Late last week, the US government finished their review of IBM’s proposed sale of System x and some software elements to Lenovo. (See http://online.wsj.com/articles/ibm-server-sale-to-lenovo-passes-u-s-test-1408135593) What does this mean for System x, IBM and the x86 server industry? Here are a few of my thoughts. Just a reminder, though I am an IBM employee, these are my own thoughts and are not due to any specific inside information, nor am I speaking for IBM.
What does this mean for IBM? Is IBM no longer in the x86 business? Well, yes and no. IBM will no longer be selling x86 servers directly to customers for their own datacenters. However, IBM does have its cloud services function, Softlayer, that sells x86 service in a cloud model. One unique feature of IBM’s Softlayer offering is that it offers both virtualized servers and bare metal capability. So, instead of selling real, flesh and blood servers to customers, IBM could sell them a bare-metal server in the cloud in addition to cloud based virtual servers. Plus, IBM touts its large, fast network capabilities in Softlayer, which could amount to selling the fastest access to an x86 server to a customer, even compared to a customer’s own datacenter and network. I think we’ll see IBM pushing even harder on Softlayer now and may begin to introduce it in situations that would normally be considered to be a pure hardware sale situation.
IBM also will still be selling its traditional outsourcing offerings which include all varieties of servers. These offerings include hosting and managing IBM servers, but also non-IBM equipment such as Oracle/Sun, HP, Dell, Cisco, etc., usually because a customer has those servers in its inventory. So, IBM can still sell x86 servers as part of outsourcing deals from any vendor, including Lenovo, HP, and Softlayer.
What about the rest of the x86 industry? An associate made a comment to me along the lines of, “why should I care about System x if IBM is selling it?” Well, I think in this case, selling System x to Lenovo could put a lot of pressure on the x86 server industry. Lenovo has been very successful with Windows workstations, especially laptops, since they acquired IBM’s workstation portfolio 10 years. They are competitive or better on price and they’ve done some nice innovation. If they take the same approach to the server environment, it could be bad news to the traditional US based x86 server vendors, HP and Dell. Lenovo would likely be very competitive in this space to try to win market share, and probably has pricing power with Intel based on its workstation and laptop business that IBM no longer had. So, combine a company willing to compete on price, and a potentially less expensive supply chain, and I think other major x86 manufacturers should be very concerned.
What do you think will happen? Are there potential political consequences of a non-US computer manufacturer making the big time in the US market? feel free to comment.