Selling less, making more

Selling less, making more

Thanks to a combination of multi-core technology and virtualisation, resellers may find themselves selling less and making more. ARN investigates the opportunities.

In March this year, researchers at IDC hit the server space with a bombshell: forecast growth in server sales was reduced by almost half, shaving $US2.4 billion in revenue off the market over the next four years. Thanks to a combination of server virtualisation technology and powerful new dual-core and quad-core systems, traditional x86 were set to take a beating, and resellers were warned to brace themselves for the shifting market.

Low end still strong
However, the predictions are not as dire for the Australian reseller channel as they might appear. Demand for x86 units is still growing, albeit at a slower rate than was initially predicted. And that growth, according to ASI Solutions product manager, Craig Quinn, is more than enough to keep the market ticking over. "Server sales are still rising in the x86 space, and while it's not as dramatic as growth we are seeing in other areas, there's still plenty of demand," he said. "Our reseller channel is doing particularly well selling servers into small businesses, many of which haven't actually owned a server previously."

Quinn said the bottom-heavy structure of the Australian business community would ensure a steady demand for x86 servers for some time to come, even if global sales suffer a slight setback.

"At the SMB level there's still a lot of companies installing a single server to run a specific application," Quinn said. "They don't need virtualisation because they aren't running enough applications; in fact, buying into that first server is already a real boost for their business."

According to the Australian Bureau of Statistics, there were more than 1.7 million businesses with less than 20 staff operating in the Australian economy in 2004. Micro-businesses with less than three employees make up more than 60 per cent of these.

At this size, Quinn argued, most businesses were probably still operating applications from desktops on the business network, and lacked the internal skills to make the shift to greater technological dependency. "Mid-sized businesses might be looking at virtualisation, but the small businesses don't have the same kinds of requirements," he said.

"Reaching that small business sector and offering options designed for the small business user is entirely in the hands of resellers."

Others, such as HP marketing manager for servers and storage, Angus Jones, largely dismiss the IDC figures, suggesting the market for x86 servers has continued to grow apace driven by new demand and greater reliance on IT.

"Historically, forecasts have been predicting the market would slow for the last couple of years but we are seeing the opposite," he said. "We're still seeing the market growing across all segments more than we anticipated." In a similar vein, Acer business manager, Richard Jones, suggested there was still plenty of growth in the x86 space, as well as opportunities in other areas of the market.

"I don't think sales will flatten out, there are still so many organisations out there that are interested in entry-level workgroup servers," he said. "All the vendors recorded growth in x86 server sales in the last quarter, so there's plenty of demand in the market." Acer's Jones pointed to the fact that in the last 12 months there was a jump in demand for the vendor's build-to-configure x86 servers to be shipped with Microsoft's Small Business Server software.

"An extraordinarily large number of small businesses don't even have the first server yet, and the attach rate of Small Business Server would indicate that these machines are going out to that segment of the market," he said. "We're seeing upwards of 30 per cent going out like that, and it's growing as a percentage of the overall demand."

However, there is another boon for the channel in the shifting market as predicted by IDC. As demand for x86 servers continues to grow in the Australian economy, so too does demand for the technologies it was feared would kill off the market entirely: virtualisation and multi-core systems.

As it turns out, this trend opens up a whole new vista of opportunities for integrators with the necessary skills.

Split personalities
Leading Solutions team leader, Paul Cranitch, said the integrator had already embarked on a shift in focus designed to leave it ready for the forecast shift. Although he conceded the company was seeing a slight flattening out of demand for x86 servers, he said growth was continuing.

"In the past, most of our revenue has been generated by hardware, but we've changed the focus and we're now selling business benefit," Cranitch said. "Whether hardware sales go up or down it doesn't really affect us anymore because we are making most of our money from services."

Rather then struggling against the tide, Leading Solutions has opted to go with the flow and focus on server virtualisation and consolidation, providing ongoing support rather than a single installation service to the customer.

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