August 18, 2003 4:00 AM PDT
IBM gets server act together
- Related Stories
IBM works to make mainframes mainstreamMay 14, 2003
Power5 to quadruple server brawnFebruary 17, 2003
IBM plans top-end 'Armada' Unix serverFebruary 7, 2003
IBM plots new Unix server chipsApril 25, 2002
IBM recovering from Sun blindnessMarch 19, 2001
IBM unveils new name, strategy for serversOctober 3, 2000
For a decade, IBM's server group was losing ground to competitors because of a fragmented product line, political infighting, an inability to adopt technology quickly and a haughty attitude toward customers.
Now the tables have turned. Over the past few years, the company has revamped its server lines so that they share components and software, reorganized itself and become more willing to adopt technologies invented outside its walls, such as Linux.
As a result, IBM is extending its lead in servers over competitors and is enacting its "sell our stuff with our stuff," or SOSWOS, strategy for boosting service contracts and other sales through other product lines.
"The best thing that happened (to IBM's server group) was they got their butts kicked in the early 1990s," said Illuminata analyst Jonathan Eunice, who thinks the troubles of the last decade triggered the best server work to come out of Big Blue in 40 years. "I've never seen IBM more attuned to product innovation."
Much of the credit, analysts agree, goes to William M. Zeitler, the senior vice president whose polished speech and carefully coiffed hair belie a willingness to break with decades-old traditions and impose drastic change in IBM's Systems Group.
"He's one of those guys who looks like he'd be profoundly uncomfortable without a suit and tie on. He looks like a conventional IBM guy, but he's not bound by conventional thinking," Sageza Group analyst Charles King said.
Even IBM's major competitors recognize the new reality--though that's not to say anyone has thrown in the towel. "To their credit, they are executing well right now. You have to acknowledge that," said Mark Hudson, vice president of marketing, for Hewlett-Packard's Enterprise Storage and Server group.
Zeitler has opted for pragmatism over tradition. IBM was divided internally over the idea of mating one of the newest forces of the computing industry, the Linux operating system, with one of IBM's oldest product lines, the zSeries mainframe, Zeitler said. Some in the company feared that support for an operating system that can be obtained at no cost would erode the famously thick software profit margins on mainframes. But Linux won out.
"If we weren't aggressive, somebody else would come in and do it," Zeitler said. "We're trying to get in front of the next big thing rather than trying to defend the last great thing."
Zeitler has won over some skeptics. "He's got that server group humming on all 12 cylinders," Robert Frances Group analyst Ed Broderick said.
Servers, networked computers that process and store data, range from beefed-up PCs that cost a few hundred dollars to superreliable systems that cost millions of dollars and can respond to the needs of thousands of users. Servers handle everything from making plane reservations to delivering e-mail.
From 2001 to 2002, IBM extended its server market share lead 2.1 percentage points to 31.1 percent of the $43 billion server market, according to Gartner. No. 2 HP had 25.2 percent, Sun Microsystems 15.1 percent and Dell 7.5 percent. IBM and Dell were the only companies among the four dominant server makers to increase their share.
IBM was left behind by Sun in the 1990s, when Internet companies and others were buying servers like mad, but Zeitler believes that the darker economic times that followed play into IBM's hands. "We've hit the bottom of this, and we'll start moving again," he said. "The leaders are going to be different than the leaders going into this. On the last seven economic downturns, IBM gained share."
Perhaps the biggest technical challenge for IBM's server group, and one of the biggest reasons for the reversal, has been the technological convergence of its four server lines, a process begun before Zeitler took over the server group in 2000 but whose delivery Zeitler must direct.
In the past, each server line had its own operating system, software and often a distinct processor. Now, Linux and Java span all four lines, masking some underlying differences between server lines that can trip up programmers.
Hardware design ideas straddle borders. The pSeries Unix servers and its iSeries midrange servers, for instance, use nearly identical hardware, with the Power4 processor at their core. IBM has brought high-end multiprocessor capabilities to its xSeries servers based on Intel processors. Technology from the top-end zSeries line for running multiple operating systems independently on the same computer have been moved to the pSeries, iSeries and xSeries.
"Dual-core" technology for etching two processors onto a single slice of silicon began with the pSeries but now has been arrived in the latest zSeries model. And now Linux and Java span all four lines.
Convergence will continue. Next year's Power5 processor will arrive within a few months in three separate "Squadron" systems--not just 64-processor iSeries and pSeries machines but also a new storage system that, unlike the current Enterprise Storage Server "Shark" line, won't lag the pSeries processor technology by six quarters, Zeitler said.
In addition, revamped "Hypervisor" software that underlies all the new Power systems will allow a three-way split personality in a single server, letting Linux run alongside both the AIX operating system for pSeries and the OS/400 operating system for iSeries, Zeitler said.
IBM's BladeCenter is convergence incarnate--a chassis that currently can be stuffed with as many as 14 thin dual-processor Intel "blade" servers. IBM has committed to selling Power blades that will fit into the same chassis early in 2004, but Mark Shearer, leader of IBM's Integrated Product Management Team, revealed that IBM is tinkering with a blade that has a mainframe's processor and a z/OS operating system.
"At our lab in Germany, we are looking at a mainframe blade. The vision is running z/OS on a blade that goes into the BladeCenter that coexists with Intel and Power," Shearer said, cautioning that the technology is just an experiment, at least at this stage.
Variety is also present. IBM is the only major manufacturer to offer in its lineup homegrown chips, Intel processors and Opteron chips from Advanced Micro Devices.
Limits on convergence
Ultimately, some server technology will likely seep upward to the mainframe line. IBM engineering teams that are designing the mainframe and Power processors have been working closely together, and some believe that IBM ultimately will bring some variant of the Power processor, or at least its design concepts, from the Power line into the mainframe.
Such a change isn't unprecedented--IBM moved the Power processor into the iSeries line without disrupting the software that's designed for earlier processors.
But Shearer says mainframe processors need different abilities from those of less powerful machines. "For the foreseeable future, there's a very defined mainframe marketplace requiring a different type of processor," he said.
Competitors, though, assert that IBM's server lines are still sprawling.
"I believe their direction on servers is getting more confusing," HP's Hudson said. For 64-bit processors--those that can handle large databases and other high-end server tasks--IBM sells servers with its Power and mainframe processors, while this year it added Opteron and Intel's Itanium.
HP, by contrast, is gradually phasing out its own PA-RISC and Alpha 64-bit chip lines, replacing them with Itanium in coming years. And Sun, while accepting Intel servers into the low end of its product line, still considers its 64-bit UltraSparc processors the mainstay of its business.
Sharing technology has helped IBM avoid turf battles inside the company, a not uncommon event given the overlapping products. For instance, when the company began a Unix server line in the 1980s, it put the line under the auspices of the Advanced Workstation Division to avoid the appearance that the machines competed with the midrange iSeries line, then called AS/400, said Jim McGaughan, director of IBM's server strategy and one of the founding members of the company's Unix server group.
"We were the people who wore the cloves of garlic around our necks," McGaughan said.
Differences have been muted now. IBM has named "eServer sales managers" to make sure that customers don't get competing offers from different IBM server groups. "People no longer say, 'You're infringing on my little kingdom.'"
The lesson of lock-in
IBM argues that its diverse line is the result of customer demand, and listening to customers has been instructive for Big Blue--in particular, when the customers were displeased. Some remained alienated for years by the company's "account control" practice of introducing its own version of new technologies to lock existing customers onto its hardware and software.
"If there were three standards, IBM would invent a fourth," Eunice said.
"Lock-in used to be the IBM battle cry," added Broderick, who believes that IBM has abandoned the practice. "Lock-in is probably a passe phrase these days, much to the vendors' disappointment. I think IBM has pretty much given up on the idea of leading people by the nose."
Zeitler admitted that the lock-in mentality led to a "valley of darkness for the last 15 years" but argues that IBM has reformed itself. "We have a religious commitment to open standards. Customers are too sophisticated to let themselves get sucked into what people call control points."
Sun, though, is quick to pounce on the issue, arguing that IBM has merely moved its lock-in strategy to its services group, which can run customers' computing operations. "They lock you at the business relationship level, which is even worse than the technology lock-up," Sun said in a statement. "A company that outsources to IBM Global Services loses all its information technology know-how seven years down the road."
IBM, first punished by customers' departure because of lock-in, now is being rewarded for being open. "When they are open, they've been successful," Eunice said, pointing to IBM's WebSphere software for running Java software on servers, its embrace of Linux and its support of the open-source Eclipse programming tools.
Openness also shields IBM to some degree from another issue in the industry: fears about Microsoft's growing influence.
"Customers have seen this movie before, and they don't like its ending," Zeitler said. "In spite of the biggest downturn in history, the price of software has gone up," he said of Microsoft's products.
One server company whose future is tightly wedded to the fortunes of Microsoft and Intel is Dell, which relies on the research of those allies to enable it to keep its expenses low. According to Gartner, for each of the last 22 quarters, Dell has increased the number of servers shipped compared to the year before by more than 10 percent, Dell spokesman Liem Nguyen boasted. "We have helped to drive down costs and raise the bar on performance by bringing relevant technology to the market at a low cost," he said.
Zeitler looks at Dell almost as an ally, because it keeps the pressure on HP and Sun. "Dell has a superior set of logistics and execution capabilities," he said. "HP and Sun are being strategically squeezed."