IBM Buys Blade to Fight for Data Center Dollars

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IBM announced that it is purchasing Ethernet switch maker Blade Networks. The move is the latest in IBM's 2010 buying frenzy, and continues the consolidation of the tech industry--pitting IBM, Cisco, HP, and Dell head to head in a variety of markets.

IBM is known for servers like this Blade Center, but is aggressively diversifying its product and services portfolio.
IBM used to be in the network hardware business. About a decade ago it dumped SNA (System Networking Architecture) off to Cisco so it could focus on servers and services. But, now the lines are all blurred and Cisco is encroaching on IBM's server and services territory with its Unified Computing System servers, and its aggressive pursuit of the unified communications market.

Companies that have been primarily server hardware vendors--like IBM, HP, and Dell--have been faced with lower margins and lower revenue. The green revolution has led companies to embrace virtualized servers and virtualized storage, providing the same computing and storage capacity with far less physical hardware and lower power and cooling costs.

That trend is not new, though, and the writing has been on the wall. That is part of the impetus driving acquisitions and consolidation. HP and Dell have both been pursuing an expanded presence and alternative streams of revenue by snapping up companies as well. HP recently acquired virtualized cloud storage provider 3PAR after a two-week bitter bidding war with Dell.

Over the past few years, an array of smaller companies that provide niche products and services has been aggressively acquired by a handful of major players. The trend from earlier in the decade to divest products and services that don't fit the core business model has been reversed and the focus is on providing an integrated, one-stop-shopping model instead.

With Blade Networks in the fold, IBM has acquired fourteen companies in 2010 alone. This purchase, along with BigFix, Storwize, and others, gives IBM a comprehensive portfolio of products and services that allow it to present customers with solutions no matter what their data center or business computing needs.

Servers, storage, and networking are the three pillars that form the foundation of the data center. The ability to deliver all three pillars gives IBM and other big players more revenue opportunities, and the chance to differentiate from competitors by providing features and functions that are more tightly integrated.

The addition of security, network management tools, data analytics, and other services are additional arrows in the quiver that enable these companies to form broader relationships with customers and turn over every stone when it comes to finding potential sources of revenue.

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