Menu
Serving it up

Serving it up

Whatever size it may be and whatever function it performs, the server is never far from the core of a business' technical operations. It's a comfortable position for a product, particularly as more and more professions turn to automation to remain competitive. Freak meteor obliteration withstanding, the livelihood of the server is assured.

The truth is that whether it's your payroll, database, communications or print/file server, its inoperability will quickly become an acute pain in the derriére. Even at a secondary level the impact is enormous. When your bank has problems processing transactions, or your supermarket bullocks' up its price codes, mundane things suddenly become insanely inconvenient.

This understanding is making users less price sensitive when it comes to servers, according to Inform analyst Chris Herbert. "They're willing to pay more for a system that isn't going to break down every two seconds," he says.

"To sell a $20,000 server five years ago was a colossal feat, whereas today customers see the cost as a necessary evil," agrees Gabe Lavelle, managing director of Queensland-based integration firm Technology Trading House. "Their own markets are forcing them to adapt. The applications require servers to run them and the businesses need to run the applications."

Having said that, customers are still shocked by the price of servers compared to other commodified hardware, despite the fact that prices have dropped dramatically over the last two years. Unit shipments grew by 30 per cent over 1999, but translated into a mere 10 per cent growth in market value because of price reductions, according to Inform. Gartner registered 64,451 total units shipped to Australia in 2000, only marginally down on 1999's figures of 64,451 (11,148 of which were entry-level servers). In terms of vendor revenue, profits shrunk from $US649 million (in 1999) to $617 million (in 2000).

"The client perception is that IT can be bought by the bucket-load and bought cheap because of the retail PC market. So when it comes to buying servers, they're shocked," says Lavelle. "The challenge is to understand what the customers want, and break the news to them gently that their existing system isn't going to achieve it."

Servers are one technology sector where customers defy being locked into a set category - the most suitable unit is defined entirely by what the customer wants to do with it. A small operation may choose an expensive processor to run specific applications. On the other hand, a larger organisation may choose a less powerful option because its applications don't require the grunt, or it may have structured its solution differently.

The rise of the dual CPU

According to research company Gartner, it was the rise of the roving workforce that launched the dual CPU market. As enterprises spread out, they recognised these units as low-cost options for managing disparate offices or departments. "Thrifty runs its whole nationwide car rental operation on two dual CPU entry-level servers operating as a redundant pair," says Peter Hedges, senior xSeries specialist for IBM, Australia/NZ. "One machine runs the business, the other is a failsafe."

While single CPU servers are often powerful enough to get the job done, users are opting for dual processors for their hotswap components and scalability. "For most users, price isn't as bad as downtime," says Rae Percival of Queensland-based integrator Practical Computer Services (PCS).

Percival says getting service people to PCS' remote client base is expensive, if not impossible. "Most of our support is done via an integrated services digital network [ISDN] or over the phone. If you start telling [users] to pull the casing off things and start fiddling around, they get scared. But with a dual processor, they can eject one [server] and post it to us to service remotely while the other one takes over," she says.

For the same reason, Lavelle says people often have six hard drives instead of one and adopt a multiple servers solution - one unit for e-mail, another for print/file, and another for applications, Web or communications. This segmenting has also become a cost-effective method of downscaling mainframes that aren't being used to their full potential. "There is a lot of redundancy being built into systems, especially with e-business requiring 24x7 uptime," says Lavelle. "A couple of years ago we used to put everything under the one box, but we can't do this anymore."

HP and IBM are at least two vendors taking e-business seriously and throwing the weight of their R&D (research and development) behind it. "We've been through this initial wave of e-business giddiness, where people thought all they had to do was add a dot-com and they would safe within the world of e-commerce," says IBM's Hedges. "This wave is definitely over. People have realised through trial and error that dot-coming doesn't do much and what they really need is to look at their e-infrastructure."

Scalability is also driving customers to the dual CPU as they seek solutions that consider future growth and traffic. Resellers have different methods of managing expansion. Percival says PCS encourages clients to update every three years to retain warranty privileges, while Lavelle believes he can save customers 20 to 25 per cent by making the server last for a fourth year. However, getting the client to think beyond the moment is an ongoing issue.

Servers weren't immune to the market slowdown last year. The fourth quarter of 2000 registered total unit server shipments of 16,607 compared to 17,769 for the same period in 1999, according to Gartner. Normally predictable buying cycles were blown away with the post-Y2K malaise, the introduction of the GST, the plummeting Australian dollar, the Sydney Olympics and growth warnings from the US closely following these events. However, Hedges says IBM sales pulled up in the last quarter of 2000 to register almost nine per cent growth on the same period the previous year. "A lot of that growth was in that dual CPU entry-level market," he says.

To put a cap on the hype, Inform suggests that single CPU servers are still outselling dual units at a rate of 80/20, respectively. Gartner is also predicting that the new millennium has triggered a tightening of resources. "Particularly in emerging markets, companies, large corporates especially, are consolidating," warns Gartner analyst Matthew Boon.

Another major retardant for market growth is the lack of software applications that utilise the dual processing. "The problem with dual processors is that you need software that takes advantage of it and there isn't much around," says Percival.

Linux is experiencing a surprising peak in this sector as users dodge the hefty $1000 to $3000 licensing price of Microsoft 2000 or NetWare. "With Linux you can get away with scaling down the box and saving on cost," says Lavelle. Either way, ease-of-use is the real priority. "People don't even want to know about their server, they want it to be transparent," Lavelle adds. "We work with an independent software vendor that can run on NT or UNIX, the reason being that customers don't want to deal with two software houses - it doubles all costs in their mind."

Mainframes: the futile game of catch-up

Chipmakers have been consciously pushing entry-level servers into what was, 10 years ago, the mainframe space. The two sister technologies currently brush fingers in the midrange, but there is little chance dual or quad servers will ever replace these mammoth pieces of hardware. "There will always be a need for that big, powerful iron," asserts Lavelle.

Server manufacturers have pulled many of the mainframe characteristics and adapted them to the smaller risk boxes. However, they still haven't achieved the 100 per cent uptime that makes mainframes so enviable.

Nevertheless, the increased power, availability and reliability of entry-level servers means they are a viable option for deploying e-business solutions to SMEs, especially at a price point of less than $5000. In terms of capabilities, one entry-level dual CPU server could run the entire e-mail, print/file or even database for an e-business of 2000 or less employees, according to Hedges.

Uptake has been strong, with Inform registering SMEs as the largest consumer of servers throughout 2000 in terms of overall market growth. "Whereas a small business may have bought a PC to handle some of its single applications (such as print/file, small scale e-mail) in the past, price competitiveness coupled with targeted marketing has opened this market up to the volume low-end server market," confirms Gartner's Boon.

"The future will see [SMEs] adopt low-cost, low-feature and low-maintenance, appliance-style servers to handle these very basic tasks, which will particularly affect replacement implementation cycles. If one considers that roughly 95 per cent of all businesses in the Asia-Pacific region are thought of as SMEs, this market represents a significant opportunity for the 1-2 way server market, both for resellers and vendors alike. The large corporate markets are facing saturation at the low-end server market as well as the higher-end business PC market."

Boon says traditional mid-range players, such as Sun, have recognised the potential of the SME market. Sun has already positioned itself with the acquisition of Cobalt last year. At the same time, IBM's standard Intel-based servers range from one to eight processors, and the vendor is on the brink of launching a entry-level server capable of utilising 64 processors later this month.

Reseller opportunities

Despite accounting for around 67 per cent of units shipped, servers priced at less than $US5000 accounted for just 20.4 per cent of total server revenue (excluding supercomputers and mainframes) during the fourth quarter of 2000, according to Gartner.

The largest revenue contributor in the Australian server market was platforms priced at between $US25,000 and $100,000. This segment accounted for almost 23 per cent of total server revenue, whilst only representing 5.3 per cent of total units.

"There is little profit in low-volume sales, particularly when the vendor model is primarily indirect," says Boon. "Resellers must get the message out that they can offer more, they have to become true VARs. There will still be a need for integrators and on-going support and this is where the value can be added, particularly in the burgeoning SME space where resources will tend to be scarcer than in the larger corporates."

The good news, according to Percival, is that the server are one gizmo that users have little desire to fathom, and are typically sold as part of a total solution. "Customers don't understand where the technology is taking them," she says. "We have set ourselves up as a one-stop-shop and we actually tell them what they want."

Meanwhile, the idea of buying these types of systems direct or online is becoming increasingly palatable. "The traditional Dell model is being embraced across the board, with recent announcements from IBM locally and globally," says Boon. This is the biggest threat to the traditional reseller market at the low-end of server-town.

IBM, Hitachi to cooperate on server developmentBy Laura RohdeLONDON - IBM and Hitachi have formed a strategic relationship to develop and manufacture certain servers, including IBM's upcoming AIX 5L server line, semiconductors and related components, the companies announced last week.

IBM and Hitachi will also collaborate on developing chips that will support Hitachi's VOS (virtual operating system), the companies said in a statement. Any financial terms of the agreement were not disclosed.

IBM has been readying its next-generation Unix AIX 5L for an April release, and the agreement between Hitachi and IBM will in part focus on "investigating additional opportunities" for PowerPC-based AIX 5L servers, Hitachi and IBM said.

Hitachi has agreed to add PowerPC-based servers to its product line and will also sell AIX 5L servers in future under the Hitachi brand name, the companies said.

Components to be jointly produced will include memory cache components and multi-chip ceramic modules, Hitachi and IBM said.


Follow Us

Join the newsletter!

Error: Please check your email address.
Show Comments