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October 7, 1999

IBM Extends Server Consolidation to Business Partners

By CBR Staff Writer

By William Fellows

IBM Corp’s server consolidation business is pulling resources together from across its product and services divisions to create a single ‘go-to-market’ message. To do this IBM’s director of server consolidation, Kathy Smith is leveraging a brand the company is establishing around an application called Align which it has developed for customers to assess what kinds of cost savings they can expect to make in their IT infrastructures by engaging IBM. It’s less a case of consolidating physical servers, VP Rick Fuchs argues, than integrating disparate legacy data sources for use in new application environments, usually e- commerce.

It seems hard to believe but the task of collecting intellectual capital from across the company is something the server consolidation people say has not been done before. It’s not something they’d undertake again lightly either, and says they feel like they’ve been creating a start-up within IBM.

While Intel and Unix system consolidation is the number one driver of the consolidation business, data integration is a close second. Even so, the 100-plus strong group still reports into the server group, not IBM global services (IGS), although IGS chief Sam Palmisano has now taken over in charge of the server business. The server consolidation team has been up and running formally for over a year now and Fuchs expects this year it will do between 25% and 40% better than the ten digit revenue it recorded in 1998. It claims that Align is being used by 150 paying customers, 60% of them in the US, 5% in Asia Pacific and 35% in Europe.

IBM is now extending the server consolidation opportunity to business partners which can pick the low-hanging fruit while IBM focuses on the more complex, high-end engagements. Twenty partners worldwide – ten in the US including Oakbrook, Illinois- based Real – are on board, with the requirement the carry at least three of IBM’s five server lines, including Sequent boxes, plus storage, networking and third party kit. IBM says it’s even leaving some of the smaller customers with Windows NT and line of business consolidation demands to the product divisions.

In the style of Hewlett-Packard Co and other vendors, IBM is also extending a range of financing options to the partners and their customers, including revenue sharing, per usage and per transaction charges. It’s a prelude to an expected push into the ISP and ASP businesses which Big Blue has so far made little headway into.

It hopes to grow the revenue from business partners by 10% a year, and though it won’t say what its initial goal is, typically between 50% and 70% of other IBM sales are made through, with or by partners. IBM has a couple more releases of Align in the pipeline and says it has now amassed enough data to do some real business intelligence on it, looking for repeated trends and other common data requirements.

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With the server consolidation business becoming a significant revenue opportunity for e-commerce engagements we wonder when chairman Louis Gerstner will name the group. The company is planning a big campaign around E-enablement next year which the server consolidation group expects to rolled into.

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