The top 10 companies in IT collectively exert a dominance over the IT market. The leader board as of the end of last year is illustrated in the Goopple article. Notice who the hardware vendors are and how they are faring. This is the first of two postings on the topic of hardware.

1. Virtualization is a challenge to Intel.

Consider Intel. Intel did well last year with share price growth of 33%. Most of that growth in value is due to the fact that it has given AMD a tough time, regularly releasing well thought-out products. We should not forget that the cpu chip is not a commodity yet and Intel’s health depends on this remaining a reality. Intel will probably continue to do well in the near term, unless AMD mounts a recovery (some commentators are already writing AMD off).

However in the long term, Intel will be challenged – indeed it already is being challenged by virtualization. Ultimately, virtualization is bad for Intel and it isn’t a trend that Intel can deflect.

Did anyone notice how easily Apple switched from the Power chip to Intel? I noticed because I have an old iMac and a new Mac Pro. There was nothing wrong with the Power chip. My cut on this is that Steve Jobs knew he could challenge Microsoft if he was on the same chip – it would be possible to compare Apples with, non-Apples. And that’s what he’s doing right now.

But the point is that chip switches used to be impossibly painful and now they are not. That’s because cpu power really doesn’t matter much for most applications (for the PC user).

2. IBM’s Presence as a Chip Vendor Will Grow

IBM’s chips power all the games machines. That’s a big market with about 70 million units annually, half the size of the PC market and growing at about the same rate. IBM competed for the games market and took it from under Intel’s nose. It is now Intel’s major competitor, although it is difficult to compare the two companies because IBM has such huge revenues in other areas.

IBM is not as challenged as Intel is by virtualization. It is currently in control of virtualization on its own chips and is happy to encourage virtualization on X86 chips. Currently that’s all helpful for IBM.

IBM is well in advance of Intel in parallelization. For Intel, multicore is just Moore’s Law by other means, but for IBM the parallelization (and the Cell chip) are about providing interfaces to virtual worlds. Can you sense the difference? IBM is ahead here, although there is no gaurantee that it will remain ahead.

There is a battle shaping up over home entertainment and, as the supplier to Apple, Intel is not poorly positioned – but neither is IBM as supplier to Nintendo, Sony and Microsoft. Nobody knows exactly what this market is yet. It is divided and likely to remain so for quite a while.

Note: There are 7 forecast postings for 2008. The others are:
Forecasts for 2008: #2 The Server
Forecasts for 2008: #3 The PC Market
Forecasts for 2008: #4 Google and the Cloud
Forecasts for 2008: #5 Communications Convergence
Forecasts for 2008: #6 The Application Layer
Forecasts for 2008: #7 Security