IBM Switches To Build To Order For Entry Power Systems

February 24, 2025 Timothy Prickett Morgan

If we trust our memory, for the past several decades both high-end Power systems machines as well as all System z mainframes have been done on a build-to-order basis, and for the past decade at least, these big iron boxes were made at IBM’s factories in Poughkeepsie, New York, for the worldwide market.

For many years, entry and midrange AS/400 line was manufactured in three plants: the main factory in Rochester, Minnesota for the market in Canada and the United States and for certain high end machines in Europe, as well as Santa Palombo outside of Milan, Italy for entry and midrange machines sold into the EMEA region and Guadalajara, Mexico for the Latin American and Asian markets. These entry machines were built to forecast plans informed by demand from the vast global reseller channels rather than being built to order – literally meaning unless there was a configuration with a purchase order for it, the machine is not built.

With supply chain issues and no one in the reseller channel wanting to have machinery in inventory locking up their cash, Big Blue is now shifting to build to order for entry Power Systems machines. The net effect of this will not be noticeable to most Power Systems customers, except during the transition period in April when IBM’s factory in Guadalajara – the only factory in the world where it makes entry Power Systems machines as far as we know at this time – will be switching gears for the transition from building for the channel to building for customer orders.

The upshot is that you will not be able to have a Power Systems machine built during the month of April, but you will starting in May. The cutoff date for entry Power Systems order is March 10 for high-end servers and March 17 for midrange and entry servers, according to the note that Nancy Bearry, director of Power ecosystem for the Americas region at IBM, sent to business partners on January 15 about the shift in manufacturing:

IBM is making an important change to the Power and Storage manufacturing operating model this year. It’s very important that you start planning now around this new model in order to ensure shipments to meet your customer’s timeframes.

We are transitioning to a build-to-order model, requiring firm orders and shipping according to published lead times. This means that if an order is not firmed in time, it will be shipped in the following quarter. The lead times are published each week in the Power Ecosystem Weekly Update that I send every Tuesday.

To ensure you are fully prepared for this change, here is what you need to know.

What is changing:

• Only firm client orders for Power and Storage will be manufactured, based on the published lead times – 15 business days for High-End products and 10 business days for High-Velocity products.
• Orders that firm after the published lead times will be manufactured on a “best can do” basis, though we expect most orders to ship close to the published times.
• It’s crucial to aggressively secure orders earlier in the quarter, adhering to the 15- and 10-day lead time windows. For Q1, please keep the following last order dates in mind: March 10th for High-End Products, March 17th for High-Velocity Products.
• IBM manufacturing will be going through a transition in April and will not build or ship any Power servers during the month of April due to this transition.

What is not changing:

• We remain committed to providing a world-class buying experience, from order placement to shipping.
• Client shipping times will remain consistent and can be tracked through Order Status Online. To access OSOL, Business Partners must have an IBMid. To create an IBMid, use the IBM Security Access Manager. To access, visit Order Status Online. Click “Log in”, then enter your w3id and complete the two-factor authentication (2FA) verification.
• IBM quarterly revenue targets will remain the same. We expect our sellers and partners to adjust by closing deals earlier in the quarter, as needed.

How this affects Orders For Manufacturing Visibility (OMV):

Manufacturing has made no promise to review OMV orders or use them for parts supply planning. OMV can still be used as a first step to prepare for a firm order by starting the order process which can identify any unforeseen issues. This can speed up the order process when it’s time to firm the order.

Keep watching for updates and further information provided in the Power Ecosystem Weekly Update.

We glean a few things from this note. First, whatever is changing with the new build to order system, it seems to affect high-end Power Systems machinery even though these machines were essentially build to order for a long time. Entry and midrange machines were built with a range of standard configurations and then put into the channel. Now it looks like everything is going to be built to specific configurations. Which how the big OEMs like Hewlett Packard Enterprise, Dell, and Lenovo do with their entry and midrange servers.

So, this change is really IBM and its channel getting normal.

What may not be obvious to you is how concentrated the bulk of Power Systems manufacturing is in Guadalajara, Mexico, which is one of the electronics manufacturing centers of the world. This has happened over time.

The RS/6000 line was manufactured in IBM’s Austin, Texas, development lab and factory for many years while the AS/400s were made in the factories above. Big iron mainframes were made in Poughkeepsie as well as in Montpelier, France, and Boblingen, a suburb of Stuttgart, Germany, back in the day; entry mainframes were made in its Endicott, New York, factories. At some point, to better serve European markets, IBM opened up a factory for entry and midrange Power server manufacturing in Mulhuddart, a town outside of Dublin, Ireland. In 2010, the Irish factory was shuttered after IBM opened up a factory in Singapore for making high-end Power and mainframe systems for EMEA customers; manufacturing of entry Power iron for EMEA was moved to the same Shenzhen, China factories that were making System x servers and at the same time Power Systems iron running AIX was moved up to Rochester from Austin. Ironically, manufacturing for Central and Latin America was moved out of Mexico after NAFTA was signed.

Three years later, in March 2013, to simplify and improve its supply chain, Power Systems manufacturing was shifted from Rochester to Guadalajara. IBM is still making mainframes as well as quantum computers in Poughkeepsie (which was a pickle factory before IBM took it over in 1941), and we presume the high-end Power E980 and Power E1080 machines were made there.

But everything else Power Systems, for the entire world, looks like it was consolidated down into Guadalajara, which a decade ago was responsible for one-quarter of the total exports from Mexico to the United States thanks to the electronics and computer manufacturing center that has evolved there over many decades. And now, with the second Trump Administration threatening a 25 percent tariff on all goods imported into the United States, it is not clear how this might affect Power Systems pricing in the United States. Those tariffs are paused until March 4, and it is not clear what might happen after that.

Maybe IBM will move Power Systems manufacturing back to Rochester before it is done. But this may not be as easy as it sounds. Last we heard, there were 38 buildings in Rochester, and Big Blue sold off two thirds of the factory capacity in 2016 and is only occupying three of the buildings. So it may not be possible to just move everything back at the drop of a red hat.

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