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IBM fuels campaign against Dell with discounts, handholding

As IBM announces another set of incentives to lure Dell customers over to Big Blue's Intel-based platforms, Dell says it'll respond to IBM by continuing to do what it always does: Focus on the customer.

IBM is sending out the hounds, again.

Big Blue announced Tuesday another campaign to lure away Dell customers, many of whom may be feeling a bit dejected since Dell said it would stop producing high-end Intel servers.

IBM will unleash a team of technical and sales specialists dedicated to convincing Dell customers to buy IBM products. This team will work with Dell customers to determine whether and how one of IBM's Intel-based eServer systems (specifically, the x440) can help lower costs and simplify systems management.

Dell customers can select a number of preconfigured eServer systems that scale up to 16 Intel processors or scale out with blade servers. Selected systems are available to Dell customers at a savings of up to 15%.

Last week, IBM announced it would offer Dell customers 15% discounts on IBM's BladeCentre system and its x440 top-end Intel server. The campaign targets Dell's blade servers, which IBM said Dell has neglected. That and the fact that Dell doesn't support a high-end Intel system has apparently opened the door for Big Blue.

Jay Bretzmann, IBM's manager of product marketing, makes no apologies or excuses for this all-out attack against Dell. "This is a highly competitive business," he said.

According to Illuminata analyst Gordon Haff, this new campaign, while clearly an attempt to get more customers, is also meant to put Dell into a box.

"They're really playing up the fact that Dell, comparatively speaking, doesn't have a lot in the way of software [and] services, and doesn't have a lot of enterprise capabilities compared to them," he said.

Because customers buy Dell primarily on price, IBM is trying to take away price as a reason to buy Dell.

"Frankly, if you take away price, Dell doesn't have all that much else," Haaf said.

But Haff said that the question that ambivalent Dell users should ask themselves is how long IBM is going to keep the prices low.

"By definition, if you have a discount program, that indicates the prices will eventually go up," Haff said. "Will they permanently offer pricing that stacks up against Dell?"

Of course, the pitch is to give Dell users a taste of IBM in the hope that they will like what they see in terms of services -- and therefore be willing to stay with IBM long term, even after the program ends and prices go back up to a higher level, Haff said.

While many of IBM's price incentive programs, including its much-publicized "Green Streak" initiative, which offered as much as 50% off some iSeries models, eventually bite the dust, Bretzmann said IBM isn't likely to hike the price.

"In general, when a price hits and sticks, we stay with it," Bretzmann said. "If we gain traction and win customers, it was a successful tactic that we keep."

He added that IBM has always been very competitive on price but that, in a bid business, street price doesn't really matter.

"What we're doing today is adding more incentive in checking out what IBM has to offer," Bretzmann said. "We have a lot of compelling reasons why Dell customers should consider IBM."

Not surprisingly, Dell disagrees vehemently with IBM's assessment.

Dell spokesman Bruce Anderson said that everyone in this industry is doing a variety of things to compete in a very competitive market and that IBM's latest pitch is certainly no shock to Dell's system.

"It doesn't surprise us that our competitors are interested in us," he said. "We've seen double-digit growth in this market. The momentum in our servers business is strong. We're a pure-play provider, and that combined with our direct sales model gives us the ability to listen to what customers want and the solutions that meet their needs."

There will be no mudslinging on Dell's part. Anderson said his company's response to IBM and other competitors is business as usual.

"We're going to continue to do what we do every day -- focus on the customer while not worrying about competitors," he said. "That's really served us well."

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