Big Tech Problem as Mainframes Outlast Workforce

IBM and CA are hard-pressed to replace the aging corps of Baby Boomers who support their still-indispensable mainframe business

When Giorgos Tsapepas started as an intern at IBM (IBM) in 2002, he had never used a mainframe. At Rensselaer Polytechnic Institute, the university he attended in upstate New York, there was no instruction in handling the powerful machines that tackle complicated computing tasks for such industries as finance and health care. Now a mainframe expert, Tsapepas had to learn his specialty on the job.

Teaching mainframe skills is out of vogue at many universities with the advent of newer approaches to solving the biggest computing challenges. At the same time, many of the engineers capable of tinkering with the refrigerator-sized machines are nearing retirement. The average age of mainframe workers is 55 to 60, according to Dayton Semerjian, a senior vice-president at CA Technologies (CA), the second-largest maker of software for mainframe computers after IBM. "The big challenge with the mainframe is that the group that has worked on it—the Baby Boomers—is retiring," Semerjian says. "The demographics are inescapable. If this isn't addressed, it will be trouble for the platform."

The resulting worker shortage poses a threat to Armonk (N.Y.)-based IBM. The company commands 85 percent of the mainframe market and can't afford to abandon a technology that despite its age, still underpins some 10,000 mainframes that are used by 4,000 to 5,000 customers around the globe. If unresolved, the lack of engineers adept at designing, programming, and repairing mainframes could curb demand for one of IBM's most profitable products. The dearth of talent could also spur customers—from banks to hospitals—to consider adopting alternatives to mainframes. These include servers made by Hewlett-Packard (HPQ) and Dell (DELL) to run networks, Web operations, and a growing range of the computing tasks once entrusted to mainframes.

CA, based in Islandia, N.Y., surveyed its customers last year and found that 70 percent of respondents called the aging mainframe workforce "a critical pain point." IBM and CA are taking steps to ease the strain.

"looks like my father's computer"

IBM has created a curriculum designed to encourage the teaching of mainframe skills and distributed it to institutions of higher learning in 61 countries. It also set up a competition called Master the Mainframe to generate interest in mainframes and identify potential employees among high school and college students.

CA has changed the look of mainframe software to make it more appealing to a generation weaned on sleek Apple (AAPL) computers and the crisp, interactive online games and tools of the new Web. Some companies still employ an older mainframe with a screen known as a 3270 terminal emulator, which evokes the decades-old Disk Operating System, or DOS, that predated Microsoft (MSFT) Windows, Semerjian says. "Gen Y looks at that 3270 screen and they say: 'You've got to be kidding me. That looks like my father's computer,'" he says. "'I want something that's Web 2.0, that's graphically rich.'"

IBM began distributing its System Z Academic Initiative to 24 colleges and universities in 2003. The number swelled to 700 this year. IBM plans to have teamed up with 1,000 institutions by the end of 2011, says Don Resnik, a manager on the project. As part of the program, IBM brings such customers as Citigroup (C), Bank of America (BAC), and Bank of Montreal (BMO:CN) to campuses to discuss job opportunities and spread the mainframe gospel. "The customers were the influencers. They would talk about their skill requirements, the demand, the hiring, and the internships," Resnik says. Participating U.S. schools include the University of Arkansas, Illinois State University, Syracuse University in New York, and San Jose State University in California.

The Master the Mainframe competitions similarly help IBM introduce young people to a technology they might otherwise overlook. Since the contest's inception in 2005, about 22,000 students from 15 countries have registered to compete in it, says Kathy Pfeiffer, an IBM program manager. Students who pass certain thresholds in the competition can submit their resumes to an IBM website that's available to customers seeking mainframe-skilled employees.

outstandingly high margins for IBM

Modern mainframes trace their roots to the introduction of IBM's System/360 in the mid-1960s, when the oldest Baby Boomers were still teenagers. With their ability to reliably process millions of instructions per second, mainframes became popular in banking, insurance, and other industries that required high-power computing. For the era's computer science students, the mainframe represented cutting-edge technology.

The number of mainframes today has dropped to about 10,000, from 30,000 to 40,000 in earlier decades, according to research firm IDC. The decline is partly related to the emergence of newer, competing technologies, including servers based on Intel (INTC) semiconductors. It also reflects that newer mainframes are more adept at computing and can handle work that previously took more than one machine, Resnik says. In July, IBM introduced a new version that executives say can run up to 60 percent faster than the previous model, using the same amount of power and cutting service costs by as much as 70 percent. While they account for an estimated $3.4 billion in average annual sales—less than 4 percent of IBM's total, according to analysts—mainframes are a high-margin business, generating additional software and services revenues. Margins for mainframes are about 70 percent, compared with 46 percent for the company's margins as a whole, according to Collins Stewart.

For all IBM's efforts to keep them relevant, mainframes are a hard sell to would-be engineers. Young techies want to be exposed to newer hardware, including mobile devices; more recent software, such as the Java programming language; and the Windows and Linux operating systems, says Dale Vecchio, a vice-president at Gartner Research (IT). "They want to be involved with the things that they've grown up with, whether it's games, or websites, or the Internet, or everything else," he says.

Resnik counters that mainframes complement newer capabilities. "When students get exposure to a platform that has grown, that runs Linux, that runs Java, that is open-systems, that has modern interfaces, they respond extremely favorably," he says.

simpler software, flexible schedules

For its part, CA set itself to making the machines simpler to use. The company hired an industrial designer and examined how customers use the software. "We realized it's not intuitive and we've made it too complex," Semerjian says. Aside from training new mainframe workers, CA aims to keep existing mainframe experts in place longer. It offers flexible work schedules such as three-day work weeks. The company will even consider letting seasoned engineers take summers off. CA also encourages retiring workers to mentor younger ones. CA hires about 40 to 50 people a year to work on the mainframe, Semerjian says. In a couple of years, recruiting may double to make up for retiring workers.

Having diehards on hand is key, says Vecchio at Gartner. "They are cheerleaders for this platform and they'll defend it to their death," he says. "As they leave, there's no one else to take up that mantle."

Tsapepas has indeed become a mainframe evangelist. "Once I was part of the team, it became a no-brainer to become part of something that has a rich history," he says. "It's something that has been around for awhile and will be around for awhile and really we have a great opportunity to continue advancing it."

Before it's here, it's on the Bloomberg Terminal.