Tuesday, November 3, 2009

The "entry-end" server systems

Since I work for IBM, I am most definitely an avid fan of IBM's business models. However, IBM has not always made the best decision and done the most righteous thing. However, this particular case that I am writing about begs to get a second glance.

Recently, there was a press release that "More Than 200 Additional Customers Switch To IBM Systems From Sun, HP", as reported by Reuters.

Since the dawn of UNIX server industry, there has been no doubt that IBM has consistently gained margin and share in the high-end server segment.

While companies such as SUN, HP and DELL have continuously argued that it's possible to 'blade everything'' perhaps it was just HP that argues so; it is proven now that the server market is probably as segmented as the clothing or retail industry.

I am going to quote this paragraph from the Reuters news article "IBM's momentum continues in UNIX servers, where the company gained 7.4 points in the second quarter to lead with 41.4 percent revenue share, ahead of Sun at 27.3 percent (down 4.4 points) and HP at 24.8 percent (down 1.6 points), according to IDC's Worldwide Quarterly Server Tracker. IBM is the only major UNIX vendor to gain revenue share in the past five years (+11 points) while both Sun (-2.5 points) and HP (-4.6 points) lost share. "

The most important question that we have to ask ourselves is how was IBM able to gain market share from HP and SUN despite the unfavorable business conditions? Well, although I work for IBM I cannot disclose whatever I may know to help you get an answer.

I will share with you my general perspective though, as an outsider. IBM has successfully leveraged and used the extremely hard economic times to inject a new an invigorate spirit of technical innovation into the "entry-end" server systems (System X and BladeCenter). If you are an IBM investor you would want to keep this thought in your mind.

We all like to pursue and propel innovation in good times. But innovation that happens in the turbulent, uncertain and unsettled times is what will come to last forever. Thus, we are going to witness, which has not come to past yet, an era of business excellence from IBM server systems (the entry-end) that will be fueled by the spurge of technical innovation, which will deliver "real and long lasting value".

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