Enterprise hardware a tough sell getting tougher

Bill Bennett -

Enterprise hardware has never been a tougher sell.

Recent financial reports from the giant companies that once dominated enterprise computing, IBM, Oracle, HP among others, do not make for pretty reading.

While there is still a demand for mainframe scale hardware in some niches, the overall picture is grim. Enterprise hardware sales continue to spiral down.

Cloud computing pressure

Amazon's cloud computing onslaught puts every enterprise hardware company under pressure. Make no mistake, Amazon is the brand that matters in this context — the company dominates the cloud market.

Old-school enterprise companies see a glimmer of hope in following an Amazon-style cloud path. They are building their own clouds.

As an option it's not that attractive although it is the least worse option. It means dropping or deprioritising a dying business with uncertain margins, for a growing business with lower, but equally uncertain margins.

Alarm bells ringing

Amazon is so strong, it leaves little room for these companies to move from shifting kit to selling their own cloud services.  The company's practice of continually ratcheting down prices as it squeezes out ever greater efficiencies should also sound alarm bells.

There is no upside for the old school hardware giants. Servers are now a commodity. If you think the big hardware brands can re-orientate to selling commodity servers based on Intel chips, think again, that market is already dominated by unbranded hardware. Many data centre companies build their own servers from scratch.

Enterprise customers still need software and support services. Both still attract respectable margins, but selling big iron? Forget it.

Is the enterprise hardware market doomed? Possibly not. There will be a need for on premise kit for years to come. The cloud transition is fast, but it isn't overnight. And it may be that many companies decide they need to retain some capability. But enterprise hardware will never regain its status as a licence to print money.