IBM Hardware Woes Have VARs Singing The Blues

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News that IBM is furloughing its U.S. hardware staff for a week in late August has not been sitting well with IBM channel partners that see it as part of a larger gloomy trend for Big Blue's hardware business. But most say, despite a spate of bad hardware-related IBM news, they stand behind the company and think it's headed in the right direction -- the cloud.

This week IBM said it was furloughing its hardware Systems and Technology Group as a cost cutting-measure to help bring the software, services and systems giant back to a profitable business model. The news comes on the heels of a trifecta of bad IBM news that included: IBM's x86 server business is falling, it reportedly laid off 1,700 employees earlier this summer, and it has been rumored that IBM has been shopping around its server business.

"IBM is battling to stay on track, but its hardware business keeps dragging it down," said Patrick Moorhead, principal research analyst at Moor Insights & Strategies. He said IBM is struggling to step up its offerings to deliver services for data centers and wean itself from selling hardware -- namely x86 servers.


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That's something Steve Giondomenica, president of Chouinard & Myhre, a San Francisco-based IBM partner knows firsthand. "Many of our clients want to move to the cloud," Giondomenica said. "And in some cases, they have stated if they can avoid buying new hardware all together, that's their preference," Giondomenica said.

For years, IBM has repeated the mantra that it's ready to move away from delivering physical processing and storage equipment and instead move to delivering cloud software and services offerings -- a challenge every other tech titan is struggling with.

Tom Hughes, director of alliances for the Technology Solutions Group of Ciber, a Colorado Springs, Colo-based IBM partner, said his customers may not be sprinting to the cloud, but more are consolidating servers onto more powerful platforms rather than just buying new ones. "Bringing both hardware and software [together] as one solution has never been more important to IBM's growth," Hughes said.

"Everyone is challenged by the same market," said Bill Gleich, president of Jeskell Systems, a Laurel, Md.-based IBM partner. He said VARs like him feel it, just as IBM does on a macro level. "Server commoditization puts the pressure on us to deliver managed services, not just bigger boxes," Gleich said.

NEXT: Biggest Hardware Challenges Facing IBM

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