The tech world is agog with news that Big Blue itself, IBM Corp. (IBM), plans to buy the venerable Sun Microsystems Inc. (JAVA) It’s a deal the Wall Street Journal reports would be worth around $6.5 billion (recession? What recession?) and media pundits everywhere are praising the potential combination for its impact on the server, services and open-source sectors.
But the real story here seems to be cloud computing. IBM has been one of the foremost proponents of cloud computing, attacking it from the professional services and data center perspectives. Sun, meanwhile, has trained its cloud computing focus on software – think architecture and technology, not the actual cloud applications. It emboldened that approach when it bought Q-layer earlier this year. Together, then, IBM and Sun bring compatible strengths to a cloud computing strategy, with the crossover taking place in professional services.
Indeed, the time for companies to position themselves as cloud computing experts is now. Research firm IDC said on March 5 that worldwide IT spending on cloud services will top $42 billion by 2012. And, as the technology practice at Chadwick Martin Bailey recently found, security and data privacy remain two of IT professionals’ biggest concerns over cloud computing – two areas IBM and Sun would be uniquely positioned to address thanks to their various subsidiaries.
There’s another point to consider as well: Sun has been struggling. Rumor has it the company has sought a buyer in the face of billions of dollars in quarterly losses that have led to thousands of layoffs. (Interestingly, Sun is reported to have approached HP and others before it met with IBM.) However, pairing two tech behemoths stands to throw the door wide open for open-source technologies and, as a consequence, for the combined company’s earnings. More and more enterprises are looking to escape from the Windows world and, one presumes, would feel safest putting their trust in two of the world’s most established open-source pioneers.
A word of caution for IBM execs, however. There almost couldn’t be two more disparate company cultures than IBM and Sun. And if one looks to Alcatel and Lucent or HP and Compaq as historical indicators, it’s apparent that executives should tread carefully or risk blowing what could be a good thing. That’s because there’s more at stake than the fate of two companies. At the least, IBM relies on a huge indirect channel for much of its distribution. Alienating resellers and other partners with messy integration work or product discontinuations would be disastrous. End users conceivably would migrate to IBM-Sun rivals such as HP or Cisco if internal discord causes external disruption.
For now, though, Wall Street thinks an IBM takeover of Sun would be a plus – for Sun, anyway. Sun’s stock soared 84 percent in late-morning trading on March 18, while IBM’s were down a little more than 2 percent. Analysts said a $6.5 billion cash transaction is large even for IBM and several said they’re lukewarm about an IBM-Sun pairing. They are concerned about IBM’s profit margins and the considerable overlap between IBM and Sun’s server products.
