IBM Stumbles, But Partners See Infrastructure, Red Hat And FinOps Opportunity

“Those mainframes, the Power systems, all of that—the entire world runs on them for a reason,” Chris Bogan, vice president of sales at Houston-based IBM solution provider Mark III Systems, said.

IBM’s surprise letter about a quarterly underperformance spoke to some trends solution providers have been seeing over the past year or two and some trends that partners are defying.

Chris Bogan, vice president of sales at Houston-based IBM solution provider Mark III Systems, told CRN in an interview that the majority of his company’s IBM business is hardware and despite the results Mark III still expects “a banner year” in that business.

Mark III’s IBM hardware projects are funded more so from line-of-business budgets than historical IT spend, with better customer experiences (CX), revenue generation and the products the customer makes. Selling into those parts of the business gives customers a tangible grasp of how the technology improved their business, Bogan said.

“Those mainframes, the Power systems, all of that—the entire world runs on them for a reason. We’ve got the skills to be able to pull those components together.”

Solution Providers Remain Bullish On Infrastructure Demand

Moving technology to a line-of-business has also come with the associated storage, networking, server, components and security, all business to Mark III and ways to tap into customer budgets beyond traditional IT.

“If you’re looking just for technology spend from IT alone—that’s going to be a challenge,” he said. “It’s got to be aligned with how the business is functioning and how the business is growing and supporting their customers.”

Bogan said he maintains long-term confidence in IBM innovation. The company is unveiling a new Power Autonomous Operations AI agent Wednesday despite the CEO’s underperformance letter and announcing days before the letter upgrades to its IBM Bob agentic software development platform to give it multi-agent capabilities, built-in AI costs and use analytics plus pre-built, specialized workflows.

Even with IBM’s storied research and development wing, partners like Mark III are necessary for completing last-mile customer requirements for custom products and services. IBM’s consulting wing—No. 8 on CRN’s 2026 Solution Provider 500—has also proven a resource helpful to Mark III client engagements, he said.

“No one group can do it all themselves,” said Bogan (pictured). “You need the ecosystem.”

Bogan said he has not seen overall IT spend grow, but funding for those projects gets pulled in as those projects become more valuable and more important to the overall business. Has seen refresh, maintenance and incremental projects take a back seat to more innovative, long-term ones in recent months.

Customers “realize the prices are going to do nothing but go up—I think we all agree with that,” he said. “They’re looking at it saying, ‘Where do I put my dollars to create the largest impact?’ And that’s where we’re really working with our team and with our customers to make sure that we’re focused in the same way because if you’re making that highest level of impact, then you’re going to find the funds. But you’re also going to have the cultural kind of connection from the customer to say, ‘Hey, let’s go get this done.’”

Red Hat A Key Growth Driver

IBM’s enterprise-grade open-source technology vendor Red Hat looks like a silver lining for the difficult quarter, with growth for the division accelerating to 11 percent during the quarter.

Paul Ponzeka, chief technology officer of New York-based Abacus—No. 174 on CRN’s 2026 Solution Provider 500 and a member of CRN’s 2026 MSP 500—told CRN in an interview that Abacus picked Red Hat as its hypervisor partner of choice despite having no partnership with the vendor a year ago.

The former VMware partner switched to Red Hat for its enterprise support, enabling vendor choice and avoiding lock-in, ability to scale and perform, and the technical prowess of Red Hat’s Kernel-based Virtual Machine (KVM). “They seemed eager to solve our tech problems versus just sell us a solution,” Ponzeka said.

Fueling Red Hat demand for Abacus is its reputation as a VMware alternative. Customers continue to assess the virtualization giant following pricing changes enacted after Broadcom acquired the company in November 2023. Customers who signed three-year contracts with VMware for pricing benefits have been exploring alternatives like Red Hat, Nutanix, Microsoft products and Proxmox, Ponzeka said.

The difficulty of VMware migrations has Ponzeka putting customers on multi-year plans to move thousands of virtual machines and retrain workers. And Abacus keeps a high human touch to migrations given the critical workloads involved.

“Red Hat really has an opportunity to drive the partner ecosystem on both the integration, these migration spaces off of Broadcom, but also pushing the vendors to having feature parity at the partner level that you have like with VMware,” he said. “They’ve done a good job, but they need to continue to invest and make sure that third-party packages and plugins are there to meet what the modern enterprise is looking at.”

Asked about the hardware supply chain, Ponzeka said that acquiring components for new projects is still difficult.

“Purchasing power has been destroyed,” he said. “That’s probably the big driver of what we’re seeing ourselves as well as our customers—our per-compute blended cost has gone up about 7x in the last eight months. (And) people are getting less for their money on the hardware side but are redirecting a lot of this to like new AI initiatives.”

Abacus itself has been evolving its business model to meet customers who want to move spending from hardware projects associated with capital expenditure (CapEx) to services purchases more associated with operating expenditures (OpEx).

The solution provider has moved from declarative technology pricing and platform pricing to outcome pricing, moving from per-user, per-server sales to a package of technology, security, operations, governance, risk and compliance (GRC), the CTO said. Clients in highly regulated industries constantly need to attest to federal regulations, which made as-a-service a better model.

“We are very much moving to outcome-based pricing, and we’ve always been heavily focused on the as-a-service side because that’s where we feel like we can provide the best value to our customers,” he said.

With IBM blaming Anthropic’s Mythos for increased customer security spending during the quarter in lieu of other items, Ponzeka did point to a bump from Mythos in terms of customer inquiries on how to protect their IT environments against new threats. The impact on IT environments by quantum has also raised customer concerns.

“We’re definitely seeing a lot of noise around, what does this mean from a disruption standpoint?” he said. “It’s changing the landscape really quickly versus what things used to be considered secure five or six years ago.”

FinOps Services Help Customers Navigate Infrastructure Costs

Duane Barnes, president of Raleigh, N.C.-based solution provider and Cox company RapidScale—No. 173 on CRN’s 2026 Solution Provider 500—said that supply chain challenges have customers looking to get more out of what they already have.

“That’s been ongoing now for a year and a half,” Barnes said. “And it’s only getting worse.”

RapidScale, which is part of Cox Communications and is interested in growing a Red Hat practice, has leaned on its financial operations practice, moving customers to the cloud, even upgrading to new vendor products that offer better cost performance where appropriate, Barnes said. FinOps conversations also give the solution provider a chance to learn more about a customer’s full application inventory, should they live in a public cloud or private cloud or on-premises and other more holistic, potentially revenue uplifting conversations.

“Our clients are telling us it was incredibly helpful,” he said.

Barnes has seen customers delay decision making on hardware purchases and seek help from solution providers. RapidScale in late 2025 and early 2026 bought more compute infrastructure to get ahead of price increases, a bet the president feels is now paying off because RapidScale can serve its clients without raising prices.

Customers have also reduced the scope of some projects—going from a full data center refresh, for example, down to couple of applications due to inflated prices.

RapidScale has not seen full-scale public cloud migrations with the current spending environment or clients wanting to move CapEx spending to OpEx.

Although IBM indicated that its execution issues are short term, Barnes pointed out that AI tools have many customers exploring ways to replace traditional infrastructure, including potential efforts to replace decades-old mainframe environments.

A couple of investment firm reports suggested the damage could impact more than just IBM’s second fiscal quarter. Bank of America in a Tuesday report said to expect IBM to lower full-year software revenue expectations to mid-single digit growth plus a mid-single digit decline in infrastructure. Bank of America now expects IBM to miss its expected $1 billion increase year on year in free cash flow.

A Bernstein survey of chief information officers showed that a third of participants planned to decrease mainframe million instructions per second (MIPS) capacity, up from 23 percent of respondents in the November survey, according to a report Wednesday by the investment firm. A May survey of CIOs showed 54 percent planning to reduce spending with the company compared to 49 percent in November.

The firm’s survey work also gave a signal for disruption to IBM’s consulting business with a net 15 percent decrease in CIOs who expect to increase use of third-party IT consultants for the rest of 2026.

RapidScale has reorganized the entire business over the past two years to structure its portfolio as advisory, implementation and managed services, with the ability to jump into projects at any stage and offer a full-stack experience.

“We’ve evolved our business from what effectively was 100 percent a managed services recurring revenue business to more of a 70-30” with professional services (PS) engagements, he said. “We really feel like we’re differentiated because many of our legacy competitors would be out there selling colocation and managed servers, but they’re not doing consulting, or they’re doing consulting only, and they’ll have a data center footprint. (So) we feel like we’re the one that spans all the sort of top pillars there.”