The Sun shines on IBM if Armonk decides to go ahead with the rumored purchase of Sun Microsystems because Sun fills so many serious gaps at IBM. In fact I was just about to do an article which would cite IBM as being almost out to lunch on key computing directions including:
a)virtualization technology and software assets;
b)RAIA and its write-once run anywhere technology (think JavaFX while IBM’s Lotus is floundering);
c)hardware innovations in servers and embedded smarts technology;
d)Cloud Computing presence – Amazon, Google, and Microsoft have huge head starts.
I would have argued that IBM’s abandonment of too many hardware and software categories had made it particularly vulnerable to rapid change and opportunity loss in many newly advancing computing arenas. Also IBM is depending on its contract services business whose margins are threatened not just by India but a number of growing European players as well. True, the Service contracts have allowed IBM to weather the downturn better than a lot of other IT vendors that are more hardware dependent; but the the margin pressure must be huge given the economic climate facing IBM’s clients. So those clients may have to take dollars out of purchases of IBM software or IBM consulting contracts. Hence IBM clearly has had to do something.
Where Does The Sun Shining Fit ?
First and foremost there are some natural philosophic fits. The two companies are committed to remarkably similar strategies on new product development. They are also strongly Open Source oriented realizing that Open Source solves a lot of the comprehensive integration problems confronting IT right now. Finally Open Source software is often much better than proprietary offerings in keeping standards relevant and effective. For IBM, Open Source acts as a bulwark against Microsoft’s drive to achieve a server side hegemony to match Redmond’s continuing 80%++ market share on PC clients. So the following are the key fits:
1)R&D oriented new market development;
2)Open Source and OS software-agnostic commitment to many OS, Server and Language platforms;
3)Ability to get into server chip game on multi-core with much enhanced software support;
4)Parallel processing and virtual sofware innovations important to data center consolidation and efficient multi-core processing;
5)Finally get Java in-house and hence the ability to craft and represent Java technology with greater impact.
However on the downside there are a number of conflicts and overlaps. Some of these may raise antitrust concerns and one can rely on Redmond (and likely HP too) to have a long laundry list of “Antitrust” objections to the deal. So lets see where the conflicts and possible antitrust objections are:
1)MySQL versus Derby+Informix+DB2 – something has to be rationalized out;
2)Solaris versus AIX+zOS+Sys400 OS(whatever they are calling it now) – again something has to give;
3)NetBeans versus Eclipse – NetBeans has proceeded to leapfrog Eclipse in Java and several other languages;
4)Power PC Chip versus Sun 16 core and other technologies – how does this gets parsed out ???
5)Big Server market share up tick will have HP, Dell and others crying foul; but Cisco’s entry and more invasions from Asia into the same space may save the day – IBM can say there is lots of robust competition.
So now one has to look at what gaps that Sun fills in the IBM markets space. We have already implied two but here are where gaps exist in IBM offerings which Sun helps to fill:
1)RAIA-Rich Anywhere Interactive Architecture. IBM did Java weblets but then abandoned them when Microsoft cut off the oxygen to the latest Java browser on IE with 90%++ market share. Since then IE market share has dropped to less than 60% and Sun has come up with JavaFX, a good technology where IBM needs a presence beyond Lotus. IBM must be in the basic PC client RAIA software that will dominate client side software for the next 5-10 years.
2)Today’s Cloud Computing offering from Sun has gotten a lot of favorable commentary from Information Week and Computerworld among others on its Cloud Computing initiatives. This is superior technology and Suns’s Zfile and Grid Computing smarts give them a leg up in doing battle with Amazon, Google and Microsoft.
3)Virtualization software that fills a big lack of Big Blue presence on the scene. It is all Open Source right now but on the big server side IBM could add extensions, control, and management features which they then could charge for. This is like what Big Blue is already doing in Linux and database software;
4)Filling gaps in the dizzyingly large and growing Data Storage market with both hardware and software innovations that IBM otherwise would have to duplicate.
And this is only looking at the major gaps Sun fills. But the important point is that IBM is now into the confluence of virtualization, grid computing, RAIA, and Cloud Computing in a much more substantial way.
Given the beaten down prices for all computing stocks plus Sun’s holdings of $3B in cash versus the rumored $6.5B offering price , and the possibility that competitors might want to buy into pieces of the Sun – IBM could not afford to leave so much competitive thrusts available to their IT vendor foes. Consider it a done deal – and only the final price and the immediate spinoffs as the outstanding matters.