Technology giant IBM’s hardware division, it appears, is back in business, with some help from India.
In the 90s, the company began shifting its focus to the services sector, which was growing faster than its hardware and software divisions. However, the 2010 first quarter earnings reveal IBM’s hardware and software businesses are growing faster than its services business, which nevertheless remains its largest division, contributing 62.3 per cent to the quarter’s revenue. However, year-on-year, technology services was up by 5.8 per cent, while growth in business services declined.
IBM's systems and technology or STG (read hardware) business, on the other hand, was up nearly five per cent, despite the fact that IT spending was down in 2009, while software grew by nearly 11 per cent. Compare that to the trailing quarter, when software was up year-on-year by 2.4 per cent and systems and technology fell 4.3 per cent.
IBM expects the growth rate of its STG division to accelerate through 2010, especially since the BRIC (Brazil, Russia, India and China) countries are building and integrating their public and private infrastructures, where IBM can be a technology partner.
India picture
IBM does not give India figures. However, Jim Stallings — a general manager in IBM who drives the global sales and go-to-market strategy for its hardware business unit — says while 2009 was a challenging year for enterprises around the world, India was relatively less impacted by the downturn. He believes clients in India this year “will look for a technology partner who can help offer them a robust technology roadmap, help capture definitive return on investment for their technology investments and provide them with smarter solutions that assist them in achieving their business vision”.
Stallings says the key sectors in India that will drive this growth include telcos, banking & finance and public sector/government, with increased investments from government in building world-class infrastructure.
Data are in his favour. IBM India's STG business, according to latest (March 2010) IDC data, leads in almost all segments. The company, for instance, is number one, with a 35.7 per cent share of the India server market, in revenue terms for Q4 2009. In the non-x86 Unix server segment, too, IBM maintained its number one position, with a 42.6 per cent market share in Q4 2009 in factory revenue terms. IBM’s external disk storage systems’ factory revenue grew 36.5 per cent year-on-year (2009 over 2008).
“The market is responding to the business value it sees in our capabilities for addressing their data centre requirements,” says Stallings. IBM's clients across industry verticals include Hyundai Motors, HDFC Bank, Reliance General Insurance Corporation, Religare, Century Ply and Sun Direct TV.
IBM, meanwhile, is sharpening its focus on Business Analytics, cloud services, virtualisation and Green Data Centers. However, cloud computing customers do not own the physical infrastructure. And, virtualisation reduces the need for additional servers (thus the need to buy more hardware).
Trends ahead
Will this not affect IBM’s hardware business? "You will always need data centres (for which you need servers, storage, etc)," asserts Stallings. He admits, though, there will be fewer data centres and more consolidation in this segment. Besides, IBM’s cloud services – for which it started preparing almost three years back – comprises "integrated service delivery platforms which include hardware, storage, networking, virtualisation and service management software".
Last year, IBM teamed with Amazon Web Services to provide pay-as-you-go access to its database servers, Lotus and Websphere middleware, running on Novell SUSE Linux. This year, it acquired Cast Iron Systems,which helps integrate public and private cloud services and supports many enterprise applications ranging from SAP, Oracle, and Microsoft to Lawson and Amazon EC2.
IBM plans to deliver a line-up of new, innovative, "workload-optimised" systems this year, designed for a ‘smarter’ planet.
