The news a couple of weeks ago that IBM had sold its server business to Lenovo set off a flurry of speculation about what IBM would do with the rest of its hardware offerings. While no one outside of IBM really knows what Big Blue will or will not do next, the speculators immediately began to target IBM’s storage business as the next likely part to be sold off. While writing columns like that are good for web site traffic, Storage Switzerland sees a different scenario playing out that makes more sense.
We don’t believe that IBM is going to do anything to its storage business other than continue to invest in expanding its market presence. In fact, the sale of the server business could be an indication of a renewed focus for IBM on its storage business. In the spirit of disclosure, IBM is a client of Storage Switzerland, as are many of its competitors.
IBM’s Value-Add Focus
Historically, IBM has avoided competing in commodity hardware markets and, clearly, they believe servers have reached that point. While many think there is room for innovation in the server market, IBM has good reason to disagree, and exiting what they believe to be a commoditized market makes sense. Certainly you could make the case that storage is on its way to being commoditized as well, but there are clearly parts of it that are nowhere near that point. Two examples are high-performance primary storage and software defined storage.
IBM Likes Memory
It is interesting how quickly the speculators have forgotten how much money IBM has spent on their flash storage business in the last 18 months or so. This includes the purchase of Texas Memory Systems and IBM’s $1 billion investment in the various Flash technologies. The new FlashSystem 840 which we covered a couple of weeks ago is an excellent example of those investments beginning to show results.
It is also important to remember that IBM is a leader in next generation memory technologies like non-volatile memory (NVM). As we discussed in a recent briefing note, “The Impact of NVM on Storage Architectures”, this technology promises to blur the line between RAM and storage and IBM’s very deep expertise in this area should not be overlooked.
IBM Is Controlling Storage Commoditization
A fair assessment may be that IBM is investing upstream on technologies like memory based storage where it can add value and generate margin, while at the same time controlling commoditization though its San Volume Controller (SVC). The SVC, which IBM describes as its entrant into software defined storage, allows the company to manage and provide storage services for virtually any other vendor’s storage. IBM can lose on price and still win where it matters most, by selling the software that controls the storage. The SVC allows IBM to add value into the lucrative part of the storage stack, flash memory, while managing the part (commoditized HDD storage) that’s not as profitable.
There is always a chance that IBM could exit the storage business but I don’t think this is very likely. They have, at a minimum, technological parity with the market leaders and in some areas, a distinct advantage. Divesting of their server business may enable IBM to refocus on storage more strategically. Given this, I see IBM aggressively attempting to expand their storage presence in enterprise data centers and expect them to be successful gaining market share in that space.