IBM refers to them as First-in-the-Enterprise (FIE) customers. These are customers that brought in their first mainframe; they’re virgin mainframe customers. Some aren’t quite virgins; they may have had a mainframe 10 years before. Most FIE customers today come from the developing world: Namibia, China, Russia, India, and South Korea. No surprise there.

More surprising, however, is when IBM lands a new mainframe customer in North America. It seems IBM had saturated the North American market decades ago; every organization that might need a mainframe already has one, or more, in many cases. The mainframe population seemed to be slowly dwindling as companies traded mainframes for scale-out distributed systems based on commodity x86 processors. The resulting server sprawl and its corresponding surge in IT management and operational costs seemed to make no difference.

Three factors contributed to this trend: lazy IT analysis, IT cultural bias, and perceived high Total Cost of Acquisition (TCA). Although IBM has provided compelling competitive TCO analyses for different workloads on the System z, it hasn’t put much of a dent in TCA until recently. For companies that don’t already have a mainframe and people with a mainframe mindset—the cultural hurdle—the initial acquisition cost seems formidable; their analysis can’t seem to look beyond that.

Thorough Cost Analysis

“When I suggested considering a mainframe, everyone started laughing,” recalls Danny Gurizzan, executive vice president at Payment Solution Providers (PSP) in Toronto, which provides electronic switching software to banks. Gurizzan, however, did a thorough analysis and calculated that the company could reduce overall system costs by 35 percent by replacing its existing scale-out distributed systems with a System z10 running z/OS, WebSphere, DB2, and Linux on System z. Clearly, Gurizzan had done his homework.

PSP, an 11-year-old Canadian company and industry leader in business consulting, smart card solutions, e-payment networks, and the integration of financial transaction processing systems, opted for the z10, its first mainframe, late last year year. The z10 will run PSP’s Atlantics Payment Switch, which it offers to clients, mainly banks, as licensed software or as a cloud service. The mainframe will also support new business opportunities for PSP's card processing business.

Previously, the company ran HP blades on many racks and many instances of Oracle, Gurizzan explains. This is a common deployment approach in the distributed world. Maybe PSP was more sensitive to the problems with this approach due to its concern about security, given the nature of its products. The HP and Oracle infrastructure lacked the security PSP required, making it difficult to comply with the banking industry's Payment Card Industry Data Security Standard (PCI DSS).

The problems with the distributed deployment, however, went beyond security compliance. As is typical, PSP deployed separate servers for each of its clients' development, production, and availability requirements. Soon, it became apparent that this approach resulted in a sprawling, inefficient infrastructure that would take up too much space and result in excessive costs for IT management, power and cooling, and software licenses. Each of those Oracle instances adds to the licensing costs. Every time PSP brought on a new client, the costs grew.

IT Cultural Bias

It isn’t surprising that the IT staff at PSP laughed when Gurizzan suggested virtualizing and consolidating the distributed server sprawl on a mainframe. They contended it would cost way too much, which is the typical reaction based on old assumptions. Yet when Gurizzan looked closely at the numbers, he saw a completely different story. It would reduce the TCO compared to the distributed environment, and when combined with DB2 and WebSphere, it would enable additional operational efficiencies, mainly in Oracle licensing savings, and give the company more flexibility in how it could deliver its product.

An analysis of how PSP’s market was evolving made it clear to Gurizzan that “the HP-Oracle infrastructure simply couldn't support our growing business.” By running on the z10, PSP's Atlantics Payment Switch can process up to 5,000 transactions per second, ensuring the company has the transaction power to meet anticipated spikes in demand by its PSP Card Services Division created by holidays such as Christmas. In the process, the z10 lets PSP dramatically simplify its infrastructure and lower IT costs per client transaction. And a z10 can be picked up at bargain prices these days.

Lowering Mainframe TCA

For several years, IBM has been trying to drive down mainframe TCA, especially for mainframe virgins and existing mainframe shops interested in expanding their mainframe workload portfolio. IBM introduced the System z114, an entry-level mainframe, at an official price of $75,000, which is cheaper than the z10 BC, though you will probably spend close to double that to do meaningful work.

IBM hasn’t formally announced zEnterprise Solution Editions—deeply discounted packages consisting of the hardware, software and middleware needed to do real work and three years of maintenance—but you can expect z114 Solution Edition packages for the Enterprise Linux Server and for an SAP bundle. Those two packages would have the best chance of attracting new shops to the mainframe, especially for Linux server consolidation. In practice, IBM confirms that all the Solution Edition Packages are available for the z196 and z114.

To further simplify the migration for mainframe virgins, IBM has been ramping up its Migration Factory, a set of services that uses a five-step approach to get an organization’s applications to the mainframe with minimal disruption and relatively low cost. PSP took advantage of IBM’s various migration services.

Initially, PSP estimated that the new mainframe environment would yield savings of 25 percent based primarily on reduced requirements for software licenses, electrical power, and floor space. However, figuring in other savings and even including the cost of migrating its Oracle database 11g to IBM DB2 (which required some application code changes), Gurizzan recently put the savings closer to 30 to 35 percent.

With HP floundering as it searches for a viable business strategy it can grow and sustain, and Oracle still sputtering in its efforts to leverage the Sun acquisition, distributed shops should welcome the zEnterprise machines, especially now that they accommodate x86 blades in the IBM zEnterprise BladeCenter Extension (zBX). Still, this requires building a compelling value case for moving from distributed platforms to the mainframe. A solid case becomes pretty obvious when you look at all the numbers; PSP is proof. The biggest challenge may be overcoming an IT cultural bias that still views the mainframe as it was 20 years ago.