Vendors fight it out for eBay contract

Last month, Pauline Nist, a Compaq Computer general manager, departed from her prepared talk to a group of visitors at the company's offices to tell them of a pressing matter.

"All of Silicon Valley" is talking these days about a special contract up for bid, she said.

The giant Web-based auction house eBay is accepting proposals from vendors who supply the servers that power the complex transactions eBay manages over the Internet, Nist told the visitors -- a group of editors from IDG publications. Such high-end servers perform the critical back-end functions of a Web-based operation like eBay and run the databases that keep track of customer information, live transactions and related support information.

The auction house uses Sun Microsystems' Enterprise 10000 Unix servers, also known as the Star Fire line. But a 22-hour system outage on June 10 last year, as well as several shorter failures, raised eyebrows about the service and allowed vendors to think they had an opening to supplant Sun.

"We're in the fight for the contract," Nist said.eBay would not comment on the contract. But in addition to Compaq, IBM and Hewlett-Packard are jockeying for the contract as well, said Jonathan Eunice, a US-based analyst.

"Everyone's got a bounty [a bonus] on that contract," Eunice said. "To be the salesman that sells into eBay would be a wonderful thing. To grab that contract away from Sun, you'd get laurels and a ticker tape parade."

Sun is not taking the fight to retain its business lying down. "We can't speculate on any contract, but I think we are going to be very pleased in this relationship in the near future," said Sun spokesperson Doug van Aman.

IBM and HP did not comment on the contract. However, IBM has wasted little time after Network Solutions Registry, a division of Network Solutions, one of the Internet's leading domain name registrars, announced it would replace Sun's mid-range, four-processor E450 server with IBM's RS/6000 S80 server.

In announcing the win, IBM cited Sun's television ads, in which Sun refers to itself as the "dot in dot-com."

"This is more than a blow to Sun's advertising campaign," James Sciales, an IBM spokesperson said. "In Big Blue's fight to regain market share from Sun for computers that power the Internet, it's a case study of what IBM is best known for -- leading technology."

Sun's van Aman downplayed the server shift. "IBM sold Network Solutions one system," he said. "We have many, many, many systems at Network Solutions. The [Sun] E450 server is a smaller server, while the [IBM] S80 is their largest server. They won one account, but we still have an extremely good relationship with Network Solutions."

IBM also sells its RS/6000 S80 server to the same enterprise clients targeted by Sun with its E10000 server, IBM's Sciales said. The IBM machine runs a 64-bit version of the AIX operating system, IBM's flavour of Unix, and has 24 processors running at 450MHz.

Sun's E10000, with the company's 64-bit Solaris variant of Unix, uses up to 64 processors, running at 450MHz. It includes features such as multiple isolated domains that represent the equivalent of multiple systems in a single Unix server and can support large distributed data sets, multiprocessing, and client-server applications.

IBM's S80 server is priced as high as $US890,000, Sciales said. Pricing for Sun's E10000 server start at above $1 million, van Aman said. ebay uses four to five Sun E10000 servers, van Aman said.

Since last year's problems, however, the auction house has solved its downtime problems, he said.

"If you look at the uptime eBay has had since they completed backup systems several months ago, there has been a dramatic increase in system availability," van Aman said. But that begs the question of the root causes of the outages.

"If you tried to point a finger at somebody, everybody would be pointing at each other," van Aman said. "It was many things contributing to downtime."

After eBay's outage, John Gage, Sun's chief researcher, said the system crashed because the auction house let its advanced development group use the same Sun machine that ran its daily operations.

"We could criticise them; but the system broke, and it was Sun's fault," Gage said back in November. Since then, Sun has instituted a policy that made payment for company developers and vice presidents depend in part on the amount of uptime of Sun machines.

Eunice, the Illuminata analyst, also pointed a finger of blame at Sun. "It's not so much that things go down; everyone's systems fail," he said. "You need a plan B and a plan C. eBay didn't [have one], but neither did Sun. No one was covered with glory."

Although value of eBay shares dropped as much as 18 per cent after the outage, the company has performed well since that time. On April 25, the company reported that first-quarter earnings increased 67 percent, soundly beating Wall Street expectations.

Net earnings were reported at $US8 million, or 6 cents a share. Analysts with First Call/Thomson Financial predicted eBay earnings per share would be 3 cents.

Quarterly revenue totalled $US85.8 million, up from $42.8 million in the same quarter last year.

As eBay examines bids from the server vendors, one thing that is clear is that everyone concerned knows a lot more now about the needs of big, Internet-based systems, van Aman said.

"A lot of this is about learning," van Aman said.