What will power IBM Power servers?

There were few clear answers to IBM's Power server problems in CEO Ginni Rometty's letter to shareholders, and they need to come soon.

In her annual letter to shareholders this week, IBM CEO Ginni Rometty certainly accentuated the positives of 2013.

She spent ample time citing the progress made in the company's cognitive and cloud computing initiatives, even managing to sprinkle in a little positive financial news about the diluted operating earnings per share reaching a new record last year.

What she spent much less time on were the disappointing aspects, most notably the spiraling fortunes of IBM's Power series of mid-range servers and its storage products.

Rometty is justified in touting the advances made by Watson and the new groundwork laid down for its cloud computing strategy now anchored by SoftLayer and what both mean for the future. But IT shops, particularly those looking to launch new cloud environments this year, need more concrete details sooner rather than later about what the company plans to do now about its flailing Power series.

Many IT shops have sunk significant investments in these systems and data and must know if it is worth their financial while to stay with the Power series or migrate to less expensive Intel-based servers. And the fact IBM will deliver the Power 8 chip next month puts more pressure on their decisions.

IBM could end up where it started in the hardware business almost exactly 50 years ago, with just its mainframes.

Unfortunately, Rometty didn't offer much guidance.

Rather vaguely, she said IBM hopes to shift its hardware business toward "new realities and opportunities," as well as toward Linux. This, she says, follows the lead of the company's "successful" mainframe business.

It is true that IBM's mainframe business throughout 2013 saw a remarkable resurgence thanks to new systems, but I am not sure how much the Power series can ape the success of IBM's Series z. While both systems can attribute some success to bundling Linux, the mainframe is much less dependent on the open source operating system. Mainframes and Power systems also play very different roles in most corporations.

Underlining its commitment to the Power series, Rometty points to the sale of its Intel-based server business to Lenovo. Last year's sale of the lower-end systems is consistent with the company's long-term strategy to abandon lower-margin businesses, as it did with its desktop PCs, hard disks and retail products. This makes sense given IBM's corporate overhead, but IBM users who migrate off the Power platform and onto an Intel platform will be going to an IBM competitor.

If IBM puts a lot of eggs in its Power series basket, and if it stays true to its mission of "remixing to higher value," as Rometty wrote, that eliminates the possibility of significantly lowering prices to increase sales.

Maybe she figures the ever growing demand for big data, cloud and mobility solutions will provide ample opportunity for both the Power and System z servers without one trampling the market opportunities of the other. The Power ship has yet to rise with that tide.

In conversations with IBM executives at the company's Pulse conference last month, it became clear the company bets that SoftLayer can not only lift the fortunes of its cloud business but it's hardware, too. By tailoring a range of key open source software, as well as migrating IBM’s most popular applications to SoftLayer, which will also be optimized to take best advantage of the Power systems architecture, IBM can deliver compelling tools for large companies.

That made sense five, even 10 years ago. But in this overly obsessed price-sensitive world of IT, cost savings often trump a system that represents a good bang for the buck.

So despite Rometty's assurance that IBM is "not exiting hardware, and will remain a leader in high-performance and high-end systems," IBM must communicate a compelling set of reasons that bolsters users' faith in the future of the Power series. Otherwise, IBM could end up where it started in the hardware business almost exactly 50 years ago, with just its mainframes.

This was first published in March 2014

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