TBR Special Report - IBM Shifts Strategy Gears to Accommodate the Cloud


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IBM shifts strategy gears with Power to accommodate the cloud-driven world

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TBR Special Report - IBM Shifts Strategy Gears to Accommodate the Cloud

  1. 1. TBRT ECH N O LO G Y B U SIN ESS RESEARCH , IN C. TBR SPECIAL REPORT IBM shifts strategy gears with Power to accommodate the cloud-driven world Krista Macomber, Analyst (krista.macomber@tbri.com) April 23, 2014 IBM embraces Power chip licensing to establish the platform as a high-performance, cost- effective backbone to cloud-enabling data centers As IBM molds its hardware, software and services to build a base for long-term viability at a corporate level during 2014, the vendor is evolving its Power business for survival. Although IBM’s speeds-and-feeds-centric messaging will create challenges in selling to outcomes-focused line-of-business IT decision makers in the enterprise, TBR sees a viable future for Power in cloud service providers’ data centers as IBM opens up the platform to third-party innovators and low-cost fabricators to enable more flexible, powerful and price-competitive x86 server alternatives. Evidenced by Google’s participation in IBM’s OpenPOWER Foundation, this open approach is facilitating buy-in to the Power platform from large cloud service providers (CSPs), which is critical to the ultimate success of Power. Under the guise of “open innovation to put data to work,” IBM maps its new POWER8 chips to its strategic mobile, cloud, social and big data initiatives through improved bandwidth I/O and increased processor speed, memory speed and capacity alongside openness, collaboration and cloud-enabling software. Additionally, IBM’s investment in and rising momentum around OpenPOWER will provide flexibility for the Power hardware and software stack to evolve in tandem with customers’ evolving requirements. However, IBM’s Power story will be complex, especially preceding IBM’s planned divestiture of its x86 server assets to Lenovo during 2014. Akin to many hardware vendor peers, IBM is having difficulty understanding its audience of enterprise IT decision makers and delivering overarching outcomes-focused messaging as the influence of IT spreads across the C-Suite — particularly considering IBM’s shift in focus from commodity hardware to a more complicated blend of proprietary hardware and IaaS. However, large-scale cloud service providers have highly specific infrastructure requirements and a large base of in-house IT knowledge and support. TBR anticipates these CSPs will increasingly adopt Power systems in 2H14 and 2015, attracted by the improved customization and cost efficiencies facilitated by the OpenPOWER Foundation. In addition to differentiating IBM from other Tier 1 OEMs in the eyes of CSPs,
  2. 2. www.tbri.com TBR OpenPOWER improves IBM’s competitive standing against ODMs, which are rapidly gaining server market share due to their ability to quickly and cheaply fulfill large volumes of custom-designed servers for CSPs. POWER8 will resonate most strongly within data- and analytics-intensive workloads, with cloud a rising opportunity through new scale-out architecture and utility-based pricing IBM touts POWER8 as a true new generation within the Power family (compared to POWER6 and 7) through its design to harness big data across compute, memory, I/O bandwidth and storage. Power’s history in high- performance computing (HPC) environments provides base-line credibility in data-intensive workloads for IBM to build on with capabilities such as expanded support for Hadoop and in-memory analytics introduced with the POWER8 refresh. IBM’s Power executives note the rising importance of technology to the C-Suite, and the shifting IT buying behaviors in the marketplace as a result. TBR believes the Power team’s core message of “open innovation putting data to work” through faster, maximized information aggregation and analytics has the potential to resonate with the improved decision making required by line-of-business executives; however, akin to many of IBM’s hardware vendor peers, work remains for IBM in elevating discussion outside of chip speeds and feeds, to more effectively convey improved outcomes. IBM’s message of fast access to data in motion bleeds into private, public and hybrid cloud environments with offerings such as its new scale-out Power systems and preintegrated POWER8-based solutions for service providers — in addition to the integration of Power with IBM’s SoftLayer IaaS capabilities. IBM touts support for twice the users per core at greater reliability and utilization compared to x86-based systems — which is compelling, particularly within workloads that carry hardware requirements such as reliability, serviceability and memory capacity that go above and beyond the dense and scalable performance inherent in cloud and hyperscale infrastructures. Additionally, introduction of utility-based pricing will help attract prospective service provider customers to the platform by reducing up-front capital required to invest in the systems and improving total cost of ownership. TBR sees opportunity for Power around big data management and analytics, industry-specific application management and open-source infrastructure service delivery. However, careful messaging of improved economics and reduced total cost of ownership in this marketplace dominated by industry-standard hardware will be necessary for success but difficult during 2014, ahead of the x86 divestiture. IBM’s Power team is all in on driving openness and rapid ecosystem expansion as a critical lever to long-term demand Considering eight consecutive quarters of Power server revenue declines, TBR believes IBM recognizes the imperative of opening up the Power architecture to ensure long-term viability in an increasingly commoditized marketplace. As a result, IBM is leveraging a variety of tools including academic programs and using the OpenPOWER Foundation to build an ecosystem around Power that focuses on tapping niche innovation and maximizing the addressable customer base. OpenPOWER lies at the core of IBM’s expanding Power ecosystem. IBM aims to provide base-layer chip innovation and simplified architecture, and then leverage OpenPOWER to drive collaborative hardware and software investments and IP with a broad range of partners such as Nvidia and Servergy. In particular, IBM has the opportunity to leverage OpenPOWER to improve x86 software support. Initiatives such as OpenPOWER improve IBM’s ability to engage a range of commercial, corporate and individual developers, including independent software vendors (ISVs), around the Power platform. IBM has more than 800
  3. 3. www.tbri.com TBR ISV partners for Power, which represent more than 1,500 applications. These ISVs are particularly important, as they present the opportunity to attract a significant number of new developers to the platform (with IBM claiming that every nine new Linux ISVs bring more than 100,000 developers) and refine IBM’s capabilities around industry- specific applications, such as healthcare analytics, which help improve outcomes for customers. IBM’s Power team works closely with IBM Software to facilitate base-layer proof points and capabilities, such as OpenStack support, Linux porting centers, enhanced Coherent Accelerator Processor Interface (CAPI) and the Linux on Power development platform, to spur this software innovation. In addition to driving collaborative development, IBM is leveraging margin and other incentives while investing in workshops and other training initiatives to better enable business partners such as value-added resellers (VARs) to sell Power systems. As Power platforms are integrated into increasingly complex converged systems, and as IBM seeks to capture prospective customers during the evolution of its platform, investing to maximize channel leverage will be a pillar to sales effectiveness. Additionally, IBM’s efforts to position as a dealer for cloud and managed service providers will support the vendor’s goal of establishing new delivery models and routes to end users for the Power platform. Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in a format that is uniquely tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis. TBR has been empowering corporate decision makers since 1996. For more information please visit www.tbri.com. ©2014 Technology Business Research Inc. This report is based on information made available to the public by the vendor and other public sources. No representation is made that this information is accurate or complete. Technology Business Research will not be held liable or responsible for any decisions that are made based on this information. The information contained in this report and all other TBR products is not and should not be construed to be investment advice. TBR does not make any recommendations or provide any advice regarding the value, purchase, sale or retention of securities. This report is copyright-protected and supplied for the sole use of the recipient. Contact Technology Business Research, Inc. for permission to reproduce.