UK: Death of the mainframe. (4 of 4)

UK: Death of the mainframe. (4 of 4) - Martin Hingley, of market research company IDC, reflects that companies such as Wang colour their business by their past successes, and by not making any genuine attempt to look ahead. "There is a lack of maturity i

Last Updated: 31 Aug 2010

Martin Hingley, of market research company IDC, reflects that companies such as Wang colour their business by their past successes, and by not making any genuine attempt to look ahead. "There is a lack of maturity in the industry," he says. "It's not like the oil or car industry where people have to come to terms with how to run a business."

But the shift to open systems has also caught the larger companies on the hop. Digital Equipment admits that its failure to adapt is partly to blame for its drop in profit. Win Hindle, senior vice-president, conceded that Digital had not anticipated the popularity of open systems, and had not done enough work on it. He also recognises the impact of Sun on Digital business: "Sun had products that were lower priced. We now have new products that are lower cost through new microchip technologies, and we are working on our distribution in an attempt to sell higher volumes."

Even IBM is having to follow the open systems movement, and according to Arthur Parker, systems management director at IBM (UK), it will be making aggressive moves to compete against Sun, and in networks. New products announced last autumn substantiate his words: "The information technology infrastructure of a business must be in place to address needs as they arise. No matter what equipment is installed, it had better be able to inter-operate," he says.

Even in mainframe computers, where IBM's dominance is unquestioned, it is rethinking its marketing strategy in the face of comment from other parts of the industry that the mainframe is dying. IBM is redefining the role of the product to give it a clear place within the new computing systems.

But the biggest change for IBM and Digital is that they too have to become service companies, as well as manufacturers. "So much of the future of our industry is in software and services. Today hardware is the bulk of our revenue, but because of improved technology the hardware segment is decreasing and by the end of the decade there will be a move towards software and services," says Hindle.

Parker says that IBM is committed to being a significant player in software and services, and is doing everything in terms of introducing services to make that happen.

It remains to be seen how quickly IBM and Digital can move their vast organisations to change. But as the dominant international players, their activity in new areas will have a significant impact on their smaller competitors. There are many who say that by the year 2000 there will be no more than 10 major players worldwide. According to Gartner Group's predictions, IBM, Digital, Apple, Fujitsu, Hitachi, Hewlett-Packard and NEC will account for 50% of the worldwide market.

Notably absent from this list are any European names: "None of the European players have strengths outside their national markets: they were national champions with protected markets, and now must spread their wings and find the money for R and D to keep up," says Dataquest's Dawley.

The main benefit which ICL will derive from its new relationship with Fujitsu is the cash to expand its distribution into new international markets. It is a highly profitable company, which could not get the necessary finance from its previous parent, STC. Likewise, Apricot Computers will become a global company with its new backer, Mitsubishi.

Some analysts believe that the Japanese are looking at potential takeovers in Europe as a way of getting market share and credibility in an area where they are not typically strong. Certainly the Europeans have not done themselves any favours by failing to agree to work together: talks have taken place between ICL, Olivetti, Bull and Nixdorf, but they always broke down.

Olivetti, like Nixdorf a success story in the mid-1980s, is now struggling to sort out a new product range. Bull is reeling under its own takeover of Zenith. "The cost of buying Zenith seems to be more than it bargained for," says Hingley at IDC. Its losses are running at nearly FFr 3 billion (£275 million) and last year (October 1990) it laid off 5,000 of its 45,000 workforce worldwide. But he believes that Bull is a stronger company than is generally believed, with a good share of government markets worldwide.

(Monica Horten is a freelance journalist specialising in business technology.)

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