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Ciber's Hughes, Jeskell's Gleich and Giondomenica, of Chouinard & Myhre, said the tealeaves for IBM's hardware business are easy to read. Here is what several VARs identify as IBM's biggest hardware challenges:
1. IBM needs to pivot faster to the public cloud.
IBM's PureFlex converged systems is a good start, but it's not enough, said VARs. IBM earlier this week expanded its IBM Flex Systems converged infrastructure solutions with the addition of three new POWER7+ processor-based models and a new x86-based model to provide more power for cloud-based and other operations.
However, analyst Moorhead questioned whether the new systems could compete with Hewlett-Packard's Project Moonshot servers.
"Where is IBM's equivalent of HP's Project Moonshot?" analyst Moorhead said.
Moonshot is HP's first densely packed low-power server for hyperscale computing environments. The servers are based on low-powered alternatives to Intel's Xeon processors, and are designed to scale performance quickly.
2. Layoffs in IBM's Systems and Technology Group are hurting the company, creating a talent drain.
IBM in June reportedly laid off 1,700 employees. But, according to the Alliance@IBM website, run by IBM union members, IBM's summer layoff numbers are closer to 3,000. Those layoffs have some VARs worried. "IBM does a good job of backfilling, but there's no question years of expertise and top talent are headed out the door," Hughes said.
But, IBM has its back against the wall with little choice other than to stay in the game, Gleich said. He said his IBM-related hardware sales are still strong, albeit declining.
In the larger market, the global server market was worth $11 billion, according to IDC's first-quarter numbers. That's down 7.7 percent from the previous year but still a big source of revenue for companies such as IBM and VARs.
"IBM is not in dire straits, but it is entering a challenging time," Moorhead said. IBM reported revenue from its hardware Systems and Technology segment was down 12 percent from the second quarter of 2012. According to its last second-quarter 2013 financials, revenue from IBM Power Systems was down 25 percent from the previous year.
In April ,CRN reported IBM was shopping around its System x server business to Lenovo. Lenovo reportedly passed on the deal, insiders said, but IBM is still looking for buyers of its low-end commodity x86 hardware, not its higher-end PureSystems and iDataPlex x86 servers.
"There are a lot of SaaS offerings out there that companies can turn to and circumvent CIOs, VARs and IBM, as no infrastructure is required," Giondomenica said. "If they don't need hardware or need less of it, that's a sea change disrupting existing business models for VARs as well as IBM and other hardware manufacturers. The key is helping our clients transition to the 'data center of the future,' which is very different from the one we've known for so many years and will, in most cases, include less hardware."