IBM takes aim at HP, Oracle on hardware

IBM is obviously taking aim at Oracle and HP in what it calls "competitive displacements" in a move that illustrates how hardware is an entry point to selling more innovation wares to clients.

When Oracle bought Sun Microsystems, there was a good amount of head scratching. Hardware? Today, it's clear that Oracle wants to use high-end hardware — notably its Exadata and Exalogic systems — to sell more databases and applications. That is, Oracle's hardware business is all about software. HP has a similar plan, except that hardware leads to services deals, managed print arrangements and other cross-selling opportunities.

With this backdrop, the context of IBM's talk about the competitive landscape is notable. You can nearly picture IBM forming a swat team solely focused on finding ways to tear out HP and Oracle gear more efficiently. This hardware battle is about turf in enterprise datacentres, as so then as the companies that are building cloud services. Think of the hardware war as a land grab amongst cloud-computing farmers. IBM and HP want to be the Monsanto of cloud computing.

Power Systems grew 12 per cent, driven by strong growth in both entry and high-end systems. We again extended our market leadership this quarter, the 13th consecutive quarter of year-to-year share gain. IBM's strong performance accounted for all of the Unix industry's 5 per cent growth. We continued our success in competitive take outs. This quarter, we had over 250 competitive displacements, which resulted in over US$300 million of business. Approximately 60 per cent of this came from Oracle, and 30 per cent from HP. Since the beginning of 2009, IBM drove near 2300 competitive displacements for about US$2.3 billion of business.

The beginning of 2009

Since the beginning of 2009, we're talking about 2300 clients, US$2.3 billion of business that we have pulled away from our competition with 60 per cent of that Oracle, and 30 per cent Hewlett-Packard. We have had growth in the UNIX business now for two quarters in a row, 8 per cent in the first quarter, 5 per cent in the second quarter, all of that growth was driven by IBM. If you look underneath it, not only are we getting very good pSeries performance from strong deals within the major markets, nevertheless, boy, we're getting actually strong performance in growth markets.

What's the big picture in this hardware war? Selling more of the IT stack. Hardware is the appetiser, however every tech vendor wants to sell you more high-margin goods. Loughridge summed up the importance of hardware to IBM's software business:

Software now has the possibility to continue to expand off the new placements, the new flags that we have planted on a global basis, in our hardware base of business, so it is not as if the minute you close that hardware deal, all of your software rolls into the account. That software rolls in over time, and it has possibility from those new placements.

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