Server sightings

Server sightings

Servers may not be the sexiest technology around, but they are literally hot stuff. Accoring to number cruncher, IDC, worldwide server shipments are showing healthy growth. And customers are getting more bang for their buck with the volume market (priced less than $25,000) - a trend that's putting the heat on resellers to differentiate.

Since the machines are capable of handling a greater workload, companies don't need to look to mid-range or high-end systems for support. Market numbers reflect the trend. The volume server market represents the primary growth engine for the server market overall. Volume server revenue increased 6.2 per cent to $US49 billion in 2004.

So where can resellers look for some action in the server world? Other IDC market findings show Linux servers are on an upswing (the platform continues to expand its presence in global data centres), and Microsoft Windows servers (based on x86 server hardware) continue to show robust growth.

Citing top trends, Meta Group's Asia-Pacific research director, Kevin McIsaac, said x64 (that is 64-bit extension to IA-32) will grow in the server space. "Sun has the potential to shine here with the Opteron-based systems," he said. Other areas to watch included the move towards iSCSI, and the virtualisation of Intel servers: "This will move from early adopter to mainstream over the next 18 months," McIsaac said.

Marketing director for Avnet Partner Solutions, Michael Costigan, said the value-added distributor was seeing a continuing push into the Intel space, particularly with IBM and HP gear.

On the flip side, he said there was a decrease in the Unix market for the channel. This was partly because of the compatibility, reliability and scalability of Intel.

"Many ISVs are moving to develop on Intel boxes, which wasn't the case five years ago because they were considered cheap," he said.

Product manager of advanced projects at Citrix Systems, Michael Harries, said Windows servers were gobbling up some of the Unix market share.

"Windows is taking away from Unix because of the cost of Intel boxes," he said. "Performance is going up and prices are coming down."

What are some overall market drivers? The three-year equipment refresh cycle is encouraging renewed spending, Fujitsu's national channel manager, Mike Yell, said.

"Companies need to refresh and expand their IT infrastructures," he said.

There was a trend away from four-way and eight-way systems in favour of two-way products, HP Australia's marketing manager for industry standard servers, Angus Jones, said.

"Intel is producing very productive systems and putting more cache on the processors."

Alstom IT's national sales manager for Sun, Danny Harwood, said vendors had to react to the downward shift, and develop appropriate channel strategies.

"There's more of a tendency for customers to scale horizontally," he said. "Years ago, it was all about four-way and eight-way but now it's going down to one-way to four-way."

Partners needed help uncovering the appropriate vertical markets for the technology, Harwood said.

General manager of IBM systems and technology group, Mark Latchford, cites two factors fuelling these overall market trends: the push to simplify the overall infrastructure; and a continued focus on delivering innovative new environments. The growth areas for IBM come with its xSeries and pSeries servers.

"For the channel, it requires infrastructure consolidation and an innovative platform," Latchford said. "Delivering new environments means not necessarily adopting generic applications, but industry-specific ones."

Offering ready-made solutions to the public sector was a prime example, Latchford said.

IBM's latest launch, the X3 Intel server architecture, aimed to give Australian enterprises and government a set of server tools that offered boosted performance, reliability and availability at lower prices, Latchford said.

Microsoft Australia's server infrastructure product manager, David Allinson, said industry-specific applications were a top trend to play out in the server world.

"This takes us beyond file, print and email and into linking CRM and ERP applications, for example," he said.

And while the refresh and enterprise spending was underway, Meta Group's McIsaac said it was a classic case of the middle child getting bypassed in favour of the other siblings. "Market demand has split into volume and high-end, with limited interest in the middle," McIsaac said. "We expect this trend to continue with more demand moving to volume and the high-end getting higher [and justified as a consolidation platform]."

The mid-range space is priced from $25,000 to $499,999.

IDC said revenue for midrange enterprise servers continue to decline as traditional midrange workloads continue to migrate to volume systems.

Although there is still life for the mid- to high-end gear in financial services, leading retail and manufacturing systems, according to IDC.

A day in the life of server-land

Those in the trenches say there's a huge opportunity for partners to look at applications. The growing demand for 64-bit servers is a partial explanation for Optima's increased sales, its server product manager, Ole Mortensen, said.

The company had seen a general business upswing of 28 per cent between 2003 and 2004. Channel business grew 70 per cent. Top verticals included government and education.

Looking ahead, Mortensen expects 64-bit operating systems and applications that take advantage of the platform shift to drive further changes in the server market in the next few years.

"This in turn will give system integrators renewed opportunity to focus on solutions," he said.

In the server house, Microsoft was the dominant OS in the corporate server market, Mortensen said.

He expected market share to grow further as the 64-bit Windows platform matured.

Mortensen said he would add Opteron-based servers to the line-up if the market demanded them.

Microsoft was slated to release Windows Server 2003 x64 Editions and Windows XP Professional x64 Edition in April, Allinson said.

The technology would give customers the ability to run both 32-bit and 64-bit applications at high performance, he said. "It lets customers move at their own pace to 64-bit computing while preserving their current 32-bit investments," he said.

And while the industry is looking towards the 64-bit story, Allinson said partners servicing the SMB space could already look for opportunities with Small Business Server 2003.

"As SMBs see the benefits of being online and having remote working capabilities they are beginning to use server technologies, which was previously cost prohibitive," he said.

Partners peddling to the SMB market - of which there are about 1.4 million in Australia - can look beyond a pure hardware and OS play to offer services and support.

Merging email, data and security applications are prime examples. Supporting a mobile IT infrastructure (with remote messaging) is one thing many SMBs may be after.

"Getting operational efficiency and productivity is essential," Allinson said.

SMBs are concerned about on how to manage their infrastructure and control IT costs.

As such, partners can help SMBs with capacity planning and remote maintenance. On the remote access front, partners can offer reporting and administration capabilities, so VARs can connect to a customer's servers.

The performance battle continues

With businesses increasing spending on IT equipment, both Intel and AMD are ramping up server platform functionality.

Intel, for its part, has extended 64-bit capability, performance, power-savings and security across its server products. The company is set to launch server platforms that support dual-core processors with a dual-bus technology, which handles incoming data faster.

In the Opteron camp, AMD's latest processors, the 252 and 852, which are designed for four-processor and eight-processor systems, will have a faster 1GHz HyperTransport bus and will support the SSE3 software instructions. This will means boosted performance for graphics processing and scientific computing.

The Opteron range is selling largely into corporate, government and industrial segments in part because of a need for high performance systems. HP recently added four new systems to its Opteron product portfolio.

Locally, the education and SOHO markets were hot spots, AMD Australia's senior field applications engineer, Michael Apthorpe, said.

"Universities are adopting the Opteron processor, in particular, for its clustering functionality as well as in the SOHO space where security is always a high priority."

According to Apthorpe, Opteron technology advancements include the direct connect architecture, dual core technology, and powerNow, which offers up to 75 per cent power savings on a server.

He said the Opteron architecture was designed to transfer data from memory to the processor as quickly as possible. This accounted for the growing level of interest in AMDs processors.

Linux servers are pegged to shine this year. According to IDC, worldwide investment in Linux servers for both technical and commercial workloads remains strong as the platform continues to expand its presence in data centres around the world.

And vendors are responding. Both Novell and Red Hat are readying Linux servers. Novell is launching Open Enterprise Server, while Red Hat is pushing Red Hat Enterprise Linux 4. HP is also working to take Linux into a host of new areas of the server world, including 64-bit processor servers.

Managing director of Avnet, Colin McKenna, said the value-added distributor was seeing some Linux adoption in the enterprise.

"Many companies have Linux servers somewhere - they're either adopting it now or have plans to do so," McKenna said. "I would say about 10 per cent of servers in companies are Linux, and it's growing rapidly. Expect adoption rates to pick up."

And while Linux was gaining momentum, it was still not a main focus area for Fujitsu, program manager of enterprise systems, Lars Kohn, said.

"You'd be hard pressed to find an organisation not looking at Linux servers, but it's more at the edge right now rather than the network," he said.

Even so, Fujitsu plans to launch a high-end Linux server platform later this month.

The technology centred on standard Intel processor technology enhanced by Fujitsu developed chipsets, Kohn said.

"This will deliver higher reliability, flexibility and improved scalability aimed at the data centre," he said.

HP's Jones said while Linux had mainly been at the edge, it was starting to make an appearance with long-time Unix customers.

"We are seeing a lot of experimentation with Linux," he said.

But the real action this year, Kohn said, was in the growing adoption of blade servers. The company is focusing more on the bigger blade chassis rather than the smaller offering. It jumped into the blade game 18 months ago.

"Blades give an organisation a better way to save space in data centres, which is very expensive," Kohn said. "Blades offer advantages like higher density in the rack and easier manageability."

Blade servers are thin, modular machines that slide into a chassis. The media and film industries (using digital graphics) were likely spots for blade technology, he said. Most blades in Australia were going through specialised partners rather than distributors.

IDC said the significance of blade servers would increase with anticipated worldwide sales of $US9 billion in 2008, which represented 29 per cent of the entire server market. There was a shift from single-processor blades to dual- and quad-processor blade systems, according to IDC.

Avnet's Costigan said while demand for blades dipped last year, the company was also bracing for substantial pickup and demand this year. "Huge data centres are the likely environments wanting blades," he said.

Meta Group's McIsaac said the local market share of blades was continuing to grow substantially. "The drivers are space, price and convenience," he said.

IBM's Latchford said blades offered flexibility, scalability and manageability.

"Companies can add or subtract the technology depending on how the data centre manages its IT environment," he said.

But HP's Jones argues blades are already mainstream technology. He said blades account for about 15 per cent of the company's server shipments per month.

HP recently launched its first blade server using AMD's Opteron processor. However, Alstom IT's Harwood said blades in Australia had been a non-existent part of Sun's business.

While US officials said Sun planned to launch a second-generation line of blade servers in early 2006 in an effort to scoop market share from HP, IBM and Dell, Harwood was unsure if these plans would reach local shores.

"We haven't seen many blade server sales through our channel in Australia," he said.

"It's very disappointing. There is a market there, but it's hard to quantify. It may be suitable for ASPs and some ISPs, but there's not enough incentive to move from a standard rack stack."

And while server prices were coming down and performance was going up, resellers need to find their groove, Meta Group's McIsaac said.

"The biggest challenge we have is the commoditisation of servers, this works as much against resellers as much as manufacturers," HP's Jones said.

Additional opportunities

Overall, there was an increase in server sales, but a reduction in revenue, Jones said. Given the landscape, resellers needed to look for additional opportunities.

"We continue to see success in bundling of product [so it's not just a box] and including the OS," he said.

Partners can help customers find the ideal solution, map out the IT infrastructure and then offer service and support.

"They can bundle the whole package," Jones said. "Design, deliver and implement."

Expertise was the prime selling feature, he said, particularly for the SMB space, which was the top market to watch.

"If you get a monkey to put together all of these systems then you get unreliable systems," he said. "You need an experienced reseller to understand the technology advancements and map out all of the pieces."

Since servers are a commodity, McIsaac said partners needed to find either software or a process that enabled business value.

"Provide processes and tools around operations excellence," McIsaac said.

"Think ITIL [including operational processes such as helpdesk and change control], security, disaster recovery. Move into a managed service, typically with customer premise equipment, think backup and recovery, remote DBA and managed security. Move out of hardware and into applications."

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