational demands of increased revenue than distributed-server-heavy organizations. Such patterns are critical to observe and understand as computational demand increases in the global economy, in business and government, and in our daily lives.

It is likely that 2012 is the "technology economic tipping point" -- the point at which demand for computing growth outstrips the ability of Moore's Law to offset increased costs. This perhaps is also the point at which organizations that have not learned by codifying the patterns of technology costs and value will see their tech expenses spiral out of control, leading to uninformed demands to cut IT expenses. On the flip side, those oganizations that have an understanding of technology economics will find themselves in a position of extreme competitive advantage.

Howard A. Rubin is founder of Rubin Worldwide, a research and advisory firm focused on the economics of business technology.

Thursday, September 13, 2012

1st Mainframedebate review

Yesterday between 4-5pm was one of the most stressful hours of my life!!!  As most of you will already know, yesterday we held the 1st ever mainframe debate on Twitter. This event came about from an idea I had a couple of months ago.  Being a Twitter nut, IBMer and also keen cyclist doesn't always overlap but on this ocassion it did, let me explain.

On Facebook I follow a number of cycling companies and one of them regularly hosts a Facebook session for an hour with one of it's mechanics where anybody can post and ask would think pretty mundane but about 40 people ask questions in the hour.  Wind forward and I am running Mark Anzani's (IBM VP for System z) diary while he is in the UK this week.  So I decide that it would be good to have Mark as the guest on a Twitter debate, playing the role of the mechanic!

Well after numerous conference calls, an IBM internal newsletter article and many swapped emails we get to yesterday at 3.30pm, thirty minutes before the debate is due to kick off.  In the room we have:

  1. Mark Anzani
  2. Jeffrey Biamonte
  3. Richard Gamblin
  4. Paul Yarrow
  5. Geoff Eggleston

On the phone we have Carly Exum and Pratin Ashketar, in Le Guardia Airport it transpires we have Paulo Carvao another IBM VP...

On my laptop I have access to not only my own twitter account but also the main IBM_System_z account.

When we get to 4pm the chaos begins, we have questions backing up and we are brainstorming how we can answer questions that would normally require a 5-minute discussion in 140 characters...for the next 60-minutes it is a blur of switching between Twitter accounts, Sametime with you boss' boss, finding links, getting answers into 140 characters when they have been built by a room of people and general panic and chaos.

We get questions from multiple IBMers including 2 IBM VP's and 2 Business Unit Directors we even get 2 customers join in.  We get representation from Jordan, India, USA, Cuba and Italy as well as bunch of guys from IBM UK during the debate.  In the hour we get over 100 interactions and this leads to multiple subsequent retweets and mentions..

And then 5pm arrives and the fastest hour of my life has gone and we are agreeing to do it again next month.  We learnt some valuable lessons while on line, so if it was less than perfect we apologise, bear with us we will be better next time...The lessons include:
  • Don't attempt a Twitter debate on your own
  • Don't have the main laptop on a dodgy WiFi network
  • Set your Sametime status to do-not-disturb
  • Get your WW colleagues involved they helped massively in the set-up
  • Don't promise an IBM VP coffee when the canteen is closed
  • Don't expect a Poughkeepsie Chip God to be succinct

See you on the 10th October (details to follow) for what will hopefully become a regular #mainframedebate

Monday, September 10, 2012

More Mainframe Twitter debate details

September 12th 2012 #MainframeDebate: zEnterprise EC12

On Wednesday, September 12th from 11-12am EDT (16:00 - 17:00 BST), @IBM_System_z and @StevenDickens3 will be hosting a Twitter debate (Steven’s blog post) to discuss the new IBM zEnterprise EC12 and how it can help businesses to do more with less. This chat features Mark Anzani, IBM VP, Portfolio and Technical strategy and CTO for System z.

On August 28th, IBM introduced the newest zEnterprise system, the zEnterprise EC12 (zEC12). The zEC12 is designed to help enterprises effectively manage their core business processes. Improvements of the zEC12 include 50% increased capacity over its predecessor and 25% performance enhancement for transaction processing.  With the zEC12, businesses can tackle the challenges of today’s competitive business environment like never before. Read System z VP Paulo Carvao’s Smarter Computing Blog post for more information on the zEnterprise EC12.

Join IBM System z experts on September 12th at 11 a.m. ET for our first #MainframeDebate to discuss zEnterprise EC12. If there is anything you’d like to discuss, tweet questions to @IBM_System_z and @StevenDickens3

This Twitter chat will feature:
Mark Anzani, IBM, Vice President, Portfolio and Technical Strategy, System z | Follow @MarkAnzani on Twitter

Mark Anzani is the CTO and VP of Portfolio and Technical Strategy for System z. He was instrumental in the development of the zEnterprise EC12. Mark is responsible for driving long term business and product technical strategy for System z. Mark has been with IBM since 1983 and has held several positions working with IBM’s enterprise systems. In 2009, Mark became the Chief Technology Officer for System z. In July, 2012, he was became the Vice President of Portfolio and Strategy for System z. 

If you have not joined a Twitter chat or debate before, here’s how they work:
  • What: A Twitter debate is an online conversation held at a pre-arranged time following a specific hashtag. Join our chat with the hashtag #MainframeDebate. You will need a Twitter ID to take part.
  • When: Wednesday, September 12, at 11 a.m. ET
  • Where: The chat can be followed on Twitter using the hashtag #MainframeChat or you can log on and access the chat on
  • Who: Anyone who is interested in joining and has a Twitter account! Just include #MainframeDebate in your tweets!
After the #MainframeDebate:
Check out the zEnterprise EC12 announcement page. Let us know your thoughts on zEC12! Leave a comment on the Smarter Computing blog below or connect with us on Facebook, Twitter or LinkedIn.

Friday, September 7, 2012

Processor Architecture - a laymans view of the religious war

Just read, a for once, unbiased review from the Register on IBM's R&D investment in chip architecture:

Definitely worth a read for the more geeky amongst us, who find micro engineering just a little bit cool.

Then I read the blog comments and came down of my geeky high, from all of the comments by people who just want to have a knock at IBM:

Now I can't claim to unbiased as Big Blue feeds my kids, but the level of vitriolic spewing on these blogs just shocked me...yes me a salesman of 17 years standing...How can people generate so much passion about the various pros and cons of chip architecture.  I know the guys in Fishkill and Poughkeepsie care, but I am sure they would not get 'biblical' on another approach.

A senior IBM exec said to me recently of IBM's chasing single thread clock speed that you can compare it with the airline industry and plane size Vs speed.  What is better Concorde or a 747?  One is designed to carry ~120 passengers very quickly the other is designed to carry ~500 a lot slower.  Both have there place as approaches (and yes I know Concorde is no longer in service).

Another saying I like about the mainframe is that "we worship different gods and speak in different tongues" never could this be more true than after reading the blog comments.

For all those x86 fans out there let me sum up the mainframe with a couple of anecdotes:

  • I know of a large retail bank that has 93% of it's business logic running on 4 mainframes that cost the bank 7% of it's IT budget.  The other 40,000 servers cost 93% of the IT budget to keep running!

  • I also know of a £1bn turnover retailer that runs its entire web front end on 4 IFL's (Linux engines on the mainframe).

So come on guys give IBM a break we have a very specialized market to service and we are spending hard cash to can that be a bad thing?

Friday, August 24, 2012

Mark Anzani VP and 'CTO for System z' - Twitter Debate details

Twitter Debate - Mark Anzani CTO System z and IBM VP

16:00 - 17:00 BST
US Eastern Daylight Time (EDT) as 11:00 - 12:00
 Wednesday 12th September
Watch this space for more details on the Twitter debate with Mark Anzani IBM VP and Portfolio and Technical Strategy system z. 

Follow the debate via the following hashtags:


Please register your questions in advance via @StevenDickens3 as I will be chairing the debate...

Mark's bio gives some insight as to why this will be a lively debate

Mark S. Anzani
Vice President, Portfolio and Technical Strategy,
System z, IBM Corporation

 Mark Anzani is Vice President, Portfolio and Technical Strategy for System z. He has the responsibility for driving long term business and product technical strategy, as well as enabling innovative client projects involving System z. He joined IBM in Poughkeepsie in 1983 and during his career has had positions in a variety of product development disciplines, primarily focused on IBM large systems. In January 2004, Mark was appointed Vice President, System z Hardware Products with the responsibility for the development and launch of the hardware products within the System z Portfolio. In January of 2007, Mark was appointed Vice President of System z Technical Support and in March of 2009 added the Chief Technology Officer responsibilities to his role. In July 2012 he was named to the Portfolio and Technical Strategy position.

Monday, July 23, 2012

RBS Outage - The aftermath at other mainframe clients

Following RBS' high profile mainframe outage a few weeks back, the reaction within my mainframe client base has been largely positive.  When the topic has been discussed the mood has been up-beat and sympathetic of RBS's plight. 

Specific reactions have been:
  • One large UK bank raised the subject at a recent board meeting and felt it was comfortable with mainframe ops because of the IT exec who looks after the platform globally.
  • Another large mainframe client has used the RBS outage to push back against an internal offshoring proposal, and surprisingly is having a lot of success
  • A large retail client commented that they saw the same issue in the scheduling software and were glad they had a mainframe ops guy locally who was so knowledgeable.
  • Another UK bank has kicked off a programme of reviewing their scheduling 'robustness' and the ability to roll-back during upgrades.
None of my clients have expressed any concerns about having their IT crown jewels on the mainframe given the recent press, in fact quite the opposite.  The feeling has been that they feel that mainframe ops and governance is best in class when compared against other platforms...

follow the debate at @stevendickens3

Wednesday, June 27, 2012

RBS Outage - does it cement the role of the mainframe ?

RBS Outage

Unless you have been living under a rock for the last couple of weeks, you will be aware of the significant outage that the RBS/Natwest/Ulster bank group has experienced.

Just in case you do claim a rock as your humble abode take a look at the links below for details:

This outage has sent a ripple through the mainframe world, especially with those clients who run CA's venerable scheduling software tool CA-7 and those looking to use offshore operations resource.  Without wishing to point the finger at my former employer and the quality of CA-7, a product that I have sold in the past, it would be remiss of me to mention that other mainframe scheduling products are available:

But seriously, wider than a bit of professional gloating and opportunism, the fundamental question arises - Should large organizations run significant core business critical applications on the mainframe when a single outage at a bank can cost upwards of £100m?

Well lets look at some history:

  • The mainframe has been around for some 40 years and throughout this time has been supporting key clients IT needs.
  • IBM back in 1974 committed to maintain investment in this platform
  • IBM provides 'integrity' commitments for the O/S
  • System z mean time between failure stats run into decades

But apart from these IBM commitments, large organizations have been running their IT largely glitch free for years on this platform.  In fact the very lack of this type of outage is the very reason why it has been such big news.  By way of proof - 96 of the top 100 banks globally run System z and this is the first time I have heard of such an outage of this magnitude.

Also other platforms are not without their high profile glitches:,vodafone-suffers-near-nationwide-3g-outage.aspx

In summary one of my clients runs 93% of their business logic on 4 servers that cost them 7% of their total IT Budget, whilst running 4000 distributed servers that contribute to 7% of the business logic and cost 93% of the total IT spend.  Which begs the question which looks the better bet?

Answers on a post card to @stevendickens3

Wednesday, June 13, 2012

Clients chose IBM System z for analytics over Teradata and Oracle Exadata

Clients chose IBM System z for analytics over Teradata and Oracle Exadata

 Re-posted from - hope you don't mind? Just remember plagiarism is the highest form of flattery...

Here is another question where conventional wisdom about “the right answer” has been proven wrong:  can IBM System z be the best solution for data warehousing and analytics?   For many of my early days in the database software and systems business the debate raged about performance and price performance implications of using System z for analytics workloads.  Recent client stories I’ve heard tell me that the advances delivered in DB2 10 for z/OS, and the Netezza powered DB2 Analytics Accelerator, have firmly answered the question.
For those that have not heard of DB2 Analytics Accelerator, it is a Netezza data warehouse appliance that integrates directly with DB2 for z/OS such that deep analytics queries are routed to it without any need to alter the application.  Transactional and operational queries are handled by DB2 as usual, and all data remains under the industry’s highest level of security and availability.
Also, you should know the Smart Analytics System models 9700 and 9710 are integrated offerings that include Cognos BI, InfoSphere Warehouse and DB2 for z/OS software on a zEnterprise z/196 or z/114, respectively.
If you are finding it hard to believe this is a real change in the game, consider the following client examples from our Banking Industry team:

European Bank Group adds IBM DB2 Analytics Accelerator to System z over Exadata
This banking consortium has  IT teams that are Oracle technology friendly, and had invested in an Exadata system last year.   They were considering moving  BI workload to the Exadata system but the IBM team demonstrated the benefits of a BI infrastructure based on IBM System z with the DB2 Analytics Accelerator.  The client chose the IBM solution.

Federal tax authority chooses IBM Smart Analytics System 9700 after DB2 10 for z/OS blows away Oracle in a performance benchmark
A benchmark between Oracle Database and DB2 for z/OS was the first step in this decision process: DB2 proved to have 10 times better performance in the benchmark.  In addition to superior performance, other decision factors for choosing IBM Smart Analytics System over Oracle included:
  • An end-to-end solution, including comprehensive data warehousing and business intelligence software
  • Reliable hardware
  • In-depth services that will support deployment and operation of the new platform
IBM System z selected over Teradata at one of the world’s oldest banks
This bank needed an integrated data warehousing solution for corporate, financial, and marketing information across the bank to reduce costs, improve revenue and drive better profitability.   Factors in choosing IBM System z over Teradata included:
  • Significant savings in hardware, software, operating and people costs
  • Faster time to value with a reduction in the time required to deploy Business Intelligence solutions
  • Industry leading scalability, reliability, availability and security
  • Simplified and faster access to the transactional and operational data on System z
North American Bank moves off Teradata in Favor of IBM Smart Analytics System
Teradata was the warehousing standard at this bank and its team had a misconception that IBM System z was not leading-edge technology or the most cost effective solution.   Fortunately, the team also had open minds and a desire to find the data warehousing and analytics solution that delivered the best value for their business.   The result: a transition from Teradata to an IBM Smart Analytics System powered by System z.

Never say never
Now don’t get me wrong.  I am not saying that System z is the best analytics system choice for all clients in all situations.  I am saying that you should not assume it isn’t the best choice for you and your situation.  Make business decisions based on the reality of today’s facts, not based on outdated misconceptions.

Monday, May 28, 2012

3 types of Mainframers...

My current role is means that on a day-to-day basis I get up close and personal with the best and the worst of the world of the mainframe, and it isn't just me, as the article will testify:

When I look at the spectrum of clients I engage with, I see all the opinions of the mainframe, so let me classify 3 for you:

The Deserter
This type of client has only still got a mainframe because the one application it still runs is too hard or expensive to migrate.  They pay MLC reluctantly and whine repeatedly to anyone within earshot about the cost of the platform...

My comment to these guys, take a step back and review your IT costs Vs Value of the application to the business.  I recently worked with a client who had 93% of their business logic on 4 servers that cost less than 10% of their IT budget to run and still thought these 4 servers were expensive!

The Status Quo fan
My Mum is a big Status Quo fan so I will be careful not to offend those who like their rock tunes to be singalong classics...  Seriously the status quo mainframer has a mainframe that they neither like nor hate that is typically run by a dedicated but under funded team that don't get to do many 'sexy' projects but are occasionally allowed to buy a new box to play with...

My comment to these guys, let us work with you to show you what this beast can do.  You successfully run an enterprise server that can run 7 operating systems and is the perfect platform for a Private Cloud.  The mainframe can run rings round other servers when it comes to Linux as well as being the quickest platform for real time analytics...let us show you the art of the possible.

The Visionary
Whilst I will admit the mainframers in this category might not be up to Mr Jobs' standard, but they do understand that the server with the worlds fastest commercial chip, that has the best stats for availability, scalability, throughput, IO etc is part of IT's future rather than it past.  These guys are actively looking to deploy workloads such as the web and middleware onto System z and are seeing this box as the Enterprise Server of choice as UNIX wanes.

My comment to these guys - you rock! Shout loud shout proud!

If you read this and are in the 1st two categories and want to talk @stevendickens3 is where you can find me...and for those in category 3 you are fine without me...

Thursday, April 12, 2012

Analyst comment on some of IBM's competitors particularly HP

HP should stand for 'Help, Please!'
By Paul R. La Monica March 21, 2012:

HP has missed out on an explosive rally for tech stocks this year. Click chart for more on the markets.
NEW YORK (CNNMoney) -- HP stands for Hewlett-Packard. Shareholders can be forgiven if they thought it stood for "Help, Please!"

The tech company announced Wednesday morning that it is merging its PC and printer businesses. Word of the restructuring first surfaced Tuesday afternoon.

While combining HP's two most consumer-facing divisions may eventually turn out to be a step in the right direction, investors aren't buying it. Shares of HP (HPQ, Fortune 500) fell more than 2% Wednesday.
That continues a disturbing trend.

HP is down nearly 9% so far in 2012, making it the biggest loser in the Dow. The poor performance is even more jarring when you consider that it's not too hard to be going up in a market this robust.
The S&P 500 is up nearly 12% year-to-date. Only 18% of the companies in that blue chip index have lost ground in 2012.

Making matters worse is that all of HP's rivals and partners are taking part in this year's big rally.

9 top tech companies. (HP didn't make the list.)
And you probably don't need to be reminded about the stock performance of Apple.

It seems safe to say that the honeymoon period is over for new HP CEO Meg Whitman. The former eBay  chief and California gubernatorial (possibly the most fun word in the English language to say) candidate clearly has her work cut out for her.

Shaw Wu, an analyst for Sterne Agee in San Francisco, said that HP, despite some restructuring in the Hurd era, still needs to simplify its organizational structure. This could be a good start.
"Meg Whitman is looking to streamline costs, and that makes sense," Wu said. "It needs to be restructured and more efficient."

However, Wu said he wasn't sure what merging the PC and printer units will do to help HP, besides possibly saving on overhead. From a pure business standpoint, the move is a head-scratcher.
"These businesses may sell to the same customers, but they are very different. Printers last a lot longer than PCs, so the product upgrade cycle are very different," Wu said.

Also, the PC division really just sells devices, while the printing business tends to make more money not from the printers themselves, but through ancillary products like toner and ink cartridges.
HP backtracked on its plan to spin-off the PC unit once Whitman took over from Leo Apotheker, the former SAP executive who had a disastrous (and brief) stint at HP after Hurd left following a bizarre expense report mishap.

Now that HP committed again to computers, it is going to have to get back into the tablet game. Remember that HP bought Palm while Hurd was around, only to have Apotheker kill the company's TouchPad line of tablets after only a few months on the market.

Abhey Lamba, an analyst with Mizuho Securities USA In New York, said the mistake HP made was trying to sell devices running on Palm's WebOS when it was clear that it could not be a viable alternative to Apple's iOS and Google's. Now HP has to hitch its wagon to Microsoft and hope for the best. Microsoft's tablet-friendly Windows 8 operating system is due out later this year, and early reviews are very favorable.
"Clearly HP needs a tablet strategy, and I think HP understands that. But they have to do something tied to Windows 8," Lamba said.

There is no guarantee that Microsoft can make a dent in mobile. That's why Lamba is advising investors to stay on the sidelines for now.

Whitman is one of several tech execs with a $1 salary

Simply put, Whitman hasn't yet done enough to convince investors that HP has a viable long-term strategy.
"As a long-time tech investor, I am not tempted to buy HP stock now," said Michael Pytosh, senior portfolio manager with the ING Growth and Income Fund in New York. His fund owns Apple, Google and Microsoft shares.

"HP is reacting to the fact that dollars in tech are moving away from PCs to tablets and phones. It's not like they are innovating," he added.

Wu has a buy on the stock, mainly because it is insanely cheap. Shares trade at just 6 times fiscal 2012 earnings estimates. But even he concedes that HP has a lot to prove to a very skeptical Wall Street.
"HP needs change. Some people may want it to be more like Apple. But it really needs to be more like IBM," he said.

While IBM presciently exited the PC business in 2005 by selling that unit to China's Lenovo, HP is stubbornly sticking with it. Big Blue has thrived, despite a lack of a consumer business (no tablets or smartphones here!) because it has mastered the art of cross-selling the three S's -- software, servers and services -- that the IT departments of big businesses around the world need.

But as long as HP is still dragged down by low-margin hardware, it will continue to remain Little Blue or IBM Lite.

All great points. I talked about why Oracle's results are a good sign for tech in today's Buzz video.
VMware is up today too. But Hurd clearly needs to do more to help get the hardware business Oracle inherited in the Sun Microsystems deal on more solid footing.

And it is amazing to see how quickly Oracle has latched on to the cloud. Given the deals for RightNow and Taleo it's tempting to think that you are in a weird dream where Larry Ellison has morphed into former Oracle sales exec Marc Benioff and is now running

The_Real_Fly: Oracle has the cockiest management in the world, full of hubris.
Management or manager? Ellison is not lacking an ego. But that may not be a bad thing. He clearly has been a master (so far) at pulling off one acquisition after another to keep earnings growing.

And even though there has been a revolving door of heirs apparent during the past decade, Ellison now has two extremely capable lieutenants in Hurd and Safra Catz to soothe investors and customers when he has one of his frequent "Larry being Larry" moments.

The Motley Fool - The Worst Stock on the Dow
The Worst Stock on the Dow
By Andrew Tonner

March 30, 2012

The Dow Jones Industrial Average is full of iconic companies, some of the most recognized and admired companies in the world ... and Hewlett-Packard. What once was a widely respected and innovative company today finds itself lost and rudderless, unable to adapt to a rapidly changing world.

Dysfunctional board? Check.
Management with no clear turnaround plan? Absolutely.
Declining financial performance? That, too.

In almost every way, HP currently disappoints investors. It does hold the crown as the world's No. 1 personal computer manufacturer, and industry observers expect the PC market to grow 4% this year, implying expected shipments in the ballpark of 368 million -- no small potatoes. But in a world where PC-making is becoming an increasingly low-margin business, being No. 1 means very little.

The real problem with HP, and many of the old-line PC makers, including Dell, is that they have no credible plan to address the direction the future is heading in, and that's a problem that should have investors shaking in their boots. HP's attempts to move into new markets have been almost laughably inept. In 2010, the company spent $1.2 billion to acquire smartphone maker Palm, touting that its webOS mobile software would allow it to compete in this growth area. It didn't work out that way, and late last year, new CEO Meg Whitman announced that the company would make webOS open-source, in a strong signal of defeat.
On the tablet front, the TouchPad product that came to market was an epic flop as well. Although there was some fanfare surrounding the release, the enthusiasm was short-lived. Problem was, the TouchPad lacked the software chops needed to give users the compelling experience they can find elsewhere. Instead, the company decided to try to entice consumers by including hardware specs like Corning's Gorilla Glass. And while Gorilla Glass has certainly seen some success in the tablet space, it doesn't move the needle quite as much as credible software. In no time, retailers were slashing prices left and right to simply move the idle inventory.

Note the $300 discount. Again, far from a smashing success.And worst of all, other companies are busy making major inroads into these massive growth markets while HP still has yet to announce any kind of achievable action to right the ship. Apple's success in this area has been well documented, setting records by selling 15.4 million iPad 2s last quarter and following that up by selling 3 million of its new iPad in its first weekend alone. priced its Kindle Fire tablet at an aggressive price to gain share in the tablet space as well. By the end of last year, it had sold 5.5 million units, and it could already be manufacturing its next iteration of the Fire.

I'm not saying HP's dead in the water. The company is aware that it needs to address its issues, and soon. My question is simply, how? And that's a big part of why the company's stock is down 42.3% over the past year.

Investor Place - HP Dividend Hike Not Enough to Make This Dud a Buy
HP Dividend Hike Not Enough to Make This Dud a Buy
Shareholders rewarded while Whitman works on results

by Marc Bastow | March 28, 2012

It really must be head-spinning time out at Hewlett-Packard). And by head-spinning, I mean the Regan in “The Exorcist” kind.

The last few years have been baffling to say the least at HP.  These has been a spate of high-priced buyouts that have come to nothing, including the $1.2 billion acquisition of Palm. There has been yet another change at the top of the HP pyramid with the appointment of Meg Whitman to the top post, the ninth change in the CEO chair since 1999. And most recently investors learned of plans to combine the printers and PC business at Hewlett-Packard.

The latest? Just last Friday Hewlett-Packard authorized a modest 10% hike in the company’s quarterly dividend, while also promising to increase the dividend annually by double digits. That will give the company a respectable yield of around 2.1%.

Don’t be fooled by the payout promises though. The real story of what HP is going through can be easily summed up in three simple points:
1.    HPQ stock has lost nearly $35 billion in market value in the past year, and is desperate to show value for shareholders holding on for the long haul;
2.    Recent structural changes to the company’s business lines will eventually wring out enough in cost savings to find economies of scale, but that’s the best plan to ”grow” the business;
3.    Nobody in the Wall Street trenches will notice the dividend or any real changes at HP.
In short, Hewlett Packard is at best a company slightly out of control, and at worst a company completely out of touch.

This is not to say the dividend is a bad move. On a purely cash basis, the move will have little effect either short or long term on their overall ability to pay the dividend: HP generated nearly $11 billion in cash flow in fiscal year 2011, more than enough for a payout slightly in excess of $1 billion annually. HP also maintains a healthy if not Apple-like war chest of $8 billion in cash.

From a basic dividend investor perspective, HP’s 2.1% dividend yield is fairly attractive. But sustainability and the yield are not quite the issue.

The recent combining of HP’s Personal Systems Group (PSG) and the HP Imaging and Printing Group (IPG) is viewed in many quarters as nothing more than an opportunity to find ways of cutting costs (read: jobs) across two struggling business units.

Both groups operate in brutally competitive markets where market share, revenues, and profits are at a premium. PSG is under siege by competitors like Lenovo and Dell, while the printing business margins continue to erode. The merge may do little to turn around either division, and do nothing to help those who will be eased out.

Whitman acknowledged during the Annual Shareholder meeting last week that the company faces “real challenges” ahead, and this one just might be the tip of the iceberg.

It’s difficult squaring up rewarding shareholders with the promise of continued increases in their dividends, as employees are forced out from yet another CEO trying yet another restructuring (see also: Leo Apotheker).
So either HP’s management is too out to lunch to recognize the image problems with such moves, or they are simply too tone-deaf to care.

There are obviously changes that need to be made. But HP management has their work cut out for them as they find a way to get through yet another possible lapse in perception.
And remember, sometimes perception is just reality.
Marc Bastow is long in AAPL.
Investors take wait-and-see attitude on HP turnaround plans
"HP will be the gift that keeps on giving -- both to its competitors and to short sellers everywhere," said Jim Cramer in msnMoney, adding in, "To say that Hewlett-Packard has lost its way is an understatement" ... Sterne Agee analyst Shaw Wu said in MarketWatch, “It seems investors don’t have a lot of confidence in the company’s ability to turn around.”

msn Money - Hewlett-Packard takes a step closer to irrelevancy
Hewlett-Packard takes a step closer to irrelevancy
Changing technology trends that favor the PC maker's competitors only add to its woes.

By Jim Cramer
March 12, 2012

Wherever I go, whatever story I read, Hewlett-Packard always seems to be on the short end of the stick. I recently looked at IBM, Accenture and SAP, all of which are doing so well, and I have to conclude that they are simply carving up Hewlett-Packard's consulting business.

Then there is the $10 billion acquisition of Autonomy to boost the enterprise consulting business by offering search software. Having seen SAP's search software in action, I have no idea how Autonomy can compete. Must have some clients, I guess, but SAP is gunning for what HP has left.

We all know Hewlett-Packard raised the white flag when it came to tablets last year, an incredible about-face on a product that it thought was integral to its strategy. We also know HP tried to develop phone infrastructure with the purchase of Palm, something Mark Hurd said wasn't about trying to build a phone operation and then reversed himself a few weeks later. That seems like a common theme in that culture.
Finally, there are personal computers. Last year Apple surpassed HP in personal computer sales pretty much out of nowhere, as it had always been HP vs. Dell.

But what's not included in the equation is the iPad. The new iPad HD seems like a suitable opponent to the personal computer, but that wasn't the case with the iPad 1, and the iPad 2 seemed only incrementally better than the personal computer. Now I can't think what the laptop, a big HP seller, has over the iPad. Maybe some software companies and data companies don't support the Apple world? Otherwise, someone please tell me why, if you were an enterprise buyer, you would stick with HP other than some bogus worry about security or because of entrenchment and good service.

 The most important point against HP is that the information technology world is gravitating toward the companies that have mobile, social and cloud. While Autonomy was supposed to be helping HP in the cloud, the company has no mobile or social strategy whatsoever.

Hewlett-Packard has been starved for innovation as even new CEO Meg Whitman said last week. And the only thing I see dominant in the whole franchise is the printing business. But believe me, given the way HP forces people into different models and has so many different cartridge types, any client would be glad to migrate from the HP printer arrogance.

None of this would matter if HP were a small company. But it's just the opposite. It has $130 billion worth of revenue that can be taken from others, and I think that's exactly what is going to happen, especially when you factor in that a scorned Mark Hurd from HP can certainly be cherry-picking vulnerable clients who want to migrate from HP hardware and software to Oracle's software and Sun Micro's solution. Not to mention EMC's and Dell's competition.

HP is still profitable. It still has lots of an installed base, and it sells a lot of bundled solutions.
But to me, the questions are how fast those revenues will go down while the company trims its staff and how it can possibly recover from the lapses in spending and research while others forge ahead.
To me, HP is going to be a source of funds as a stock and a source of clients for years and years. It will be the gift that keeps on giving both to its competitors and to short sellers everywhere.

The Street - Jim Cramer on HP
Jim Cramer on HP

By Jim Cramer
To say that Hewlett-Packard has lost its way is an understatement, said Jim Cramer. As other competitors grow, the $120 billion company is falling behind in the hardware and consulting space, lacking significant mobile, social and cloud strategies.

"You have a company that's kind of been left out and I don't where the turns going to come from. It's not going to come from just printers," Cramer said.

HP continues to lose out to competitors in the hardware space. Apple passed Hewlett Packard as the largest hardware seller, and Cramer said the tablet has turned out to be a category that's more important than ultra-book. Though HP spent a billion on Palm, for its operating system, it has not lead to a phone. In addition, Cramer thinks the public has soured on HP's printers.

HP, he said, had been making some inroads on the consulting side but he thinks that could be rolled back.
Despite the recent rally in the stock market, HP has continued to drift down and Cramer thinks the company is in serious trouble. Though HP's bonds are holding up, he wouldn't want to hold them either. He prefers Accenture, IBM, and SAP, which stand to benefit as they pick off pieces of the business.

"This is tech. This is not General Mills. It's not Kellogg. Get a new CEO in there and they are not going to be able to reinvent the syrup. Hewlett Packard is falling behind. And the others are spending a lot more," Cramer said. "Here, I think of SAP, Accenture. To a lesser extent Dell. And certainly IBM on the consulting side."

HP, unloved and under appreciated?
March 19, 2012, 2:31 PM

It’s been a pretty good year, so far, for the giants of the technology industry.
Well, except for Hewlett-Packard. As the first quarter of 2012 draws to a close, the big tech names on the Dow Jones Industrial Average have posted double digit gains.

Intel Corp. is up by 14%, IBM Corp and Cisco Systems by 12%, and Microsoft Corp. by an impressive 24%. But then there’s H-P. The Silicon Valley icon’s stock is off by 5%, one of the top decliners on the Dow.

So what’s going on?
Sterne Agee’s Shaw Wu says he’s been talking to investors and he says, “It seems investors don’t have a lot of confidence in the company’s ability to turn around.”

“Some of the concern is with management but also with the end markets the company participates in, namely printers and PCs,” he adds. “There is also concern with the balance sheet and whether they can improve it.” There’s been a lot of uncertainty surrounding the PC market, in the wake of weak consumer demand and the lingering impact of the hard disk drive shortage following the Thai flooding disaster.

Last week, Jefferies analyst Peter Misek cut his estimates for H-P and for Dell Inc. citing multiple headwinds for the PC industry.

In fact, he argued, “We believe PC-related companies that are citing Thai-flood HDD issues as the cause of PC weakness have been using it as a smoke screen to mask underlying slower demand trends. Due to these factors, we expect PC sales, especially notebook sales, to slow meaningfully.”

H-P’s printing business, once seen as the crown jewel of the Palo Alto, Calif.-based giant, is also facing a market that many believe is in secular decline. The reason: users apparently are losing interest in printing pictures and documents.

Still, Wu of Sterne Agee was upbeat about H-P’s stock which, he said, reminds him of “Cisco and Dell a year ago.” He was referring to the two other tech giants staged a comeback after reeling from poor reviews on Wall Street. Dell shares have gained 19% this year.

Wu has a buy rating on H-P, arguing in a recent note that the stock “is an underappreciated turnaround story.”- Benjamin Pimentel

Whitman's dilemma: It may be easier to identify challenges than fix them
HP CEO Meg Whitman may find it easier to identify the company's challenges than to solve them, The Financial Times reported... After HP announced it is combining imaging & printing with PCs, Forbes said the best option for HP leadership is to learn from its mistakes and return to its heritage of innovation, but the reorganization amounted to rearranging the "deck chairs on the Titanic" ... After defending her strategy before HP shareholders, and making the case why HP is still relevant, reported Whitman received mixed reaction.

HP chief finds pitfalls easier to identify than fix
By Richard Waters

March 7, 2012

The loud hissing sound that can be heard in the heart of Silicon Valley is air leaking out of Hewlett-Packard’s share price. With its frequent leadership changes and boardroom spying scandal, HP had already guaranteed itself a place among business school case studies. Now, in the face of a broad based erosion in its competitive position, it has become a cautionary tale that highlights the pitfalls that can befall tech conglomerates.

Having slumped 6 per cent after it published weak quarterly results two weeks ago, HP’s shares have been on a steady slide that took the decline to 16 per cent before a halfhearted bounce early on Wednesday. Wall Street has clearly decided that for a company that was already reeling from a series of missteps, things can get even worse.

The messages from this are of wider significance for the tech world. First and foremost is the need to recognize, and adhere to, a clear distinction between value and growth strategies. The transition from growth stock to value play has always bedevilled tech concerns. HP’s mistake, though, was its failure to decide which side of the line it wanted to stand.

Until Mark Hurd was unseated as chief executive after losing the confidence of his board some 18 months ago, HP was well on the way to becoming a value story. The profit margins in the world’s largest PC business by sales, for instance, are never going to be very exciting, but Mr Hurd managed to drag them up to a point where they were at least respectable. This was a welcome change from the previous regime, when HP executives seemed undecided about whether they should be chasing growth or margins. His reward was a jump in HP shares as a new class of value investor climbed on board.

Imagine the surprise of those same investors then, when Léo Apotheker, who stepped in after Mr Hurd, executed a 180 degree pirouette and declared that HP was back on the path to being a growth company. Publicly trashing the PC business even before he confirmed plans to dump it while at the same time drastically overpaying in a $10bn deal for Autonomy were guaranteed to make the value crowd on Wall Street see red.

In the circumstances, new chief executive Meg Whitman has done the smart thing. A quick about-turn that keeps PCs within HP may or not be the right long-term decision, but it should at least stem some of the value-destruction in the short term.

But while HP is still big in personal computers, it has lost touch with the main trend in personal computing: the rise of touchscreen devices. Ms Whitman is now entirely dependent on Microsoft’s ability to make the forthcoming Windows 8 the killer platform that is finally capable of competing with Apple and Google on mobile devices. Like Nokia, which has thrown its lot in with Microsoft’s lagging Windows Phone software, this is not a comfortable place to be.

A second frequent trap for tech companies, and one into which HP jumped with both feet, has been trying to serve both consumer and business markets. Few have been able to do both well at the same time: the 23 per cent drop in consumer revenues at HP in the latest quarter, at a time when Apple’s business soared by 75 per cent, shows how far behind HP is falling. Apple is riding the wave of “consumerisation” of business IT without compromising its single-minded focus on users.

Third in the list of pitfalls is the danger of a mistaken “transformative” acquisition. Wary that the challenge of integrating large businesses might distract them from fast-moving new markets, tech companies have traditionally stayed clear of large deals – a mold that was broken partly by HP’s own acquisition of Compaq more than a decade ago. It is now becoming apparent that Mr Hurd’s purchase of EDS to boost his company’s presence in services has left it with a business far more in need of fixing than it realised.

The final pitfall is one that faces all conglomerates: allowing a reliable cash cow to distract from the difficult decisions that need to be made about other, less successful businesses. In HP’s case, that cash cow has been its imaging and printing division. This has been one of the great unsung tech success stories, but it is not without its challenges. Consumers now print fewer pictures at home, eating into sales of ink cartridges: the unit’s profit margin fell by more than a quarter in the latest period, to about 12 per cent.

Ms Whitman has not shrunk from blaming her predecessors, notably for failing to invest enough in new products over a sustained period, and has set about an urgent effort to shore up operations that are suddenly sagging on many fronts.

But identifying the sins of managements past is easier than fixing them. As HP’s shares continue to head south, the odds that it will eventually be forced into a more sweeping break-up have been rising.

Deck Chairs On The Titanic? Interpreting HP's Reorg
Roger Kay, Contributor 3/26/2012 @ 9:18AM

Our industry is hardly ever at a loss for excitement.  If it’s not one thing, it’s another.
Last week for the umpteenth time, Hewlett-Packard (HP) announced that it was reorganizing its divisions.
In this instance, it is blending the Personal Systems Group (PSG) with the Imaging and Printing Group (IPG).  This stuff is insider baseball, HP palace politics, but nonetheless, a whole slew of tea-leaf-readers follow and interpret these intrigues before, during, and after they unfold.

The mingling of the PSG and IPG assets is a redux, mirroring the same strategic maneuver executed by Carly Fiorina in 2005 for somewhat similar reasons, but with the opposite structure.  Then, briefly, Vyomesh Joshi (known as “VJ”), the now-former head of IPG, took over the whole ragbag for a few months.  Looking back, it was perhaps his grandest moment.  Former CEO Mark Hurd pulled the two divisions apart soon after he took over from Fiorina.

This time, however, under brandy new CEO Meg Whitman, VJ was shown the door, and Todd Bradley, long suffering head of PSG, got the nod to run the combined show.
Bradley will finally get his day in the sun.

And none too soon, either.  Bradley’s patience with HP has thinned over the past several years, as it passed over him for the top spot twice and even, under the short-lived regime of Leo Apotheker, considered dumping PSG entirely, labeling it a “commodity business,” a diss from which Bradley — not to mention the division itself — has barely recovered.

His sunshine will last for only a day, though.  Tough work lies ahead. HP held a not-particularly-illuminating call with industry analysts last Friday.  The company chose as spokesperson someone apparently not actually briefed on the subject.  Some of the analysts tried to ask probing questions, but made scant headway, as the spokesperson pleaded ignorance about many of the most pressing inquiries.

But the outlines of the reorganization are becoming clearer nonetheless.
IPG has long been a hearty contributor to HP’s top and bottom lines, and still is, but its margins have halved in recent quarters.  Revenue growth is stagnant with maybe a hint of decline.

PSG is the largest contributor of revenue to the company, but its margins are lower than IPG’s, an indicator, perhaps, of the fact that PSG has many competitors and that IPG stands nearly alone at the top of the printing-and-imaging pyramid.  Selling ink by the bucket is still a great business.

PSG’s revenues are off, and its margins, under pressure, but some of this performance could be attributed to Apotheker’s premature announcement of the division’s death, which was made before — and was certainly a major factor in — his own invitation to walk the corporate plank.

Despite their relative positions, PSG has a more obvious future than IPG.  HP has become known as one of the better makers of all-in-one desktops, those sleek concoctions that combine the computer “works” with the display into a monolithic unit.  Arguably, all-in-ones will account for a rising proportion of future desktops, since the “works” will continue to get smaller while the requirement for a display larger than is practical for a portable machine will remain for some users.

Meanwhile, Intel is reinvigorating the notebook category with its Ultrabook push, creating extremely thin, light designs that boot and resume quickly, deliver a high-performance experience, and offer all-day battery life.

Tablets — at the moment ceded to Apple, which got off the blocks before the rest of the racers had even bent over — will get a rejuvenating injection when Microsoft brings out Windows 8 later this year.
So, there is something to look forward to in PCs.  Not so much in printers.

I sat with VJ for 45 minutes at IPG headquarters in San Diego last October, at which time he articulated the division’s way forward.  He spoke of scanning and printing as on- and off-ramps in an otherwise electronic workflow, one which HP could help manage — even as it tried to convince people to get off once in a while to print something.

As I thought about his departure last week and that day I spent with him and his lieutenants, I looked around my office at the gifts I received during my visit.  One was a beautiful print of a 35mm slide that I had taken in the mountains of Northern Italy in 1986 and subsequently scanned with a Nikon CoolScan high-resolution scanner.  With Adobe’s PhotoShop, I took the 65MB TIFF file down to something more manageable, a 2MB jpg.  No detail of the gorgeous analog original was lost.

The print was done on paper textured to look like canvas, and the form was stiff and foldable so that after the print was made, it could be formed into a shallow box that looks a bit like a real framed painting.  One great gimmick is that the edges of the photo are replayed on the sides of the box so that one sees the photo from all angles, although details at the edge are repeated.  Still and all, the effect is lovely.

The other gift was a photo album.  At a kind of rest station on the factory/office floor where employees can go to do printing tasks for free, my guide took a handful of digital cam shots of my boy and a friend, which I happened to have on my notebook, printed out 4x6s and 5x7s, and, with an auto-compose tool, set them in a nice book, which I took home. The thing about these two charming items is that they represent corner cases in printing: high-value-add processes that one might do on occasion, but not every day.

Contrast that with what I used to find next to the (HP) printer when I worked at IDC in the mid-2000s: literally hundreds of abandoned Web pages and emails, printed by people who thought that they needed them and then forgot about them in the general insanity of the moment.  Clearly, those printouts weren’t as important as their originators thought when they hit the “print” button because they managed to get along without them.

Information has exploded.  Trees are rarer.  Printing doesn’t scale.  People save files or indices to places on the Web to find things nowadays. So, printing is in decline, retreating to specialized applications, and PCs have a way forward, albeit a difficult one.

What these two businesses share in common is that they are not on the strategic main boulevard of the company, which sees itself growing further as an enterprise solutions provider akin to IBM.  HP still has work to do building its software side, but its enterprise hardware and services are already world class.  The enterprise business has both growth and healthy margins, good reasons to focus investment on it.
What’s ahead for the combined IPG-PSG unit?  Clearly, cost cutting.  No headcount reduction number has been announced, but it is likely to be significant.

Otherwise, product-line simplification.  From Apple, other companies are learning the benefits of a simple product line.  HP has far too many products in both IPG and PSG, and each one comes with its own personnel and cost structure.

The benefits of simplification will be lower costs and better focus.  The drawback is that a lot of people will lose their jobs.
Analyst: HP's coal is just coal, no diamond in the rough
Hewlett-Packard is under-invested in R&D, lacks focus, and its business model is under pressure because HP relies too heavily on PCs, printers and ink sales, Deutsche Bank analyst Chris Whitmore said, Bloomberg Businessweek reported: "HP has gone three years without any meaningful cash flow growth. 'Either $40 billion went down the rabbit hole or [HP's] core business is under duress,' Whitmore said"...After The Motley Fool reported the printing business is worth 40% of HP's total enterprise value of $71 billion, Fortune said, "The slowdown in printer sales is hitting HP at a tough time. Whitman is trying to do more than rearrange HP's deck chairs, she's trying to make bold moves to eliminate the company's weaknesses and focus on its strengths."

Bloomberg Businessweek - How Exactly Does HP Invest in the Future?
By Ashlee Vance on March 23, 2012

Hewlett-Packard’s decision to merge its PC and printing businesses into a single entity does not stand out as a terribly novel idea. The company was for this structure (under Carly Fiorina) before it was against it (under Mark Hurd). And Hurd had contemplated merging the units near the end of his tenure to chase the same proposed gains from unifying the supply chain, branding, and support that Meg Whitman now hopes to realize.

What must keep Whitman awake at night are the far more daring moves that HP will need to take to reawaken its business. Chris Whitmore, an analyst at Deutsche Bank, issued a research note this week that framed HP’s competitive position in the starkest of terms.

Whitmore notes that HP spends less on research and development per year than IBM  or Cisco .
Keep in mind that HP is a larger company than any of those rivals, and competes in a wider range of businesses—PCs, printers, servers, storage, software, and networking. Oracle, by contrast, mostly deals in software, while Cisco concentrates on networking. If you take out the money HP spends on printer R&D, it runs about the same as a pair of companies that are even more specialized. Over the past six years, HP’s R&D spending as a percentage of revenue has gone down about 25 percent.

HP, a $130 billion-in-revenue-per-year, one-stop-shop technology colossus, has been investing in products as if it were doing battle in a niche market. Digest that for a minute. It’s a wonder HP has managed to get new products out the door at all.

True, HP does not need to spend as much as rivals in some respects. It relies on partners such as Intel  and Microsoft to do a little of the innovation heavy-lifting and then uses its reach to sell products. It has also used $40 billion in acquisitions over the past four years to plug gaps.

As Whitmore points out, though, that strategy does not seem to have worked. HP has gone three years without any meaningful cash flow growth. “Either $40 billion went down the rabbit hole or [HP's] core business is under duress,” Whitmore writes.

HP still does not seem to have a smartphone or tablet strategy, while the margins on PC sales remain tight. The company’s moneymaking printer division has started slipping and its services business has failed to meet expectations. (Making matters worse, Whitmore estimates that 75 percent of HP’s services deals are tied to PCs, printers, and high-end servers—all of which face tremendous pressure.) Having added all this up, Deutsche Bank slapped a $20 per-share value on HP, which closed at $23.03 on Thursday.
An HP spokesman declined to comment on the Deutsche Bank research note, and instead pointed to comments Whitman made recently during a call with investors.

“We didn’t make the investments we should have during the past few years to stay ahead of customer expectations and market trends,” Whitman said. “As a result, we see eroding revenue and profits today. We need to invest now as a market leader from a position of strength, and that’s especially true because these businesses are not only under intense competitive pressure but are also under pressure from tectonic shifts that are taking place at the very foundation of the industry.” So, yes, she is aware of the problems.

“We need to move quickly to capture emerging opportunities in areas like cloud, security, and information management,” Whitman continued. “We’ve already assembled some formidable assets. Now we need to align our portfolio to deliver a new generation of capabilities. We see a once-in-a-generation chance to define the future of technology and position HP as a leader for decades to come.” Right. There’s the call to arms.So, let’s assume for a moment that HP’s new leaders aren’t just rehashing the old ideas of old leaders. Whitman must have something far more drastic in store. Right?

The Motley Fool - Ink is Black Gold for HP
Ink is Black Gold for HP
Brendan Mathews
March 16, 2012

Hewlett-PackardHas fallen on hard times. A series of bad acquisitions, management turnover, a few bad quarters, and a dismal outlook for personal computers have resulted in a beaten down stock price -- less than 9x earnings. At today's prices, HP represents a solid value, driven in part by the value of HP's printing business. Printing is a cash cow, and according to my estimates, its milk accounts for 40% of the value of the company.

HP is No. 1 in the printing market with 42% market share, which is more than the next two competitors combined. HP uses a razor blade business model: printers are sold at low cost, encouraging frequent upgrades to a wide array of printers with non-standard ink cartridge or toner fittings. HP then generates a recurring stream of revenue from cartridge sales. The economics of HP's printing business are phenomenal. To put it in perspective, printer ink costs more than blood by volume and more than caviar by weight.
The high price of ink isn't an accident. HP creates thousands of printer and ink SKUs, which makes it nearly impossible for independent replacement-ink vendors to operate at a profitable scale compared to HP. Check out the number of HP printer SKUs refills offered at Staples -- and also notice that Staples doesn't even sell generic ink. HP's engineers purposely design cartridge holdings to be difficult to copy with "compatible" refills, even going so far as to manipulate the chemicals in the ink (i.e. if your generic refill doesn't have the right viscosity, it'll jam the printer). Consumer Reports has labeled generic refills as a false economy because they frequently don't work.

To maintain the ink-cash machine, HP spends $1 billion a year on ink research and development and holds 9,000 patents related to imaging and printing, 4,000 of them for consumable supplies such as ink and cartridges. "Typical ink development might have five PhD chemists working on it for several years and of course an army of technicians," says Nils Miller, an ink and media senior scientist for HP, "and that was just to develop it." HP will also sue to enforce patent rights.

Bears will point out that tablets from Apple  and Amazon  have reduced the need to print out documents. That may be partially true; however, in my humble opinion, we're still decades away from a paperless world, and professional researchers seem to agree with me. IDC predicts the market for printers and ink will hold steady for at least the next five years.

The printing business generates revenue of $25 billion annually at a 15% operating margin (before unallocated corporate overhead). By comparison, Lexmark generates 6.5% operating margins and trades at 8x earnings. After allocating corporate overhead and deducting taxes, my estimate of earnings power for the printing unit is $2.9 billion. A multiple of 10x, which is a reasonable premium to Lexmark, implies an enterprise value of $29 billion. In other words, the printing business alone is worth 40% of HP's total enterprise value of $71 billion.
CTO says HP wants to be primarily a hardware company
Hewlett-Packard chief technology officer Matt Potts raised eyebrows when he told TheStreet HP wants to be a hardware company that differentiates itself through integrated hardware, software, and services solutions for clients, which he claimed is different than IBM's strategy. The CTO said HP is not looking to be a software and services business "like IBM," adding, "We are primarily a hardware business, with software and services -- they are primarily a services company that has software, and has some hardware." Odd then how software was the one part of HP's business that grew last quarter.

Smarter Planet makes IBM a smarter investment
IBM's stock price has tripled since the Smarter Planet strategy was launched in November 2008, BloombergBusinessweek said: "It’s a rare feat for a company as large and as old as IBM to rewrite its image and reignite interest among once cool investors... IBM has an ethos that speaks to the future, while rivals such as Hewlett-Packard often seem like they’re doing the same old, same old" ... Bloomberg published a similar feature on the success of IBM's Smarter Planet  campaign.

Who's winning the cloud race?
Synergy Research Group predicted a "two-horse" race between IBM and HP in cloud computing, with Cisco in third, Datamation said... said though Cisco UCS is seeing some momentum, "service providers say the proprietary system isn’t a good fit for the cloud"; in fact, some cloud and hosting providers are moving off UCS... Bloomberg said Oracle is playing catch-up in cloud computing as companies swap older ERP systems for cloud-computing software: "Oracle was years late to market with its Fusion applications... Salesforce and Workday are causing customer defections and eroding Oracle's application maintenance business."

HP, IBM and Cisco Battle for Cloud Dominance
HP and IBM are fighting for the cloud infrastructure top spot while Cisco closes in with a little help from its UCS portfolio.
By Pedro Hernandez

March 27, 2012

HP is the cloud equipment king, but IBM and Cisco aren't far behind, according to a new report from Synergy Research Group.

As with any hot market, the research firm's "4Q11 Cloud Equipment Market Share" report paints a rosy, if volatile, picture of the cloud server, storage and networking equipment sales. In the last quarter, HP took home 17.4 percent of worldwide cloud hardware revenues. IBM was close behind with 15.9 percent.

All told, IT vendors booked $39.4 billion in cloud equipment revenues last year, a 15 percent increase over 2010. In the fourth quarter alone, they brought in a healthy $10.6 billion haul.

Those stratospheric figures are due to an explosion of Web-enabled services, says Jeremy Duke, Synergy Research Group's founder and chief analyst. "Cloud services are clearly a game changer in the market and we're seeing huge growth in interest, service launches, and customers," he said in a company statement.

"The vendors that provide infrastructure for cloud services have the opportunity to benefit greatly from this surge -- you don't see many $40 billion markets growing by 15% per year," he adds. The bulk of that growth is coming from Europe, the Middle East and Africa (EMEA) and Asia-Pacific. North America still accounts for the largest share, however, with 43 percent.

While the expanding cloud market is raining good fortune on IT vendors, some are faring better than others.

Cisco is the growth leader for 2011, having experienced 23 percent increase in cloud equipment revenue from 2010 to 2011. While its top dog status in networking is a given, Synergy Research observed that Cisco's blade server business is picking up steam.

Earlier this year, Cisco announced that it hit new milestones with its UCS portfolio, which integrates networking and server hardware. The company now has 10,000 customers running UCS servers and the product slate is responsible for $1.1 billion in annual revenues. Todd Brannon, a product marketing manager for Cisco, told that his company is currently selling more UCS B-series blades than rack-mount C-series systems.

In the North American market, Cisco's upward momentum places it near the top along with HP and IBM. The report also notes that HP grew its cloud hardware business by 10 percent in 2011 while IBM's growth chugged along at a mere 2 percent. The two companies were virtually tied for first place in 2010.
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