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Is it time for IBM to say 'Goodbye to the Machine'?

Chris Purcell on ‎08-13-2014 01:29 PM

I pulled this title off a recent 451 Group research paper, published July 10, 2014, and although I have written previous blogs on IBM departing the server business, I don’t believe that IBM is anywhere close to saying “Goodbye to the Machine”. The 451 Group article notes that for the past several quarters, IBM’s systems and technology revenue has been in a steep decline and ended at -23% year-over-year last quarter. This is mostly because of the pending deal to sell the x86 server portion of their business to Lenovo. Okay no news there, so why do I still disagree that IBM would like to say “Goodbye to the Machine”?


I would wager that IBM is not actually exiting the server business, it is just shifting positions. The 451 Group paper speculates that IBM wants to shed its low profit margin of x86 server business and replace it with POWER. This is a technology that is owned by IBM and, as a proprietary technology, would come with the promise of higher margins in the server business. That’s what I believe will happen…so no “Goodbye from IBM…they will just be saying “Hello”.


Does history repeat itself?

Not wanting to declare my age, I want to point out that I have seen this behavior from IBM before. My heritage goes back to Compaq, a fledging computer company going up against “Big Blue”. In the 80’s, IBM was the leader of the personal PC standard, running on a new Intel x86 platform. When this platform was first introduced, life was good, margins were high, and the market was extremely receptive to wanting to use the IMB platform. As always in business, it was not too long before competitors started to creep in (like Compaq) and the PC market started to become extremely competitive. This did not matter too much at first, as the market was still growing so rapidly, and there was enough room everyone. But this was short lived as more competitors moved in and price became more and more competitive.


While other competitors worked on new valued features and competitive pricing, IBM decided to take a different approach. They opted to change the current standard (that they had originally created) and switch the industry over to a new architecture that they called PS2 (Personal Systems 2). That sounded fine on the surface. PS2 had some distinct benefits, ran faster and was a brand new platform. The trouble was none of the software or peripherals that had been running on the previous x86 versions were compatible, and at that point there were little conversion tools to transition over the existing infrastructure. At the time there was a common saying that “nobody would be fired for buying IBM”, but after the introduction of PS2, that saying started to lose a lot of credibility in the industry. Even though many of the existing IBM customer base transitioned over to PS2, the new platform was not a success, and those customers that did transition were quick to come onto a common industry standard. If you have interest, you can find this story well-articulated in a new book called OPEN authored by Rod Canion, one of the founding fathers of Compaq Computer Corp.


Industry standards

The importance of industry standards are critical as a common foundation for businesses to build upon. I have seen this first hand over the past 20 years, first with Compaq asserting its ISA (Industry Standard Architecture), whichgrew into EISA (Extended Industry Standard Architecture), and which has become the common foundation that the x86 business is running on today. And somewhat recently, I have seen an extension of this happening in today’s data center with a new strategy being applied called Converged Infrastructure…which is another means of providing common standards that drive more efficiencies across the data center.


Will IBM be successful taking this route? It will be especially interesting to watch, as historically similar initiatives have met with limited success. It’s disruptive to customers, and if the PS2 example showed anything, moving away from common platforms and common standards comes at great risk.


The 451 Group article goes on to point out “IBM customers have a general tendency to be loyal, especially those who use IBM proprietary technologies. However, anecdotal commentary illustrates that the TheInfoPro’s respondent community is showing increasing concern about support for the dominant server technologies that they use to run their critical business workloads.”


I am interested to see how this all pans out.


I don’t know where you are on your datacenter journey and how you are considering your next moves, but I do want to point out that HP is here to answer your most pressing questions and address your business concerns. We have well-established networks of service professionals, strategic partners and channel partners to help you. We’re also very committed to your success, to deliver business value and to help you solve your toughest IT and business problems.  Uptime, security, scalability are all requirements that aren’t going away. 

I would strongly encourage you to reach out to your HP sales representative or to me directly.  I would be happy to discuss all of your questions and concerns with you and show what we are willing to do to win your business and most important, your trust. We understand your future business needs require the commitment of a strategic partner, one with the know-how in applications, infrastructure and support services combined with decades of insight into your industry.


When you’re ready to make your choice, HP is here, ready to help you.


Visit the Project Smart Choice website and request a free half-day strategy session to find out how HP can help make your “Plan B” your “Plan A”.



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About the Author

Chris Purcell

on ‎03-03-2015 09:54 AM

The weakest part of IBM's game is their software.  Had their software been better they could have moved more hardware.  I know I worked there for 15 years the majority of the people that worked there had no clue how to write software and most didn't either have degrees let alone have MIS and CompSci degrees!  IBM lost their hardware edge due to their really god awful software!

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