IBM's new enemy: the whitebox

IBM plans to step up its marketing to small and medium-sized markets in 2005, by investing in alternatives to commodity x86 systems.

If IBM's hardware division has an enemy number one in 2005, it may be the lowly whitebox server. Speaking at the company's annual PartnerWorld conference in Las Vegas last week, the company's top hardware division executives said it was spending millions to become more competitive selling to small and medium-sized businesses that have embraced commodity servers.

Central to this push are technologies like the company's BladeCenter line of ultra-thin servers, as well as the new X3 system architecture that the company announced last week, which build on the same Intel x86 processors that are also used by whitebox vendors.

IBM has invested heavily in its x86 server designs - the company spent $US100 million developing X3 alone - but the investment appears to be paying off. IBM's x86 server sales grew by 22.4 per cent in 2004, faster even than sales of similar products from Dell.

"This was a market where people said you couldn't add value and you couldn't differentiate," senior vice-president and group executive of IBM Systems and Technology Group, Bill Zeitler, said. "You can add value, you can differentiate."

Claiming the small and medium-sized business (SMB) market was growing at more than three times the pace of the enterprise, IBM is keen to expand its presence in the space, executives said.

"We've got to do better in SMB," vice-president of worldwide systems sales with IBM's Systems and Technology Group, Emilie McCabe, said. "We are putting more resources in SMB, sales resources and technical resources."

However, many of those resources will come from outside of the division selling the Intel-based xSeries. IBM plans to spend US$1 billion over the next several years reinvigorating its neglected iSeries line of mini-computers, which have long held a foothold in the mid-market.

"Our partners said that we've got to improve our image in the marketplace," general manager of iSeries, Mark Shearer, said. "I have spoken with hundreds of partners and clients around the world and everyone tells me that the iSeries is the best kept secret."

One IBM partner was happy to see signs that IBM was reinvesting in iSeries. "They need to give the brand its individuality back," president and chief executive officer of iSeries software developer, NewGeneration Software, Bernard Gough, said

IBM's pSeries Unix division is also getting more involved in SMB marketing. It plans to double the size of its sales force and increase the number of pSeries systems in IBM's Express Portfolio of easy-to-configure systems for SMB users.

In 2004, there was only one pSeries system listed in the Express Portfolio. By year's end there would be more than half a dozen, the company said.

Stacy Cowley contributed to this report