Wednesday, April 9, 2014

IBM's Strategy in Linux

In the case “GE’s Growth Strategy: The Immelt Initiative”, Jeff Immelt clearly defined core elements and focused on these areas (and gave up some non-core business such as insurance) to ensure GE’s growth. However, it is often difficult to even figure out what is the company’s core competences especially rapidly changing industry such as Information Technology. I have been working in IT department of a bank for about 10 years and seen so many game-changing shifts: Web service, virtualization, Cloud, mobile, Big Data, etc. In this dynamic market, it is hard to have a stable core element to focus in the long run.

In my work experience, I worked closely with IBM. I have always been interested in IBM’s positioning in this volatile industry. For example, It sold its PC business to Lenovo in 2004. Wasn’t PC IBM’s core element? Actually they invented PC. So I guess for IBM’s management, it is not easy to decide what they should sell next year.

One of the things that interested me is IBM’s strategy in supporting Linux. Linux is an open source OS developed by Linus Torvalds in 1991. IBM has long been supporting Linux since 1999 even though it could directly compete with its proprietary server OS (AIX). Our bank has enormous scale of AIX servers but now it is trying to shift some portion of them to Linux on blade servers and IBM is supporting this move. I wondered why IBM would do something that undermines its revenue source.

The attached article gives this question a plausible explanation. Perhaps IBM pursued opportunity to provide service and solution on Linux rather than selling hardware and their own AIX OS. It is easy for a customer to migrate to Linux but it is extremely difficult to migrate from upper products that IBM provides (Websphere, Rational, Tivoli, etc) So I think IBM’s move to Linux is not meant to be “open” but to get more customers “locked in” to their products and service.

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