The iSeries Blog

Jan 28 2008   10:06AM GMT

IBM escaping the hardware business?

Mark Fontecchio Mark Fontecchio Profile: Mark Fontecchio

Arthur Cole at IT Business Edge has a blog post speculating over whether IBM is “looking to get out of the server hardware market before virtualization sends it crashing to the floor.”

Cole’s argument is that despite IBM’s denials, its moves indicate that it is leading toward being more of a software company. There’s no doubt that IBM’s software division is a huge leg of its business. But can it and the services/support leg be the only ones IBM needs to stand on?

Cole points to the announcement by IBM that Lenovo, the owner of Big Blue’s former PC unit, will begin selling rebranded IBM x86 servers later this year. Cole wrote that while System x revenue rose 8% last year, overall server sales at IBM were flat, and so System x was a prime platform to be outsourcing.

Of course, System p revenues also increased last year, by 9%. Perhaps another reason IBM chose System x is because x86 servers aren’t much different than PC hardware and thus fit Lenovo’s business plan better.

Cole also sees IBM’s acquisition of AptSoft as an indication that IBM is focusing more on software. Then he hits on the virtualization theme again:

But if virtualization does start to tear into server demand as the experts predict, it probably does makes sense to unload hardware lines onto companies that can survive on smaller volumes.

Here’s the thing, though. What company would take on the System i or z lines, or even p for that matter? They’re all built on a more specialized architecture — which includes proprietary IBM hardware such as mainframe and Power processors — than commodity x86 servers. If IBM outsources its server hardware, will it start outsourcing its processors as well?

If this does happen, if it ever happens, it’s a long, long ways down the road.

1  Comment on this Post

 
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  • Mark Fontecchio
    I totally disagree with Cole's speculation. As previously noted, the x86 technology is basically public while IBM's other server lines are proprietary which is the reason their systems are known for reliability and quality, especially the System i. In the same vein of thought, can we speculate Apple entirely outsource the Mac and iPod hardware to concentrate only on the software? It would be antithetical to the success of their product being more reliable than PCs if Apple gives up that control. IBM is the initials for 'International Business Machines'. I do not foresee them changing the name, branding, culture and business model to 'IBS, International Business Software.' Or is that name already taken? Maybe, 'IOBS, International Only Business Software.'
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