IBM today announced its second major alliance in two weeks, this time with Google and three high-performance computing (HPC) vendors, to create the OpenPOWER Consortium, the first time IBM has offered to license its Power RISC processor hardware and firmware to third-party server manufacturers. The first announcement, on July 24th, was the alliance with Pivotal, which is 70% owned by EMC, to run WebSphere on top of the Cloud Foundry PaaS both as a product to offer to IBM customers and as a service on the IBM cloud.

It is easy to see what the three niche HPC vendors — Mellanox, Nvidia, and Tyan — get from the Consortium in terms of using an advanced, powerful, and lower energy processor for their high performance equipment. And IBM gains those and potentially other third-party manufacturers as customers for its Essex Junction, Vermont, chip foundry.

The ringer in this group, of course is Google. A huge hardware consumer, it is one of the creators of hyperscale, a highly virtualized, very large data center architecture based on white-box hardware. The principle of hyperscale is to put all functionality into the software layer and use interchangeable hardware building blocks that individually are so cheap they are throw-away.

The only apparent reason for Google, which does not manufacture its own servers, to be part of this Consortium is if it believes that it can use Power-based servers in its hyperscale data centers. This requires high volume, low cost manufacturing. Exactly what manufacturer will do that is not obvious — perhaps IBM, itself, since the named members of the Consortium are not high volume manufacturers. But the implication is that production of Power processors will experience a huge demand increase, and as with all digital products, that will drive production costs, and therefore price, down.

This definitely implies a major change in strategy for IBM, which has always used Power in its highest performance systems, which it sells at a premium price to users who require that level of performance. The new strategy will reverse that and attempt to bring the price of Power down to compete with Intel and Arm, which means that IBM’s fabrication group hopes to grab a large piece of the server market away from Intel. This also has implications for Microsoft, since these new lower priced servers will probably run Red Hat and/or SUSE Linux, which IBM already sells on its System z mainframes and which is standard in hyperscale.

This is clearly a long-range strategy, but IBM has the deep pockets to support it and has often taken the longer view while its competition lives quarter-to-quarter. For Intel, which has already largely lost the burgeoning mobile device market to ARM, another RISC architecture manufacturer, this is not good news.

Larger Implications

However this announcement also has larger implications. One has to ask whether IBM and Google, two industry giants who do not compete against each other in their core businesses, are likely to ally in other areas where their interests align. For instance, they both compete against Amazon AWS. Google this year announced the Google Compute Engine, and IBM has its own cloud offering mainly for its hardware clients moving compute loads to the cloud.

One implication from this and the Pivotal alliance announcement that is increasingly obvious is that we can expect more announcements of this kind from IBM. At IBM Edge in June, Ambuj Goyal emphasized that IBM is an open systems company because “today no one company can do everything.” At the time I, and I am sure most attendees, presumed he was talking about third party software developers creating tools and applications on top of IBM platforms such as WebSphere and Storwize, and the examples he offered were exactly of that. Since then, however, we have seen a different interpretation of that idea begin to appear in these two alliances. The implications for the industry and IT users are potentially huge.