Cloud & Services

Server Hardware Down, But Not Out Yet

IBM is searching for a buyer for its Intel-based SystemX and BladeCenter server hardware units. The move is a part of a larger trend in technology, and should be viewed as proverbial “writing on the wall”, but it’s way too premature to say server hardware is dead.

Virtual servers and cloud services have taken the wind out of the sails of server hardware.  The boom times of companies buying racks and racks of hardware to fill data centers have been replaced by smarter tools and more powerful hardware capable of running an entire IT infrastructure from one box.

As a result, revenue is declining for the IBM x86 server business.  IBM is attempting to divest less-profitable lines of business and focus more on software and services. It has been investing money and effort to support open source cloud initiatives like OpenStack and Cloud Foundry.

IBM has reportedly engaged in talks with a number of potential buyers, but the leading contender to buy the SystemX and BladeCenter business is Lenovo. Lenovo acquired IBM’s PC business a decade ago, so the two already have a solid history together. The question Lenovo needs to consider is whether or not it’s possible to squeeze profit from server hardware.

Jean Bozman, a research vice president with IDC, agrees there’s still life left in the x86 server business. She’s quoted in a TechTarget article saying, "IBM is a company that is 50 percent services and 20 to 25 percent software, with things like analytics, Big Data and cloud they could innovate around the x86 platform, whether those solutions are built by them or someone else.

Small and medium businesses in particular still need x86 server hardware.  Cloud servers and storage can allow businesses to cut costs and enable greater agility to address spikes in demand, but the cloud is still maturing, and putting all of your eggs in that basket can be a risky proposition.  The best solution for most SMBs is to leverage cloud services that make sense, but take a hybrid approach that includes virtual servers hosted on a local server as well.

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