IBM, the $96 billion technology giant, is taking an aggressive stance on its server business in India. The $550 million Indian server market is the latest on Big Blue?s hit list and it is leaving no stone unturned to make deep inroads into the segment. Analysts believe that the Indian server biz could attract greater investments from other corporates too, not just IBM, and the landscape could get increasingly competitive in the short to medium term.

As the market moves to its next level of IT infrastructure, the tech major is looking at building its market share consistently and strengthening its leadership position, backed by its latest innovations this year. Be it smart traffic systems, real-time analytics in

financial markets, government initiatives or healthcare, today?s emerging business models and services are driving the need

for innovation in servers and

IBM has been in line to pick up

the trend.

IBM is shy to reveal the quantum of investments that it would make in the space in India, as one would expect from most multinational companies. Globally, IBM spends over $3 billion a year in systems and technology R&D. During the second-quarter results, IBM posted revenue of $4 billion globally, up 3% year on year, in its systems and technology business. This has encouraged the technology major to act aggressively in countries like India, where they feel its server business could do even better, despite being the market leader.

The tech giant?s long-term strategy for the server market has been driven by its investments focusing on innovation and integration. The company?s investments in its India systems and technology (STG) lab is aimed at building skilled resources based in the country dedicated to its hardware products business.

On its recently launched mainframe server zEnterprise, the company has spent $1.5 billion

on research and development (R&D) spanning around 4-years involving over 5,000 employees globally. While for its Power 7 server it has made an investment of $3 billion, and it invested an

additional $6 billion annually on UNIX systems research.

?Today our clients in India are looking for a technology partner who can offer them a robust roadmap and smarter solutions, one that not only has a reasonable acquisition cost but also offers greater return on investment (ROI),? says Sreenath Chary, vice-president, System z, Systems and Technology Group, IBM India. ?They are focusing at high performance for more challenging workloads, high levels of security and energy conservation and that is driving our momentum.?

In India, IBM has clients across industries, which includes Hyundai Motors, HDFC Bank,

Reliance General Insurance,

Religare, Apollo Pharmacies,

IFFCO and Century Ply. This year it also plans to strengthen its

positions in the tier II and III

markets directly and through business partners.

Globally, IBM has logged more than 2,100 customer wins in its power servers from 2006 through 2009, including nearly 1,050 versus Sun and about 825 versus HP, which has resulted in more than $2.15 billion in revenue.

However, while the market is still dominated by large enterprises like IBM, HP, and Dell, the Indian server space, growing at 6% year-on-year, is also throwing up opportunities for relatively smaller players. Acer, a Taiwanese PC maker, for one, has been expanding its presence and is seeking to grow 25% in 2010 to Rs 2,500 crore.

According to Acer, opening up business in the mid enterprise segment is going to drive its Indian sales and expansion. Although sale of conventional Tower and Rack servers currently contribute only 1% of its revenues, the company feels that having a strong presence in this domain has become a strategic necessity. To this end, the firm announced its foray into the high-end Gemini and Blade servers.

Talking about the importance of providing a single point of

accountability for all their

hardware purchases to discerning customers, WS Mukund, managing director of Acer India, says ?With the present economic environment, it?s imperative for growing companies to provide end-to-end technology solution in order to be at pace with the current

competition.?

Companies like Acer will find the room needed to grow, if projections of a 15% growth this year are met. According to industry

experts demand for cloud computing infrastructure, data growth, real time business analytics and high performance computing will account for a major push in the market.

Market research firm IDC says, unit shipments in India?s x86 server market totaled 113,040 units in 2009?HP, IBM and Dell were the top three vendors. In the quarter ended March 2010, 31,150 units were shipped.

HP, which has a 35% share in the Indian server market, is also looking at increasing its market share in India with its recent launch of the G7 series of servers, storage and power management technologies aiming at enterprises and small and medium businesses. HP is growing at 44% in terms of unit growth. According to Gartner, HP?s server revenue reached $3.4 billion, representing 31.5% of the market, in the first quarter of 2010.

Today quality of service plays a vital part in every company?s capability to retain its loyal customer base. Demands from customers and partners are stretching the limits of enterprise data centres as there is a need for systems that raise the bar on efficiency, performance and cost savings while lowering management complexity.

With enterprises across sectors including, retail, healthcare, manufacturing, telcos, BFSI, automotive chartering out expansion plans there is also a strong intent from government giving thrust to IT infrastructure.

Today saving data centre energy costs is the most important aspect in the server market globally. Keeping in mind demands from the customers, IBM?s System z creates a unified and IT infrastructure reducing energy consumption by up to 80%. ?With the ability to manage workloads across systems as one, it can drive up to 40% lower acquisition costs and reduce cost of ownership by 55%,? says Chary of IBM India.

Workload optimisation reflects how clients run IT to support their businesses. Technically any platform can be configured to run any workload, but in reality workloads influence platform choices. A typical transaction processing workload like core banking is characterised by a high rate of transactions where scale matters and quality of

service is vital.

?We?re not pursuing a strategy to drive more common PC parts into enterprise servers. We take a very client-centric approach. There is a need for integration and optimisation between the hardware and software that can attack the pain points enterprises are seeing,? says an IBM spokesperson.

IBM?s corporate revenue for the second quarter was $23.7 billion, while the systems and technology revenue was $4 billion. The firm, which holds a leadership position in the Indian server market, is now focusing on different business segments, be it entry level x86, Unix or the mainframe business. ?The product launches this year sends a signal of our commitment to the server market and our clear focus on technology and industry leadership,? the spokesperson adds.

According to Gartner in the next few years, x86-based servers will be biggest driver for the

server market in India, while Blade adoption will be a key

enabler of this growth. Virtualisation will be another driver of growth in the x86 market in

India. This is because many midsize companies are expected to join large enterprises in deploying server virtualisation in the next three years.