IBM + Sun: How a merger would impact IT

The IT industry is abuzz with the rumor that IBM is going to purchase Sun for nearly $7 billion, first reported in the Wall Street Journal. It’s all speculation until a deal is confirmed, but the combined reach of an IBM/Sun company would be vast. Here are nine topics to consider.

•  Cloud computing. Both IBM and Sun are potentially big players in cloud computing markets – both as providers of IT services over the Web and as providers of server and storage infrastructure necessary to build cloud platforms. Even as rumors swirled about the potential IBM/Sun acquisition, Sun was announcing new compute and storage services to compete against Amazon’s Elastic Compute Cloud and Simple Storage Service. But it’s the cloud infrastructure piece that might prove most compelling to both companies. “The companies have a similar view of the cloud,” says Pund-IT analyst Charles King. “Frankly, both IBM and Sun are basically plumbing suppliers for IT. They’re very much focused on the infrastructure offerings.”

•  Servers. Cisco’s entry into the blade server market was bound to cause some reaction among competitors. Could IBM’s rumored purchase of Sun be the first response? In any case, a combined IBM/Sun company would be formidable in the hardware markets. IBM already owns 36% of the worldwide server revenue market share with nearly $5 billion in fourth-quarter sales, according to IDC. Purchasing Sun would give IBM another $1.2 billion in quarterly revenue and raise its market share to more than 45%. That would give IBM more share than HP and Dell combined. The three companies together would account for 85% of the server market. One long-term question: will IBM urge Sun’s Sparc customers to migrate over to servers based on IBM’s Power processors?

•  Virtualization. IBM invented virtualization decades ago when the mainframe was king, and has gained commercial success more recently with a hypervisor for its Power-based servers. IBM has resisted building a hypervisor for x86 processors. That product gap could be filled with Sun’s xVM hypervisor for x86-based systems, but given xVM’s limited market reach IBM executives may not consider that a big deal. The hypervisor isn’t all that exciting anymore – it’s how you manage virtualization that’s most important, notes analyst Judith Hurwitz of Hurwitz & Associates. Both IBM and Sun have focused on partnering with hypervisor vendors VMware and Microsoft to enhance the capabilities of virtualized servers, King says.

•  Competition with HP. As mentioned earlier, IBM is already the king of server market share, ahead of rival HP, and acquiring Sun would give Big Blue a significantly larger numerical advantage. “From a competitive standpoint acquiring Sun would put IBM way ahead,” King says. “I don’t really see HP erasing or catching up against that for years, if ever.”

Separately, Sun’s virtual desktop software could improve IBM’s standing vs. HP.

“The Sun VDI offering would give IBM it’s own core virtual desktop offering, from thin clients to the back-end infrastructure, making it more competitive with HP, and less reliant on external partners such as VMware,” says Phil Hochmuth, a senior analyst at Yankee Group.

•  Database overlap. IBM and Sun are major players in the database management software market, with IBM producing DB2 and Sun having acquired open source MySQL a year ago for $1 billion. Acquisitions involving overlapping products are often cause for concern among customers, who in this case might wonder if IBM would stop supporting and updating the MySQL database. But IBM already supports multiple database management systems, partners with outside database vendors and is quite friendly to open source, according to software analyst Curt Monash. “There’s little reason to think IBM would orphan MySQL or any other DBMS product,” Monash writes.

•  Speaking of open source… Sun has continually stressed the importance of open source software and uses phrases like “open storage” and “open cloud” to describe its various product offerings. This transition may well be part of what attracts IBM to Sun. “Sun’s deeper move toward open source and open standards under [CEO] Jonathan Schwartz is very resonant with what IBM is doing in the open source and open standards space,” King says.

•  Java. IBM could certainly be interested in having a bigger stake in the Java platform, which is largely controlled by Sun. “Java is important to IBM because it runs across all of the IBM servers, and it’s a foundation for IBM’s middleware stack (WebSphere for transaction-processing, IBM DB2 database, IBM Tivoli systems management framework) and Lotus Notes,” IDC analyst Jean Bozman writes in an e-mail. How the Java community would react to IBM ownership of Sun is another question. Rival Java vendors have spoken out against Sun’s control of the Java platform, with some urging Sun to sever its ownership of Java and the Java Community Process, which helps dictate the future of Java by developing technology specifications and reference implementations. 

“IBM has been one of the major powers pushing for more openness in Java, so at first IBM taking control of Java would seem to bode well in that regard,” Javaworld blogger Josh Fruhlinger writes. “But IBM has a definite interest in keeping Java open now because that lessens Sun’s control over it. Once IBM owns the right to the Java trademarks — and once the Java universe doesn’t have an outside power as big as IBM angling to keep Java open — things might get very different, very quickly.”

•  Clash of cultures? In terms of technology, IBM and Sun have more in common than they do in conflict, King says. But in terms of culture, Sun prizes innovation and “sometimes contrarian” thinking that may not mesh with the formal corporate world of IBM, King says. “A big challenge for IBM is to bring Sun and employees into the fold in a way that maintains that level of innovation Sun is well known for,” he says. “Both companies to my mind are among the most innovative players in the IT space. They’ve got a lot in common. The thing for IBM to do is figure out how they can maintain that commonality of interest without insisting that Sun become too homogenized.”

Network World Senior Editor Denise Dubie contributed to this report.