One of the topics that we frequently wrote about in 2010 was the ongoing coalescence of the IT industry around a few key players. We are going to use this newsletter to provide more insight into how one of the players, IBM, is likely to leverage its acquisitions to position itself in the IT market.
As we mentioned in our last newsletter, at one time IBM was a major player in both the network equipment and network services marketplace. However, by the end of the 1990s IBM had exited the network market and showed no interest in re-entering it until the end of last year when it acquired BLADE Network Technologies. As we also mentioned in our last newsletter, rumors have been flying around for the last year or so that IBM would acquire Juniper Networks.
Let’s assume for the sake of this newsletter that IBM does acquire Juniper or a lower cost, high-value option such as Extreme Networks or Force10. Does that mean that IBM will be a networking company the way that Cisco is a networking company? We don’t think so and our thinking has nothing to do with the relative revenues that IBM and Cisco currently derives, or are likely to derive from selling network equipment.
Our thinking comes largely from how the two companies currently go to market. It may seem obvious, but the Cisco sales force actively sells network equipment. If you are an enterprise company and you want to deploy a new data center LAN, the Cisco sales force will be happy to sell you network equipment to allow you to do that.
It was only recently, when it began to sell UCS (Unified Computing System), that Cisco sold solutions that were broader than just a networking solution. We believe that IBM will take the opposite approach. They will not have a sales force that is focused on selling network equipment. Rather, its sales force will sell only network equipment that is part of an integrated solution.
One could make the assertion that given the movement to deploy a converged data center infrastructure that the IBM approach of selling an integrated solution will be more successful than the Cisco approach of selling individual components of the overall solution. However, we remain skeptical relative to how quickly enterprise IT organizations will adopt a converged data center infrastructure. As such, we see IBM and Cisco as positioning themselves for a fight that will not begin in earnest for another couple of years.
