Lenovo and IBM Complete Initial Closing for System x Deal

By Charles King, Pund-IT  October 1, 2104

Lenovo and IBM’s announced completion of initial closing on the sale of the System x server business and IP means that the deal is on track for full closure. That means it’ll be wrapped and delivered in major markets by the end of the year, with a few laggards tailing over into Q1 2015.

We’ve discussed and analyzed the major points of the sale in past Pund-IT Reviews but it’s worth remembering the high points: That Lenovo is acquiring IBM’s entire Intel-based solution portfolio, including tower, rack and blade products, BladeCenter and Flex System servers and switches, x86-based Flex integrated systems, NeXtScale and iDataPlex servers and associated software, blade networking and maintenance operations. That will leave IBM with its System z mainframes, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances.

The companies also established a strategic alliance where Lenovo will serve as an OEM to IBM (providing Intel-based components for IBM customers) and will resell select IBM storage and software products, including the entry and midrange Storwize storage product family, Linear Tape Open (LTO) offerings, and elements of IBM’s system software portfolio, including Smart Cloud, General Parallel File System and Platform Computing solutions.

Good enough but while the technology assets covered in the deal are substantial – providing Lenovo, in a single step, with a full portfolio of enterprise-class data center solutions – the human assets involved are just as valuable, if not more so. That’s because both companies recognize the critical role that experienced personnel play in the success of any IT solution and are aiming to bring along core System x employees to Lenovo’s new organization.

That makes clear good sense all the way around. After all, you can teach many people to be effective engineers or salespeople given enough time and training. But Lenovo wants to hit the ground running with System x and get its investment making positive returns ASAP, not dawdle along while new employees acclimate to their new corporate culture.

That doesn’t mean there won’t be significant differences for workers to face. First and foremost, under Lenovo’s management, System x staff will no longer have to consider or accommodate strategic issues and efforts concerning legacy hardware platforms. Instead, they will be the effective “spear point” of Lenovo’s Intel-based thrust into enterprise data centers; a responsibility and experience we expect most will find heady and enjoyable, if also a bit initially disorienting.

The deal also portends changes IBM. For some years now, IBM has been clarifying its essential position and reputation as an enterprise-facing vendor. As part of that effort, the company has invested billions of dollars in R&D and acquisitions into bolstering its homegrown System z mainframe and Power Systems portfolios, solutions and services, with impressive results.

That doesn’t mean that, with System x migrating to Lenovo, that IBM’s way forward in hardware markets is clear or without risk. Though the company’s sales of mainframe solutions and services remain solid, its Power Systems have seen hard times over the past few quarters despite being the clear leader in traditional Unix markets.

IBM has responded by significantly reshaping its Power business, including formulating a vital new Linux-focused strategy and offering open source-style access to its POWER architecture to members of the OpenPOWER Foundation, including Google, NVIDIA, Tyan and 50+ other companies. The coming months and years will determine the wisdom of those considerable efforts.

The sale of IBM’s System x to Lenovo is certainly interesting from technological and business perspectives but the larger point of the deal is in the way it will act to transform both companies. The pair’s individual goals have been clear for some time; for IBM to reinvigorate itself as the IT infrastructure vendor of choice for enterprises worldwide, and for Lenovo to achieve its ambitions as the leading global provider of end-to-end IT solutions for businesses of every sort.

Considered this way, the announced completion of initial closing on the sale may punctuate the end of this effort by Lenovo and IBM but it also signals the beginning of new journeys, adventures and destinations for both organizations.

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