State of Technology: IBM, HP Lead the Server Charge

Rich Baldwin sells a lot of Hewlett-Packard servers--everything from entry-level boxes to heavy enterprise iron--and he's pushing many sharp blades too. But it's not the hardware that's making money for his company. It's what he can do with those servers that makes the difference.

"We're getting more and more into solution sales, and solutions are servers, storage, services, security, solving a disaster-recovery problem," says Baldwin, CEO of San Diego-based Nth Generation. "A server is just part of it."

Respondents to the VARBusiness quarterly State of Technology survey listed servers as one of the most important technologies in their portfolios--namely, because those servers are the building blocks of most any IT infrastructure. Further, they enable VARs to build an array of solutions, from security and disaster recovery to virtualization, that solve customer problems and fulfill customer needs. That's also why server sales for leading vendors--IBM and HP, to name a couple--are expected to remain healthy or grow.

"If you're selling just one part of the solution, you're just selling parts and not adding value," Baldwin says. "The higher you can sell the solution, the more value you typically have. You have to ask what problem you're trying to solve. If someone has the problem down to just a parts list, you might as well call CDW because you're not looking for services and higher value."

Dan Love, vice president of business development at Siwel Consulting, a New York-based reseller of IBM xSeries and pSeries servers, agrees wholeheartedly. "If you had to live off just hardware margins, you'd be out on the street. You'd have to do large volumes just to make money," he says. "If you can provide software and services around hardware, you have a viable business."

When choosing server vendors with which to partner, VARs look for those that are building boxes with multiway processors, high power and performance, and ease of deployment and management.

Reseller loyalty to vendors contributes significantly to server sales. According to our survey, solution providers plan to sell or recommend more server products from IBM, HP and white-box builders in the next 12 months than they did in 2005. By comparison, Dell's server sales appear to be somewhat sluggish, and so do Sun's.

Many vendors are doing one of two things: They're delivering technology that addresses specific business needs and creates new efficiencies. Or they're enabling solution providers to build systems that provide customers with measurable value.

Innovation and education, too, play key roles in winning over solution- provider partners. "As vendors roll out innovative [technology], they have an obligation to educate the reseller force so those solution providers can articulate the value that innovation brings to the end user," Love says.

Judging by the numbers, IBM and HP are succeeding on two levels. They're delivering cutting-edge technology. And they're doing a good job of communicating with partners, to boot.