The Lego Co. is all about making toys, but its decision to rip out its Hewlett-Packard Co.-based server and storage infrastructure and replace it with IBM Corp. products is far from child's play.
The Denmark-based toy maker has embarked on a massive migration of its entire server and storage infrastructure that calls for the removal of over 230 HP servers and the installation of about 34 IBM servers. Although there are significantly fewer of them, the IBM servers are expected to provide more computing power than the HP servers, the companies said.
While generally happy with HP's servers for the past five years or so, Lego is switching to IBM to take advantage of IBM's "on demand" pricing that will allow the toy maker to pay for the processing and storage capacity it uses.
"The on demand (arrangement) will give us the ability to have extra computing capacity and infrastructure to support the business demands as they come up," said Hal Yarbrough, Lego's senior director of global IT. HP also offers similar pay-per-usage arrangements, but IBM's overall package fits Lego's needs better, he said.
Lego estimates the IBM migration will allow it to lower its annual cost of owning, operating and maintaining its storage and server infrastructure by 30 percent, Yarbrough said.
Lego's business is very cyclical, with an sharp increase in activity during the holidays, between October and December, so the company was very interested in adapting its computing capacity to the changing demand of its business and its clients. "For a seasonal business, being able to have extra capacity to buy and available instantly for only the amount you need when you need it, is a very good match," he said.
"This is a very good alignment with our lean and agile supply chain," he added.
Lego, one of the world's largest toy makers, had 2002 revenue of 11.4 billion Danish krone (US$1.26 billion as of Dec. 31, 2002).
Lego is buying "fully configured" IBM server and storage systems with the ability to turn on and off capacity as needed, the companies said in a statement Monday. "It's a capacity-based arrangement where we're buying capacity as opposed to the traditional way of buying boxes," he said.
Lego will also be able to tap into IBM-owned equipment to get extra capacity, said Michael Nelson, director for Internet technology and strategy in IBM's server group.
The IBM servers will be on site at Lego locations and owned and operated by Lego staffers. A "significant" part of the migration has already been completed, and the work should be finished before the year is over, Lego's Yarbrough said.
The companies declined to provide the multi-year deal's value, but IBM's Nelson called it a landmark. "This is the biggest infrastructure on-demand deal for IBM," he said. "This deal is really a vindication of our entire on-demand strategy."
The HP wares making their exit include HP 9000, Alpha and ProLiant servers, and StorageWorks ESA storage systems, an IBM spokeswoman said. The IBM products Lego chose include two eServer pSeries p690, four eServer pSeries p650, 24 eServer xSeries x440, Tivoli's Storage Manager software and four IBM Shark Storage SAN servers, the companies said.
IBM's Nelson said IBM didn't win the deal by slashing its prices. "We won this not because we underbid but because we're providing a better solution to meet their needs," he said. "This is one more instance where IBM is beating HP in the market because we're providing a more flexible and broader solution."
Asked for comment, HP e-mailed IDG News Service the following statement: "This is one of only a handful of Alpha losses, which is testament to a very successful product transition from Alpha Tru64 Unix to HP UX. We win some, they win some. For example, we just beat IBM on an even bigger enterprise deal with the China State Tax Authority involving 60 Unix servers, of which 40 were (HP 9000) Superdome."
(Robert McMillan in San Francisco contributed to this article.)