IBM’s sale of of its x86 server business to Lenovo raises questions about IBM storage.
Lenovo did not buy any storage systems in the $2.3 billion transaction, but it will OEM and license IBM Storwize storage arrays, tape systems and General Parallel File System (GPFS) software as part of the deal.
I see much potential impact on the storage business from this deal. Certainly it is too soon to make any conclusions and even to speculate at this point. But, there are some areas worth considering:
- Storage sales are often server-led, meaning customers often buy new storage systems when they purchase servers. The x86 server line did have storage drag along with it. That’s part of the reason why Lenovo will OEM IBM storage, and may mitigate some of the disruption for customers. But will the sales drag continue for the Storwize systems? Lenovo is a low-cost provider and there will be pricing pressure. And, Lenovo may want a more commodity priced offering.
- Will the pricing pressure drive down the prices of storage overall and make the storage business less profitable? With less profit, there will be less motivation to invest in development and the competitive pressures may be too great.
- A possible upside is Lenovo’s success as a low-cost provider will drives more volume and increases profit, allowing greater investments in the storage business by IBM.
- IBM’s service and support for enterprises has been a factor for customers buying IBM systems. Will that change after the acquisitions? This could be a hidden impact which will take some time to surface.
- What about the IBM storage products not in the OEM deal? This is less of an issue because these systems are primarily sold with the server systems that IBM has held on to (Power and System-z) or through independent storage sales. The Storwize systems should continue sales from IBM and its resellers for independent storage sales and with the Power servers as well. But with Lenovo selling the Storwize and tape systems, will there be conflict with IBM? There may be engagement rules established to handle this situation but we don’t’ know that yet.
- What does the big picture look like for IBM? IBM is moving away from low-margin devices and systems. The threshold for selling off the business is not clear and probably for good business reasons. But, the question comes down to whether the investment and resulting innovations in storage will produce enough added value to continue the investments. IBM has an excellent portfolio of storage products currently and some great people in sales, support, and in the channel and distributors. There is great potential to continue to be competitive and move forward with technology and solutions. This is what is expected of IBM.
(Randy Kerns is Senior Strategist at Evaluator Group, an IT analyst firm).