There are fewer mainframes in use today than there were 15 or 20 years ago. In some cases, all the applications were moved to other types of systems; however, in most cases the reduced number is due to consolidation. That is, several smaller mainframes have been replaced with a smaller number of larger systems.

There is a compelling reason for consolidation. Mainframe software (from many vendors) can be expensive and typically costs more than the mainframe hardware. It is usually less expensive (and sometimes much less expensive) to replace multiple software licenses (for smaller machines) with one or two licenses (for larger machines). Software license costs are often linked to the power of the system but the pricing curves favor a small number of large machines.

Software license costs for mainframes have become a dominant factor in the growth and direction of the mainframe industry. Several nonlinear factors make software pricing very difficult. We must remember that mainframe software is not a mass market situation like PC software. The growth of mainframe processing power in recent years has been nonlinear.

The relative power needed to run a traditional mainframe application (for example, a batch job written in COBOL) does not have a linear relation to the power needed for a new application (with a GUI interface, written in C and Java™). The consolidation effect has produced very powerful mainframes. These mainframes might need 1% of their power to run an application, but the application vendor often sets a price based on the total power of the machine.

This pricing policy results in the odd situation where customers want the latest mainframe (to obtain new functions or to reduce maintenance costs associated with older machines) but they want the slowest mainframe that will run their applications (to reduce software costs based on total system processor power).