IBM, admitting that it has little penetration in small enterprises, has handed some small server reins to Lenovo. The agreement allows Lenovo to manufacture and market IBM-designed one and two socket servers worldwide (excluding China). This agreement has led to speculation that IBM is moving out of server hardware as it did with the PC business.
It is unlikely that IBM would drop out of the server market where it currently holds a substantial share. The estimated IBM market share is approximately:
- 41% share of all server sales into large enterprises.
- 20% share in small and mid-sized enterprises (SMEs) overall.
- 7% share in enterprises with 500 employees or less.
With these figures in mind, it is clear that IBM has a major task in store. IBM is making a strategic move to focus on the customers (and margins that come along with them) that it knows best – larger enterprises. Lenovo has a large installed base within the small business market which it can leverage effectively. This arrangement offers both firms growth potential without seriously impacting either vendor's market strategies.