eWEEK content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.
These are good times for IBM’s hardware business.
The company’s Systems and Technology Group (STG) was one of the main drivers behind IBM’s strong second-quarter financial numbers that saw overall revenue grow 12 percent and net income jump 8 percent. Revenue for IBM’s STG grew 17 percent in the quarter, according to the tech giant’s earning report, which was released in July.
That was followed Aug. 23 by a report from IDC, in which the market research firm said IBM, fueled by a 24.5 percent jump in server revenue in the second quarter, surged into a statistical tie with rival Hewlett-Packard as the world’s top server vendor.
All this comes at a time when top competitors such as HP, Dell and Cisco Systems are undergoing significant transformations, and Oracle continues to look for ways to leverage the SPARC hardware business it inherited when it bought Sun Microsystems last year.
According to Rod Adkins, senior vice president of IBM’s STG, the company’s success in hardware can be traced to a steady drumbeat of strong innovations across all segments-from the x86-based System x systems to the higher-end Power Systems to the System z mainframe business-and solid product roadmaps in which customers can put their faith.
The hardware group also has gotten some help from its rivals, in particular HP and Oracle, whose ongoing feud over Oracle’s decision to end support for Intel’s high-end Itanium processor platform has made customers of both nervous and helped fuel migrations to IBM’s Power portfolio, Adkins said in a recent interview with eWEEK before the IDC numbers were released.
“We built incredible momentum coming out of 2010, and we’re still seeing momentum across those platforms,” Adkins said. “That’s been driven by a fundamental part of our strategy of continual investments in innovation, because we do believe research and development as a key investment element is what allows us to deliver differentiated systems. I think we’re seeing that in a major way in the market acceptance of our products.”
He noted that since the beginning of the year, IBM has rolled out new and upgraded systems throughout its portfolio, from Power Systems to System x servers and, most recently, in its mainframes, with the July rollout of the zEnterprise 114, a mid-level offering in its breakthrough zEnterprise System mainframe portfolio, which first launched a year ago.
In announcing the z114, IBM also unveiled support for System x blades within the zEnterprise System running Linux, with support for Windows coming later this year. The zEnteprise System is an example of IBM’s “hub” architecture that addresses both scale-up and scale-out environments, which is a key part of IBM’s approach going forward, according to Wayne Kernochan, an analyst with Infostructure Associates.
“In its new formulation, a hub is a platform that carries out or manages most, but not all, of the tasks of a particular workload type: data management, or security, or administration, or email,” Kenochan said in an Aug. 10 report. “The key advantage of the new hub is its dynamic flexibility: the ability to move workloads or parts of workloads more easily, rapidly and cost-effectively from a scale-up to a scale-out platform, or vice versa, as necessary or advisable.”
He said he expects IBM to continue expanding on this idea as the rest of 2011 rolls out, and indicated that the vendor is not resting. “It’s not about IBM STG taking a bow for recent accomplishments,” Kenochan wrote. “It’s about STG rolling up its sleeves and going back to work for the rest of this year for the benefit of IBM customers.”
Adkins said two of the key drivers behind IBM’s market-share gains have been the innovative roadmaps the company has for its products and the questions surrounding the high-end platforms of HP and Oracle. A roadmap, he said, “means you have a history of investment, but you also have some forward-looking views in terms of capabilities to come, and that requires spending money in R&D. … There’s an increased appetite in the marketplace for clients wanting to do more with less, so they’re looking for the types of solutions that will allow them to reduce their overall costs.”
The dispute between HP and Oracle also has helped IBM. Oracle officials in March announced they would no longer support Itanium, saying they believe Intel plans to end development of the platform relatively soon. The decision-which follows similar ones by Microsoft and Red Hat-drew sharp rebukes from both Intel and HP, which said that Itanium roadmaps go out for the rest of the decade. HP-which has Itanium chips in its Integrity and NonStop systems-also has sued Oracle, saying the decision violates an agreement between the two to continue supporting technologies used by joint customers. The two companies share about 140,000 customers.
HP officials this month said Oracle’s decision was a key reason HP’s high-end server revenue dropped 9 percent in the second quarter, and analysts have said that IBM will be the big winner in the dispute.
“Rather than providing what Oracle likely hoped would be a competitive edge for its Sun hardware solutions, the company’s battle with HP has instead given IBM an unprecedented opportunity to move on HP/Oracle accounts with migration programs designed to remove forever the discomfort and dangers of warring vendors putting mission-critical systems at risk,” Rob Enderle, principal analyst with The Enderle Group, said in a June 22 report.
IBM’s numbers back up that assertion. According to company officials, in the second quarter, IBM had a record 847 competitive displacements in the second quarter for servers and storage systems, including 253 from Oracle and another 248 from HP. IBM’s Power Systems had 334 of those displacements-210 from Oracle and 110 from HP.
“Oracle is a bit stuck because SPARC is dead-ended, and a lot of benefit we continue to see from a business-performance perspective is coming at the expense of Sun and how we’ve been able to penetrate their customers base,” Adkins said.
Oracle officials say they will continue investing in SPARC, and are looking to combine the Sun hardware and Oracle software to offer tightly integrated systems-such as the Exadata system for database workloads-in a manner similar to what IBM does. Oracle is planning to roll out the SPARC T4 chip that, among other things, reportedly will support Oracle’s own database and middleware software.
Adkins argued that IBM has an advantage over Oracle and HP in this area because of the deep integration of the hardware and software, which enables IBM to innovate and optimize at all levels of the stack that goes beyond simply packaging hardware and software together.
“We could put things together around industry-standard capabilities, but we also have the added advantage where we could do deeper integration and optimization because we make investments and we innovate at every level of the system stack,” he said.