Why did IBM dump its commodity server biz? Amazon

Maybe it’s because my head’s in the cloud so much, but I view IBM’s planned divestiture of its server business as a direct response to the growing threat it sees from Amazon(s amzn). Simplistic, yes, but that doesn’t make it wrong.

Here’s how AWS drove (or at the very least helped drive) IBM(s ibm) to act:

  1. In the past 3 years AWS emerged, like an aircraft carrier out of the fog, as a prodigious competitor to IBM in IT services. The fact that AWS won the CIA cloud contract over IBM despite quoting a higher price, crystallized that for anyone who had doubts
  2. Buying trends among Amazon and its webscale cousins Facebook(s fb), Google(s goog), Yahoo(s yhoo) pulled the rug out from under brand-name X86 server makers. These companies thirst for simple, cheap hardware and increasingly they either design their own boxes to be built by white-box providers like Quanta and Wistron. Or they just buy cheap servers off the rack from such suppliers.
  3. As more corporate workloads — CRM, e-mail, office productivity applications — flow to SaaS providers and more in-house product development to AWS the companies that used to buy hardware from IBM or HP etc — don’t have to upgrade their own servers as often. Or when they do update, they buy fewer servers since virtualization lets them cram more workloads on fewer boxes.

All of that churns up a perfect storm for legacy providers like IBM. The company’s decision to sell its server unit to Lenovo, and to devote more time and resources to its SoftLayer-focused cloud efforts, is the direct result.