IBM Tells Partners It Supports Entry-Level Servers, Despite Lenovo Deal


IBM has leaked a memo which tells its solution providers it is committed to its System x family of x86-based servers despite a technology agreement with Lenovo that gave Lenovo rights to build similar servers, but VARs said the company was preaching to the choir.

Instead, solution providers said they have not seen a drop in IBM's commitment to the product line, especially in the entry-level line where Lenovo also competes, although they have seen moves by IBM that indicate a shift in emphasis in its marketing to that segment of the server market.

IBM and Lenovo in January of 2008 unveiled a four-year technology agreement under which IBM licensed its x86 server technology to Lenovo.

That agreement let Lenovo build one-processor and two-processor servers based on IBM's System x server technology, including rack mount and pedestal servers, but not blade servers.

Under the agreement, both companies have been offering their own branded versions of the servers. Solution providers report that the IBM-branded and Lenovo-branded entry-level servers look almost identical, except for cosmetic differences.

Lenovo, which in late 2004 acquired the PC Division of IBM, including the ThinkPad line of mobile PCs, already sold its own line of x86-based servers in China at the time of the server agreement with IBM, but used the IBM technology to expand its server reach worldwide.

In the memo, Adalio Sanchez, general manager for System x in IBM's Systems and Technology group, wrote that competitors have tried to use IBM's licensing agreement with Lenovo and other agreements with Rackable to plant doubt about IBM's commitment to the System x business.

Sanchez wrote that IBM has used similar OEM and intellectual property agreements for 40 years to expand its technology footprints in semiconductors, UNIX, mainframes, and systems software.

"Let me be clear ... IBM is not exiting or selling its x86 server business," Sanchez wrote. "We're not leaving the one-and-two-socket rack and tower business. We're not leaving the high-end, BladeCenter or iDataplex, all of which will set the pace for the future of x86 computing. To the contrary, the x86 server space is huge and very strategic to our clients and IBM. The fact is, IBM is more committed than ever to making sure the entire System x product line provides clients with unparalleled value in the current and next generation of x86 server solutions."

IBM declined to comment on the memo.

IBM solution providers, most of whom also have access to but sell few of Lenovo's entry-level servers, said they have seen no signs that IBM is lessening its commitment to that part of the market.

However, they said, there may be some shifting in terms of where IBM focuses its resources.

David Stone, vice president of business development at Solutions-II, a Littleton, Colo.-based IBM solution provider which also works with Lenovo, said the vendor has moved more of its direct and channel resources towards higher-end servers.

"But, and I emphasize but, IBM hasn't taken away from its support of its volume servers," Stone said. "The focus is more on driving entry-level servers through its volume resellers."

Which server to take to the customer depends on the solution and on whether solution providers can sell the products competitively, Stone said. "That's the key," he said. "We have to be able to sell competitively."

For now, the IBM entry-level server business is still the same as before IBM's server deal with Lenovo, said Joel Kaiser, pre-sales rep at TSG Server & Storage, a Minneapolis-based solution provider.

"There's some talk it might change, but it's too early to comment," Kaiser said. "But Lenovo is not knocking on our customers' doors."

One IBM solution provider, who asked to remain anonymous, said there are already changes happening in terms of how IBM markets its entry-level servers vs. those of Lenovo.

The solution provider said that IBM has changed its server distribution so that higher-value System x servers are now available through Avnet and Arrow, while the entry-level models are available through Ingram Micro and Tech Data.

The problem with such a system is that IBM solution providers get back-end dollars through distributors, and by splitting orders for high-end and entry-level servers between two distributors, solution providers could lose some of those rebates, the solution provider said.

Meanwhile, the solution provider said, Lenovo's servers are available through Synnex. "I'm just interested where this will pan out," the solution provider said. "I don't see why IBM is splitting its 1U and 2U servers from Arrow and Avnet. However, right now, if I buy 1U and 2U servers from Arrow or Avnet, they will do inventory transfers from Ingram Micro or Tech Data."

Lenovo has a share of the small business market that IBM can not necessarily penetrate, and needs to put more feet on the street, which led to its Lenovo deal, said Mitch Kleinman, president of Ryjac Computer Solutions, an Irvine, Calif.-based solution provider.

"But If I'm an IBM business partner, why would I want to buy Lenovo," Kleinman said. "I want one source. But if I focus on ThinkPad [notebook PCs manufactured by Lenovo], I'd consider Lenovo servers."

Tom Templin, director of advanced technologies in the Technology Solutions practice of Ciber, a Greenwood Village, Colo.-based solution provider which partners with both IBM and Lenovo, said he is seeing continued IBM investment in its entry-level server line in 2009.

Templin said his company, which has been an IBM partner for 20 years, always leads with IBM servers, but will provide Lenovo servers if customers request them.

"I had expected to see a drop in IBM's 1-socket and 2-socket server line because of the Lenovo relationship," Templin said. "But it's been the opposite. I've seen IBM move to support the line."