What’s up with industry standard servers? – The IBM View

I finally had time to read through the IBM 4Q ’08 results yesterday evening, it is good to see that Power Systems saw a revenue growth for the 10th straight quarter,  and that the virtualization  and high utilization rates are driving sales of both mainframe and Power servers.

I was somewhat surprised though to see the significant decline(32%) in x86 servers sales, System x in IBM nomenclature, put down to the strong demand “virtualizing and consolidating workloads into more efficient platforms such as POWER and mainframe”.

I certainly didn’t see any significant spike in interest in Lx86 in the latter part of my time with IBM and as far as I know, IBM still doesn’t have a reference customer for it many references for it, despite a lot of good technical work going into it. The focus from sales just wasn’t there. So that means customers were porting, rewriting or buying new applications, not something that would usually show up in quarterly sales swings, more as long term trends.

Seems to me the more likely reason behind IBM’s decline in x86 was simply as Bob Moffat[IBM Senior Vice President and Group Executive, Systems & Technology Group] put it in his December ’08 interview with CRN’s ChannelWeb when referring to claims by HP’s Mark Hurd “The stuff that Mr. Hurd said was going away kicked his ass: Z Series [mainframe hardware] outgrew anything that he sells. [IBM] Power [servers] outgrew anything that he sells. So he didn’t gain share despite the fact that we screwed up execution in [x86 Intel-based server] X Series.”

Moffat is quoted as saying IBM screwed up x86 execution multiple times, so one assumes at least Moffat thinks it’s true. And yes, as I said on twitter yesterday was a brutal day in the tech industry, and certainly with the Intel and Microsoft layoffs, the poor AMD results, and the IBM screw-up in sales and Sun starting previously announced layoffs, as the IBM results say industry standard hardware is susceptible to the economic downtown. I’d disagree with the IBM results statement though in that industry standard hardware is “clearly more susceptible”.

My thoughts and best wishes go out to all those who found out yesterday that their jobs were riffed, surplused or rebalanced, many of those, including 10-people I know personally, did not work in the x86 or as IBM would have it, “industry standard” hardware business.

4 Responses to “What’s up with industry standard servers? – The IBM View”

  1. 1 Brian January 23, 2009 at 12:52 pm

    Hi Mark,
    Just a small point… Telefonica is at least one customer using Lx86. They used it for an x86 -> Power consolidation.

  2. 2 cathcam January 23, 2009 at 2:03 pm

    Thanks for the update Brian. I’ll correct the Blog post.

  3. 3 Nick Hortovanyi January 23, 2009 at 9:20 pm

    Mark, this doesn’t surprise me at all. X-Series x86 servers are really just a commoditized component. No one is making any money from them selling into corporates. Resellers are getting margins around 1% on a winning deal. How sustainable can that be?

    Whats worse is that management are allowing the sales guys to put in pricing at that price point. All it does is makes the sales figures look good. Hope those sales guy are getting OTE based on sales volumes!

    • 4 cathcam January 26, 2009 at 10:02 pm

      I guess my point wasn’t to deny the fact the x86 with its wafer thin margins was living on the edge, it was to question the IBM Earnings report assertion this was because customers were buying Power and mainframes for their virtualization, when less than a month before the head of Systems Group was quoted as saying it was because they screwed up.

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About & Contact

I'm Mark Cathcart, formally a Senior Distinguished Engineer, in Dells Software Group; before that Director of Systems Engineering in the Enterprise Solutions Group at Dell. Prior to that, I was IBM Distinguished Engineer and member of the IBM Academy of Technology. I am a Fellow of the British Computer Society (bsc.org) I'm an information technology optimist.

I was a member of the Linux Foundation Core Infrastructure Initiative Steering committee. Read more about it here.

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