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Is the enterprise hardware business doomed?

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. Sales  continue to spiral down.

Amazon's cloud onslaught puts every enterprise hardware company under pressure. And make no mistake, Amazon is the only brand that really matters in this context - the company dominates the market.

Old-school enterprise companies see a glimmer of hope in following an Amazon-style cloud path. It's not that attractive. In effect it means dropping a dying business with uncertain margins, for a growing business with lower, but equally uncertain margins.

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

There is no upside. Servers are a commodity. If you think the big hardware brands and re-orientate to selling commodity servers based on Intel chips, think again, that market is already dominated by unbranded hardware. Many datacentre 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.

[digitl 2014]

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