Over the next several weeks, don't be surprised if you get a postcard or letter from an IBM Business Partner that asks whether you're interested in consolidating your servers. It just means you're part of a campaign that IBM launched two weeks ago with Business Partners to promote server consolidation among mid-market companies and, in the process, advance the computer giant's long-term strategy for those firms.
For several years, IBM has heavily promoted server consolidation among large enterprises with hundreds of servers. In recent studies, however, IBM has learned that as many as one-half of all mid-market firms may also be considering server consolidation. Most of these firms host their enterprise applications on AS/400, iSeries, or Unix systems, but also support Windows servers for file and print serving, messaging, Web serving, and other infrastructure tasks.
Unfortunately, many mid-market firms manage both types of servers in ways that make them more expensive than they need to be. In a misguided effort to keep IT spending in check, many companies add Windows capacity one single-processor server at a time. This reduces the price paid for each server, but dramatically increases the cost of managing the resulting infrastructure. As the number of servers increases, their growing complexity unleashes a "multiplier effect" in which management costs increase geometrically rather than arithmetically. Some companies are also refusing to purchase additional iSeries or Unix servers for their enterprise applications. In many cases, however, these older systems are imposing higher costs for maintenance, power, and other support costs than newer servers.
Server consolidation represents a way to address these cost and management problems while improving the availability and accessibility of both applications and databases. Mid-market companies are waking up to this fact, and IBM is mobilizing its Business Partners to capitalize on that growing awareness. Over the next several months, qualifying IBM partners will be able to log onto a special Web site where they can design their own server consolidation mailing materials using templates and marketing text that IBM has designed and approved. With the touch of a button, Business Partners can then instruct IBM to mail their newly designed materials to their own prospect lists as well as lists that the computer giant has developed. IBM is even offering to follow up on the leads these campaigns generate through its telemarketing representatives.
While IBM is promoting server consolidation because it makes sense for mid-market customers, it is also doing so for its own internal reasons. Over the last several quarters, server sales have plummeted at IBM and other vendors. In such tough economic times, server consolidation--with its appeal of reducing management costs--is one of the few ways IBM can get its customers to consider newer, more powerful systems. Since those systems often replace older non-IBM boxes, server consolidation is also a great way to take market share and account control away from the competition. At the same time, server consolidation projects drive additional sales of hardware, software, and services. Much of this sales volume flows back to IBM.
At the same time, server consolidation fits perfectly into IBM's long-term strategy to migrate mid-market companies to a utility-based computing model. Here is the reason why: Before most companies will be able to hand over their applications and databases to computing utilities to host and manage them, they will need to consolidate and optimize those systems. Just as you cannot move to a new house until you've organized and packed everything, so you cannot move your IT systems to a utility until you've consolidated them. You can always hire someone else--such as the utility provider--to do the consolidation, but somebody has to gather the systems to be outsourced into a manageable and measurable package. As such, server consolidation is a gateway to utility computing. IBM realizes this and knows that the sooner it can get mid-market companies to consolidate their servers, the sooner it will have a market that is ready for computing utilities.
Of course, many of IBM's mid-market customers will consolidate their servers just because it saves them money and makes their systems more manageable. That's fine with IBM as long as those customers buy its products in the process. Over the course of this decade, it believes that many of those customers will gradually outsource the management of those products to an IBM-built--and in many cases, IBM-owned--computing utility. If that happens, IBM could replace the wild hardware revenue fluctuations it experiences with a smooth and predictable stream of monthly payments for computing capacity. In times like these, that is a vision that haunts the dreams of many server vendors.
Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology. You can reach him at
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