IBM System x Highlights
- IBM has revamped its System x range continuing to design highly integrated and backward compatible products
- System x has 3 system types – iDataPlex, Blade Center and Enterprise eX4
- Expect a stronger move to x86 servers with the growth of Public Administration and the decline from the Financial Sector
- Cloud Computing, Trading Down and the launch of Windows Server 2008 SP2 will have a positive effect on demand
I’ve been meaning to write this up for a couple of weeks. IBM invited a number of analysts over to Avnet’s Bracknell office to present ‘orchestrating the data centre’. IBM brought out its most senior EMEA executives lead by Tikiri Wandaragala and including Steve Legg (storage systems) and others. Also presenting was Charles Ferland of Blade Network Technology. I’ve mixed some of the things I learned from them with some of my own analysis of IBM’s server business which I hope you’ll enjoy.
IBM was second to HP in generating revenue from server hardware in 2008 (see Figure 1). As the longest term server vendor it has three basic server ranges based on the different processor architectures. In particular:
- System z mainframes are based on its own System 390 microprocessors running z OS and many IBM applications such as its CICS and IMS transaction processing monitors
- System p based on IBM’s Power 5 processors and run AIX – IBM’s Unix variant. System i servers (running their own i OS operating system and integrated applications) no longer have dedicated server hardware, but are considered part of System p
- System x based on X64 processors from both Intel and AMD. These typically run Microsoft’s Windows Server operating system, although a significant minority run Linux (which IBM actually promotes across its other two lines) as well
IBM publishes the quarterly growth of revenue it generates from each platform, which I’ve shown in Figure 2. While all of its business is in decline, System p and x are currently doing slightly better than its overall server business.
However the company goes out of its way not to publish the absolute value of its server revenues- so I’ve had a go at estimating them (see Figure 3).
System z remains the largest revenue generator, although the success of System p is beginning to threaten – partly because it is benefiting from System i users moving onto this converged platform. I’ve shown a rolling 4-quarter view by adding an estimate of the annual value of each platform at the end of each quarter. This takes out the strong seasonal growth, which for IBM peaks strongly every fourth quarter.
My research suggests that IBM is currently a long way behind both HP and Dell in the X86 server market. It has chosen by and large to follow a higher end strategy than others, designing highly integrated systems and avoiding most of the volume competition at the low end.
Its x86 servers come in three types as I’ve shown in Figure 4. In particular:
- At the top end it offers its iDataPlex product which uses standard PCI boards and hard disk storage in a highly condensed cabinet. It is positioned as a competitor to similar machines being designed by HP and Oracle/Sun and a similar approach by Dell. This machine is designed for use in very large data centres running Cloud Computing or Scientific and Technical applications. IBM is partnering with Blade Network Technologies which supplies fast Ethernet switches for these machines, matching the selection of fast-but standard components which will help reduce the overall cost of these machines.
- IBM’s Blade Centre rack mounted products are designed to be used in standard 19” racks, but differ in their design from the iDataPlex servers as they are horizontally (rather than vertically) aligned. The rack mount machines range from single to quadruple unit sizes (1U to 4U) and include AMD Opteron as well as Intel Xeon processors. The maximum number of processor cores varies from 4 up to a massive 96 in the top-end Xeon 7400 based system (each chip has six cores). These high end 4U machines are decribed by IBM as its Enterprise eX4 range. IBM has gone out of its way to develop its own highly integrated machines, maximising its knowledge of server design from the mainframe and Unix worlds. One down side is that IBM sometimes takes longer to integrate the latest chips. Adding AMD to other mix also took IBM longer a few years ago. In addition IBM offers strong backward compatibility in its Blade Centre approach.
- For Small and Medium Businesses (SMBs) and branch computing IBM offers a number of conventional tower configurations. It does not currently include AMD chips in this line.
IBM’s System x business suffered badly a few years ago, firstly when the company decided to off-load its PC business and again when the company decided to restructure itself around industry sectors. Somehow the platform got lost in the mix and IBM faltered in the strong indirect channel marketing to keep it successful. I sense that it is now preparing itself for a bigger push for a number of reasons. In particular:
- The failure of the Finance Industry will badly affect sales of IBM System z – 50% of which are used in that sector
- The shifting business to public administration favours x86 based servers in many cases, not least because of the lack of technical expertise typical in this sector
- Cloud Computing is most often based on x86 servers. Although it is arguably easier to host (and delete) many multiple virtualised Unix iterations on a mainframe, the use of x86 servers in Service Providers allows them to offer dedicated, rather than shared, resources.
- Trading down is a strong feature of the current downturn. The System x is more of a commodity product that z or p, and as such gives IBM the opportunity of keeping customers even if they decide to move to x86 servers.
- Microsoft is launching its Windows Server 2008 SP2 in October, which will encourage users to upgrade their servers despite the recession.
Personally I’d like to see IBM adopting a stronger indirect channel approach in EMEA with its System x line. It currently lacks the focus HP has, especially in EMEA where 2-tier distribution is key. While the highly integrated nature of IBM’s products make them more suited to Value added Reseller (VAR) and direct sales, it is unlikely that the company will be more successful with SMBs without a stronger investment.
I hope you enjoyed this overview of IBM’s system x and server business. Let me know what you think – especially when it comes to comparing IBM’s products with others.