International Business Machines (IBM) is pushing deep into flash technology in order to gain a stronghold over the Big Data market. In a recently announced strategic initiative, IBM stated that it will spend $1.0 billion on research & development of new flash solutions. IBM will integrate the new solutions within its expanding portfolio of servers, storage systems and middleware.
In its raw form, Big Data refers to the unstructured data, which is collected and stored for further processing and analysis. As per IBM estimates, 2.5 quintillion bytes of data are created every day from a variety of sources around the world, making it difficult for enterprises to analyze the data and navigate through it, which in turn impacts their competitiveness, efficiency and profitability.
Hence, enterprises are always on the lookout for efficient ways to manage the vast amount of data that is generated during a business process. IBM believes that flash is the appropriate technology to solve the challenges posed by the tremendous growth of Big Data. This is due to the fact that flash technology is faster compared to traditional hard drives as its response time to queries is in microseconds.
Flash lowers transaction time for banking, trading, and telecommunications applications up to 90%. For enterprise resource planning and business analytics applications, transaction time reduces up to 80%. Moreover, the technology is reliable, durable, energy efficient (reduces energy consumption by 80%) and hence cost effective, a desirable feature for the enterprises.
IBM is also opening 12 centers of competence around the world to promote the technology going forward. The centers in China, France, Germany, India, Japan, Singapore, South America, U.K., and the U.S are expected to be operational by the end of this year.
According to Transparency market research, the global Big Data market was worth $6.3 billion in 2012 and is expected to reach $48.3 billion by 2018. We believe that Big Data management provides significant growth opportunity for IBM over the long term.
We believe that IBM’s strong product portfolio will drive growth going forward. IBM recently launched FlashSystem storage products, which are based on technology acquired from Texas Memory Systems (Aug 2012). The products have generated significant demand from customers such as Sprint Nextel Corp. (S), which recently inked a deal to install 150 terabyte of additional storage in its data center.
However, we expect IBM to face significant competition from traditional flash system developers such as Micron (MU) and SanDisk (SNDK) going forward. Moreover, declining outsourcing signings is another major headwind for IBM in the near term.
Currently, IBM has a Zacks Rank #3 (Hold).
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