It’s fair to be concerned if you’re considering IBM for your x86 servers but for some reassurance I invite you to consider the following three points:
- X86 servers are commodity hardware, deal with it. Lenovo can.. If you still think there is significant differentiators in the hardware from various x86 vendors, you’re looking in the wrong place. Lenovo has demonstrated success in growing business in a commodity market (PCs.)
- IBM is still there where it counts: converged systems. Trends in consolidation and virtualization have made the main building block of the datacenter not stand-alone servers but converged bundles of servers, switches, storage and virtualization. IBM is still very much in this game with PureSystems.
- IBM/Lenovo Partnership is Deep. In the days since the January 23 announcement IBM has reiterated several times the depth of the partnership going forward. This is not a case of fire and forget offloading.
Just to recap the situation, on January 23 IBM announced that it was selling its entire x86 server business to China-based Lenovo for $2.3 billion (USD). Included in the sale: “System x, BladeCenter and Flex System blade servers and switches, x86-based Flex integrated systems, NeXtScale and iDataPlex servers and associated software, blade networking and maintenance operations.”
IBM Doesn’t do Commodity
IBM’s selling its x86 server business to Lenovo is simple recognition of a fact: industry standard x86 server architecture is a commodity. Like all commodities the governing business metric is unit cost. In this case, what is the total cost (processing and memory) per server workload?
The vast majority of server workloads out there, whether in data centers or in the big cloud services, are running on x86 servers. While there is emerging alternatives such as microserver processors based on mobile processors (ARM), the x86 is going to be doing the lion’s share of the work for the foreseeable future.
But while this commodity thing may be good for overall sales of x86 servers (in terms of market share) it isn’t a good thing for IBM. IBM focuses in hardware is on engineering differentiation and innovation, and charging big margin for you to take advantage of that specialness. The margin on x86 servers is razor thin when all that really matters is those commodity metrics of cost per server workload.
IBM arguably invented the industry standard PC, and had some excellent PC products (ThinkPad), but when those PCs became commodity hardware IBM sold PCs to Lenovo. Lenovo is looking to do the same now with servers, focusing on producing a quality product that is cost competitive in a commoditized market. It has succeeded in doing so in PCs.
But make no mistake, this is a huge move not without risk for both IBM and Lenovo. Some reports of the sale said IBM was unloading its “low-end” server business, as if they were general motors deciding to get out of economy compact cars. In fact if this were General Motors this move would be akin to GM getting out of the domestic automobile market entirely to focus on building things like large trucks and military vehicles.
Stand-alone servers are no longer the building blocks of on-premise data centers. Increasingly the converged system combining servers (usually blades), switches, storage arrays, system management and virtualization in one product SKU is that building block.
Info-Tech publishes dozens of vendor comparisons each year but we do not do comparisons of commodity hardware like desktop PCs and x86 servers. We do, however, compare vendors of converged systems that x86 servers will plug into. In our most recent VL IBM was a champion (See Vendor Landscape: Converged Systems)
IBM’s focus on converged systems will continue. Last week IBM announced the installation of the 10,000th PureSystems System. It will continue to sell PureApplication and PureData Systems – converged systems for applications hosting and big data analytics respectively – and continues to own the PowerFlex management software.
PureSystems can be provisioned with x86 server blades as well as IBM Power servers. Where x86 is involved IBM will source the blades from Lenovo instead of from themselves.
Not to belabor the commodity point further, but it is worth noting that the other hardware layers of the converged stack – switches and storage – are also typically based on x86 “controllers”. The future of value differentiation is in the software running on those controllers, not the hardware. In a software defined future, look for all the hardware layers to be commodity (look out Cisco, EMC, NetApp, et al)
One concern that has been raised about the Lenovo deal is whether IBM will be able to maintain a high level of system integration when a key layer of the convergence cake, servers, are manufactured by somebody else. In fairness, in our converged systems vendor landscape, ownership of the entire stack leads to higher scores.
I think there is some assurance here in the level of partnership between IBM and Lenovo. This is more than an asset sale. It’s a strategic partnership. IBM has also promised uninterrupted support for the x86 product set throughout the transfer.
IBM and Lenovo are tight right now. I don’t think it is in either’s interest to wander off in different directions.