TOKYO -- Hitachi will supply IBM-made mainframe computers loaded with its own operating systems starting in fiscal 2018, beating a retreat from hardware development in the age of cloud servers.
The arrangement was announced Tuesday. Hitachi will continue developing operating systems for mainframe machines. New products will offer improved compatibility with Hitachi's "internet of things" platform Lumada.
Mainframes have been widely used across Japan's public and private sectors for in-house computer systems since they emerged in the 1950s. Japan was a particularly big market, with Hitachi, IBM, NEC, Fujitsu and others all competing for a piece of the pie at one point.
But the tide turned in the 1990s, when computer servers loaded with Windows and Linux operating systems became widespread. Japan's mainframe shipments topped 1 trillion yen ($8.94 billion) in the mid-1990s, but slid to below 45 billion yen in fiscal 2015, according to the Japan Electronics and Information Technology Industries Association.
That changing market climate prompted Hitachi's eventual exit from hardware. At the same time, the company recognizes persistent demand among companies that value stable system operation and security. There is also promise for use in the internet of things, a business Hitachi sees as a growth field.
The turning fortunes of IBM are symbolic of the technological shift. The company's sales fell for a 20th straight quarter in the January-March period of this year. The company was hit by the advent of servers and then by the spread of cloud servers. This is in stark contrast to Amazon.com's cloud business, which is the world's largest. The business logged $890 million in operating profit in the January-March period, accounting for 90% of the company's profit.
In Japan, where cloud computing has not become as widespread, IT companies have been logging relatively solid earnings. Yet, Fujitsu, NEC and Hitachi all saw revenue in the IT segment decline in the year ended in March. Making it imperative for them to respond to the growth of cloud computing.