IBM + Sun: How a merger would impact IT

Clouds, servers, open source, Java, and competition with HP would all be affected by potential acquisition

The IT industry is abuzz with the rumor that IBM is going to purchase Sun for nearly $7 billion, first reported in the Wall Street Journal. It's all speculation until a deal is confirmed, but the combined reach of an IBM/Sun company would be vast. Here are nine topics to consider.

•  Cloud computing. Both IBM and Sun are potentially big players in cloud computing markets – both as providers of IT services over the Web and as providers of server and storage infrastructure necessary to build cloud platforms. Even as rumors swirled about the potential IBM/Sun acquisition, Sun was announcing new compute and storage services to compete against Amazon's Elastic Compute Cloud and Simple Storage Service. But it's the cloud infrastructure piece that might prove most compelling to both companies. "The companies have a similar view of the cloud," says Pund-IT analyst Charles King. "Frankly, both IBM and Sun are basically plumbing suppliers for IT. They’re very much focused on the infrastructure offerings."

•  Servers. Cisco's entry into the blade server market was bound to cause some reaction among competitors. Could IBM's rumored purchase of Sun be the first response? In any case, a combined IBM/Sun company would be formidable in the hardware markets. IBM already owns 36% of the worldwide server revenue market share with nearly $5 billion in fourth-quarter sales, according to IDC. Purchasing Sun would give IBM another $1.2 billion in quarterly revenue and raise its market share to more than 45%. That would give IBM more share than HP and Dell combined. The three companies together would account for 85% of the server market. One long-term question: will IBM urge Sun's Sparc customers to migrate over to servers based on IBM's Power processors?

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The IT industry is abuzz with the rumor that IBM is going to purchase Sun for nearly $7 billion, first reported in the Wall Street Journal. It's all speculation until a deal is confirmed, but the combined reach of an IBM/Sun company would be vast. Here are nine topics to consider.

•  Cloud computing. Both IBM and Sun are potentially big players in cloud computing markets – both as providers of IT services over the Web and as providers of server and storage infrastructure necessary to build cloud platforms. Even as rumors swirled about the potential IBM/Sun acquisition, Sun was announcing new compute and storage services to compete against Amazon's Elastic Compute Cloud and Simple Storage Service. But it's the cloud infrastructure piece that might prove most compelling to both companies. "The companies have a similar view of the cloud," says Pund-IT analyst Charles King. "Frankly, both IBM and Sun are basically plumbing suppliers for IT. They’re very much focused on the infrastructure offerings."

•  Servers. Cisco's entry into the blade server market was bound to cause some reaction among competitors. Could IBM's rumored purchase of Sun be the first response? In any case, a combined IBM/Sun company would be formidable in the hardware markets. IBM already owns 36% of the worldwide server revenue market share with nearly $5 billion in fourth-quarter sales, according to IDC. Purchasing Sun would give IBM another $1.2 billion in quarterly revenue and raise its market share to more than 45%. That would give IBM more share than HP and Dell combined. The three companies together would account for 85% of the server market. One long-term question: will IBM urge Sun's Sparc customers to migrate over to servers based on IBM's Power processors?

Click to see: Chart showing what IBM and Sun offer.

•  Storage. Acquiring Sun would also give IBM a significant boost in the external disk storage system market. IBM grabbed 15.7% of worldwide market share in the fourth quarter, down from 17.7% year-over-year, IDC says. Buying Sun would push IBM over the 20% mark but still leave it short of EMC, which is sitting pretty with 23.3% of market share. Purchasing Sun also would eliminate IBM's biggest competition in the high-end tape storage market. But some analysts question whether it's even worth buying Sun, which has seen its external disk storage market share plummet.

•  Virtualization. IBM invented virtualization decades ago when the mainframe was king, and has gained commercial success more recently with a hypervisor for its Power-based servers. IBM has resisted building a hypervisor for x86 processors. That product gap could be filled with Sun's xVM hypervisor for x86-based systems, but given xVM's limited market reach IBM executives may not consider that a big deal. The hypervisor isn't all that exciting anymore – it's how you manage virtualization that's most important, notes analyst Judith Hurwitz of Hurwitz & Associates. Both IBM and Sun have focused on partnering with hypervisor vendors VMware and Microsoft to enhance the capabilities of virtualized servers, King says.