IBM Invests $1 Billion In Linux To Revive Power Systems 

IBM wants its Power Systems server business to grow again, and it is going to have to rely on Linux to make it happen. And so, last week at the LinuxCon 2013 conference, Big Blue said that it would invest $1 billion in various Linux development and marketing efforts aimed specifically at its Power-based servers.

The machines based on IBM's homegrown Power processors are vital to IBM. They are as important in terms of driving revenues as Big Blue's venerable mainframes – something on the order of $4 billion or so a year these days for each line. The Power-based server line probably does not push nearly as much profits to the bottom line as mainframes do. (It is hard to tell because IBM doesn't break out revenues and profits by hardware product line.) The high cost of mainframe software, which has only one supplier, means mainframes are still the big profit engine at the company, but Power probably comes in second after you load up software on top of the systems and is very likely more profitable than the company's System x X86 server business.

Most of the Power Systems machines that IBM sells run its AIX variant of the Unix operating system, with a smattering of machines running Linux from Red Hat or SUSE Linux or its own IBM i proprietary operating system. The trouble that IBM is facing and the reason it has to invest to get more Linux applications running on Power is this: The Unix systems business has been in steady decline for many years now after reaching its pinnacle at the turn of the century. Unix systems account for maybe 15 percent of worldwide server revenues a year now, compared to close to 50 percent at the height of the dot-com boom when IBM ponied up its first big Linux investment.

In the past decade, IBM has been able to eat market share from Oracle/Sun Microsystems and Hewlett-Packard to keep its Power Systems business growing, and it eventually became the dominant supplier of Unix systems. But in recent quarters, despite a steady pace of new Power processors and systems to run them, the Power Systems business is starting to decline. Big iron Power Systems and their Oracle Sparc and HP Itanium equivalents are still used by some of the largest organizations in the world to run their databases and transaction processing systems. But new workloads tend to go on X86 iron, and this is a problem.

Ironically, it is a problem that IBM itself partially created. Back in late 2000, when CEO Louis Gerstner was getting ready to leave and Sam Palmisano was being handed the reins, it was abundantly clear that Linux was going to be a force in the data centers of the world. So IBM committed $1 billion to getting the open source operating system tweaked to run well on its various platforms, to get more of its own software to run on top of Linux, and to build a technical team that could support Linux in the manner that enterprises were accustomed to with its AIX, OS/390 (now z/OS), and OS/400 (now IBM i) operating systems. IBM also eventually created a variant of its z/VM partitioning software and radically cut the price of its mainframe processors when they ran Linux.

Fast forward thirteen years, and Linux is used at about a third of mainframe shops on their mainframe systems, and workloads are being pulled off X86 machines and put on Linux partitions on mainframes, as hard as that may be for many to believe. And in some cases, new applications that might have never been considered for the mainframe and would have been put on X86 servers without a passing thought years ago run on mainframes in Linux partitions.

The idea with this round of investments is to repeat the success, but this time on Power-based machines instead of on mainframes.

IBM doesn't usually talk about its investments in particular platforms, but as Jim Wasko, director of the Linux Technology Center within IBM's System and Technology Group, pointed out to EnterpriseTech, when IBM does put a number on something, it is to demonstrate that it is serious about the matter. Wasko is in charge of Linux development on the company's System x, Power Systems, and System z platforms as well as related open source projects such as its BigInsights Hadoop distribution and its SmartCloud Orchestrator OpenStack variant.

Back in 2000, "that $1 billion was spread very broadly," says Wasko. "This investment is very focused on Power, and Linux, and open source. It is a more targeted investment." Wasco concedes that IBM has done pretty well selling its own software and consulting services for Linux systems, and has done well with System z mainframes and even its System x machines, but "not so much on Power."

"This gives us that focus we need. It is not just an operating system that runs, but it is an ecosystem. It is ISVs and applications, including open source applications like MongoDB, MariaDB, Ruby on Rails – those sort of tools for in-house application development as well as significant ISVs on top of that."

The investment devoted to bolstering the Power-Linux combination will pay for research and development and marketing. Unlike the prior Linux investment from 2000, Wasko says that this latest one will be aimed at companies outside of IBM and helping them port their applications to Linux running on Power. The Linux investment will span from three to five years. And Wasko admits that IBM is not exactly sure how quickly it will burn through the $1 billion because the company wants to react on the fly to what is working in the field.

IBM will be ramping up its Virtual Loaner Program, which gives software vendors freebie access to Linux slices on a cloud based in Dallas, Texas on which they can port, test, and tune their applications. IBM has three Linux development centers – one in Beijing opened this May, adding to existing centers in New York City (thanks to Wall Street) and Austin, Texas (where AIX software and Power chip development is done) – and will be adding personnel and computing resources to create another Linux development center in Montpellier, France.

As an example of an early success that the company wants to build on, Wasko says that IBM's Linux technology center in Beijing has helped software firms port over 400 applications to Linux on Power. China is an enormous market for all IT vendors to try to crack, but as it turns out, it is less like one market and more like many separate markets, with regional governments and companies all using different applications – all of which need to be individually ported from X86 to Power processors if IBM is to sell its machines against X86 iron.

According to internal documents seen by <i>EnterpriseTech</i> when those Power7+ machines came out in February, IBM reckons that there more than 2,500 core, open source applications available on Linux. These, by default, are available on Power Systems machines if they are part of the Red Hat and SUSE Linux distributions. IBM reckons that there are another 1,600 ISV applications that have been ported to the Power-Linux combo, including around 150 of Big Blue's own applications. Historically, the typical Unix distribution had on the order of 3,000 to 4,000 unique ISV applications running on any particular release at any given time. Unix vendors usually cited much larger numbers, but they were double and triple counting apps for different versions of their operating systems.

Once companies port apps to Power Systems iron, IBM has to supply machinery that competes against comparable X86 machines, both in terms of performance and price.

IBM launched its Linux-only PowerLinux servers about a year and a half ago, to substantially close the pricing gap with X86 hardware. With a PowerLinux machines, IBM tweaks the firmware on its Power iron so it can only run Red Hat Enterprise Linux or SUSE Linux Enterprise Server and then radically cuts the price on processing, memory, and disk capacity to compete head-to-head with equivalent Xeon-based servers. It is a maneuver similar to the Integrated Facility for Linux, or IFL, engines on mainframes, and in fact, earlier this year when IBM rolled out the Power7+ processor in its entry and midrange Power Systems servers, it hinted that it would be offering PowerLinux-style pricing on its larger machines at some future date.

The last piece of the Power puzzle is the OpenPower consortium, which IBM announced a month ago. With the consortium, IBM is opening up the intellectual property related to the Power processors and making it possible for others to make Power-based motherboard or systems or to hook peripherals into the processors. So far, search engine giant Google, graphics chip maker Nvidia, networking and switch chip maker Mellanox Technologies, and motherboard maker Tyan have joined the effort. Precisely what each party plans to do remains unclear.

Will this Linux investment work as well in 2013 as it did in 2000? Can it revive the Power Systems business and get it back to generating somewhere on the order of $5 billion a year in system sales, like it used to? Is this all too little, too late? IBM doesn't think so.

"If you look at the decline in the hardware business, our goal is to turn that around, and to do it with Linux," says Wasko. "We want to fill that hole and grow beyond that. We want to be, over time, a competitive threat that puts us on equal footing in the data center with the other major chip vendor." That refers to Intel, of course, but Wasko did not mention the company by name for dramatic effect. "I don't think we have illusions of being number one in that space, but a very solid number two and a very viable option."