Commentary: IBM servers gain strength in family

It is not surprising that IBM is increasing its lead in the server market. The company has been reinventing its server business, and the results are quite positive.

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In late 2000, IBM consolidated its server brands into a single eServer brand. That move represented a marketing response to a marketing problem. IBM is the revenue leader in the combined RISC-Intel server market, but it ranks third in Unix and Intel servers--the two primary growth categories.

IBM comes up short in terms of brand equity compared to RISC competitors (Sun Microsystems and Hewlett-Packard) and Intel competitors (Compaq Computer and Dell Computer). The eServer program is intended to fix that problem by shifting emphasis from independent server brands toward a stronger overall IBM brand.

The company has reorganized across server lines. Individual organizations no longer report to product-oriented executives. Rather, server development reports to a single executive, and server marketing reports to a single executive.

After a downward spiral of missed commitments, lagging performance capabilities and diminished sales aggressiveness, IBM's Unix business is showing renewed focus. Investment in the pSeries (formerly called RS/6000) has led to strong performance and aggressive sales and discounting--even outside of the traditional IBM installed base.

IBM has yet to show the same focus and attention in the Intel server market, but 2002 will be a year of change as the company introduces the Summit chipset in a serious, high-end, competitive product.

The most important development to watch is eLiza, a major research initiative focused on developing systems that can manage and fix themselves with less human intervention. IBM expects to spend as much as 25 percent of the server group's $2 billion annual research and development budget on the effort during the next three to five years.

Gartner believes that self-healing systems capability will grow rapidly in importance through at least 2006--particularly as skills costs escalate and exposure to downtime heightens. Although today's homogeneous IBM mainframe world contains elements of many desirable properties (such as availability, manageability and security), the eLiza initiative aspires to embrace not just all types of servers, but all types of systems that include IBM and non-IBM products.

IBM's server family is truly becoming a family in terms of organization structure, shared development expense, shared branding and the eLiza initiative. The company's renewed focus on Unix and Intel servers will be an important driver to its success in the short term.

Over time, eLiza will become the company's most important server initiative and, given the right amount of investment and marketing, it could become a major differentiator for the IBM server family.

(For a related commentary on IBM's eLiza initiative, see Gartner.com.)

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