Thursday, May 23, 2024

The Potential Power of an AMD and IBM Partnership

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This week AMD released its latest Epyc 7Fx2 Processors, and they are performance beasts (with 50% lower cost of ownership). The Cloud companies mainly took interest because they focus on performance over almost everything else, and in AMD, they appear to recognize the performance value these processors represent. 

Participating in the launch were the who’s who of cloud providers, including AWS, Microsoft Azure, Google Cloud, Oracle Cloud, and Tencent Cloud.  But one of the Cloud providers that caught my interest was IBM, and they have been moving aggressively of late to overcome their late arrival on the competitive field and showcase they can play with the big boys.  

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But there is a unique opportunity that these two companies have with each other in that AMD’s executive leadership came from IBM, and that gives them more in-depth insight into IBM’s processes and operations. The result could be a partnership that reaches legendary proportions, and I think that potential connection is worth exploring this week. 

The Problems With Partnerships Between Major Vendors

One of the significant issues in the current tech segment is that the major technology suppliers are unusually powerful. Typically a company like IBM, Dell, or HPE would be so much more potent than the firms supplying them with parts leadership in the final complete product is clear. The OEM is the leader. The parts folks follow that lead. 

But with suppliers like Intel and Microsoft, their power can often exceed that of an OEM, and when that happens, the tail can seem to be wagging the dog. Because they are typically more removed from customers, the result is a suboptimal offering where critical decisions were made by the parts supplier, not the OEM. 

Now Microsoft gets around this in the Cloud space by having one of the leading Cloud platforms, and in the PC space with Surface. But both create other problems because Microsoft, with those offerings, is competing with their OEM partners who, and they can be vocal about this at times, aren’t pleased with that competition. 

Now on the PC side, this has turned into a major annoyance. Still, on the Cloud side, mainly due to the nature of the business, the OEM’s only big problem is that Azure has such a substantial market presence. Still, Amazon and Microsoft have always had a somewhat rocky relationship with Amazon anyway.  

Ideally, as an OEM, you want a parts supplier that is subordinate, but what would also be handy is a parts supplier that also understands the OEM’s internal process so the supplier can better fit within it.  Often, assuming there aren’t leftover issues from the divestiture, a unit that has been sold by a company that became a parts supplier would be the best choice.  But, there often is a ton of hatred in that regard between the two firms making it very difficult for them to collaborate. 


But AMD didn’t spin out of IBM; several ex-IBM executives just lead them. The result is that, at least with AMD leadership, they know intimately how IBM operates, what it wants from a supplier, and even has the depth of contacts to be able to make critical calls if something appears to be going wrong.  

But they won’t compete with IBM for leadership because they know IBM is closer to the customer.  Also, AMD has been one of the most aggressive in terms of building custom processors for its clients, having created custom processors for Microsoft (Xbox and Surface) and Sony (Playstation). 

While Microsoft is aware of this AMD capability, given they’ve used it with two products, they’ll be on top of this as well. Still, others may not (Google might be another exception), allowing this combination to result in Cloud offerings unique to IBM and uniquely powerful in the Enterprise space given the market leader, Amazon, spends a lot of their effort below the Enterprise.  And, in the Enterprise, there isn’t another Cloud player that has IBM’s experience, which extends back well into the last century.  

Wrapping Up:

AMD’s new Epyc processors appear to be impressive, and they certainly have impressed he major cloud providers. But IBM and AMD may be in unique positions to best use each others’ capabilities because of the deep background the top AMD executives have with IBM and IBM’s unique, extensive Enterprise background.  These two vendors together could create an unmatched Cloud offering, further allowing IBM to advance in the Enterprise-Class Cloud. 

If these two firms execute their potential, the result could be a game-changer in the Enterprise-Cloud space. 


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