IBM Makes a New Play for Google's Business

NEW YORK (TheStreet) -- For the last decade, server companies such as IBM (IBM) have been watching helplessly as Google (GOOG) has changed the rules of their game.

Instead of buying high-end servers, Google bought the cheapest hardware it could find, integrated it and created vast clouds of capacity that can do more for less money than any computer system ever could before.

With these public clouds taking an ever-greater share of the general computing market, IBM is facing a declining share of a declining market, according to the Gartner Group. The company hopes a new, open-development process will fuel a comeback.

It's called the OpenPOWER Consortium , named for the IBM Unix server system it supports. The consortium includes Mellanox ( MLNX), a networking server chip outfit, Nvidia ( NVDA), a graphics chip company, and Tyan, a unit of Taiwan's MiTAC that has had some success in serving these cloud markets.

Another company it includes is Google. Google is the key.

According to Bradley McCredie, a vice president with IBM's systems and technology group and one of about 70 "fellows" who represent the company's technology elite, cloud providers are slowly moving beyond commodity boards. They are innovating at the board level, and looking for chip-level innovation to keep the power coming.

This is the kind of innovation OpenPOWER plans to provide.

Cloud data centers "started buying off the shelf, then they started building their own. Companies like Tyan are an example of that. They provide cards and boards to Web 2.0 data centers. That will continue to move into the chip level," and OpenPOWER is designed to support that.

While some compare the result to what ARM Holdings ( ARMN) does, shipping designs to device makers who customize and then order chips, McCredie said this is more complementary to things like Facebook's ( FB) OpenCompute project and Netflix' ( NFLX) OpenConnect.

McCredie said the partners will spend this year building out their alliance, creating a governance structure. Some aspects of the resulting technology will be open source, like the KVM hypervisor, while others will be licensed under Fair, Reasonable and Non-Discriminatory terms.

You can argue that the target here is Intel ( INTC) and its x86 architecture, or you can say its target is ARM, which has ambitions to get into data center computing.

But it's clear to me, at least, what the real target is: Google.

McCredie was very cagey talking about Google. It is not quoted in the press release. "You can call Google," he said. "They will provide a quote." But what IBM needs is a purchase order, not a quote.

OpenPOWER provides a way for both IBM and other chip-level vendors to put their technology on one table, for the customers who count most in this decade.

McCredie doesn't exactly know how this will play out. "This new marketplace is different from the classic data center market, and they consume technology differently, with different lifecycles and optimization points," he said. "The base Intellectual Property of POWER is great for these new marketplaces, but we need to package it differently.

"Innovation takes place in a different way, in an open and collaborative way, in these markets."

Game on.

At the time of publication, the author owned 100 shares of IBM

This article is commentary by an independent contributor, separate from TheStreet's regularnews coverage.

Dana Blankenhorn has been a business journalist since 1978, and a tech reporter since 1982. His specialty has been getting to the future ahead of the crowd, then leaving before success arrived. That meant covering the Internet in 1985, e-commerce in 1994, the Internet of Things in 2005, open source in 2005 and, since 2010, renewable energy. He has written for every medium from newspapers and magazines to Web sites, from books to blogs. He still seeks tomorrow from his Craftsman home in Atlanta.

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