Posted by : bpburnwal on Sep 27, 2003 - 07:44 AM General

Last month, Dell lowered prices on a number of its products, from desktop and notebook personal computers to workstations and peripherals. The company slashed prices of its four-processor servers, including its PowerEdge 6600, by 22%. It also cut prices on some of its other servers by up to 10%. A server is a computer on a network shared by more than one user.
The price cut is good news to IT buyers keeping an eye on cost. After falling for three consecutive years by a total of almost $20 billion, spending on servers appears to have stabilized in the first quarter of 2003, according to recent figures from IDC, Framingham, Mass. Spending fell 3.6% to $10.5 billion compared to the same quarter one year ago. When compared to the previous quarter, the decline is less than 5%.

At the same time, shipments of servers grew by 11.5% year over year. As IDC sees it, this strength in volume of server sales reflects "continued interest in buying low-cost servers to add incremental capacity to existing computer infrastructure." Figures from Gartner Inc., Stamford, Conn., show similar growth. In the U.S., shipments rose 13.2% in the first quarter of 2003 to 499,609 units from 441,540 units in the first quarter of last year. The first quarter of 2003 is the fifth consecutive quarter in which the U.S. posted a year-over-year growth rate greater than 10%.

At 27%, Dell has the largest share of the U.S. server market, according to Gartner. Dell and IBM have both gained share of the server market recently at the expense of such other players as Hewlett-Packard (which has maintained share) and Sun (which has lost some share). IBM has 12% share of the U.S. server market, according to Gartner.

Dell and IBM have different takes on the server market. Here's a quick look at how the two companies differentiate themselves:

IBM: On demand

At IBM, revenue from its server business has grown over the past 11 years. During the second quarter of 2003, IBM eServer xSeries revenue rose 23% while its Unix-based server revenue increased 20%. IBM's major server brands are: pSeries (runs the Unix operating system), xSeries (Intel processor and Linux operating system), iSeries midrange servers and zSeries enterprise (mainframe) systems. The pSeries and iSeries use IBM's most advanced microprocessor, the POWER4. All pSeries servers, which can run both Linux and AIX, IBM's Unix operating system, now ship with the latest version, POWER4+.

"Our value proposition really resonates with customers," says Jeff Benck, director, eServer xSeries and BladeCenter products, IBM. "That's why we're experiencing significant market share gains."

One customer, Graybar--the electrical, telecommunications and networking products distributor--uses IBM servers (eServer pSeries and xSeries Intel-based) and storage systems to power SAP's mySAP software as part of a $90 million ERP (enterprise resource planning) system that will help better manage inventory, increase productivity and improve collaboration and supply chain efficiencies for Graybar, its customers and its suppliers.

One way IBM differentiates itself from its competition is by leveraging technology from its mainframe products to its Intel- and Unix-based server products. "This isn't just technology for technology's sake, but delivering technology in order to lower costs for our customers," says Benck. IBM has also invested heavily in systems software (IBM Director).

Server consolidation. In the economic downturn, IT buyers increasingly are purchasing high-performance servers that allow users to do more with less. Use of high-performance servers also helps reduce the number of systems companies have to manage.

Modular systems and scalability. In another effort to help reduce costs, IT buyers are attaching servers to servers. "Scalability in a modular fashion means companies don't have to purchase a refrigerator-size server to build a high-end system," says Benck.

Blade servers. IBM introduced its eServer BladeCenter Intel Xeon processors-based blade server late in 2002. In a blade server product, servers are held together is a chassis; the servers slide in like books on a shelf. Blade servers have applications in data centers and the telecom industry. "Customers have come to us and said they want to take a building-block approach to the servers they buy," says Benck. "They don't want to have to pay for everything up front."

On demand. As such, companies increasingly are installing only the capacity users need. Innovation also allows capacity of IBM Unix servers to be turned on and off (for example, to accommodate increased traffic on a Web site). Through IBM's on demand model IT buyers may choose to purchase capacity they need or they may have IBM host server capability. On demand is a model IBM uses for delivering business applications based on usage to customers. (It's similar to the way consumers purchase utility services.) Recently, LEGO has purchased servers from IBM on demand. Customers may also choose to outsource server capability to IBM Global Services.

Growth in demand for the Linux operating system. Companies are now leveraging Linux (a free, nonproprietary operating system) as a solution from mainframes to Intel-based servers for their enterprise because of its rock-solid stability and cost savings, says Benck. "Its use is moving from academia into business environments." IBM models its software offerings (middleware) in support of Linux.

Scale out. Scientific and educational users have capability to do super computing workloads with thousands of small servers (two-processor Intel servers running Unix). IBM sees this scale out capability moving into more commercial uses (petroleum and auto are two) with its pSeries and xSeries platforms.

Dell: Standards-based

Dell's server business has experienced double-digit growth year-over-year in the U.S. for the sixth consecutive quarter, according to Gartner. It's the 22nd consecutive quarter the company has had double-digit growth in its server business.

Russ Ray, senior product manager, PowerEdge Servers, Dell, attributes the company's success to its broad product line and its standards-based approach to the market.

Dell, which re-entered the server market in 1996, "has taken what used to be high-end server features and driven them down the product line," says Ray, pointing to dramatic declines in price of entry-level servers over the years from nearly $5,000 to about $500. Also, he sees a trend toward "much more leveraged R&D throughout the industry," something Dell has been able to capitalize on during the economic downturn.

Dell's PowerEdge server line consists of three product families: PowerEdge Rack Servers, PowerEdge Performance Tower Servers and PowerEdge SC Value Tower Servers.

Dell's newest server, its PowerEdge 3250 is a high-performance server designed to meet such sophisticated computing requirements as complex financial modeling and genomic research. Based on the new Intel Itanium 2 processor, the server has a compact 2U form factor and is available in 8-, 16-, 32-, 64- and 128-node cluster configurations.

The Nasdaq Stock Market recently selected Dell PowerEdge (standards-based) servers running Microsoft Windows Server 2003 to power its NASDAQ.com Web site.

Scale out. Users of servers running the Unix operating system have an option: Dell servers running Oracle 9i database software provide increased performance at lower cost. The computer company offers a server/storage platform for Oracle 9i for both Linux and Windows environments. In addition, Dell is partnering with Oracle to provide professional services to help further reduce costs and ease deployment for customers migrating from proprietary, legacy database architectures. "Extremely powerful standards-based computing is displacing a historically high-dollar proprietary environment," says Ray, pointing out that, as such, customers "will be able to accomplish the same level of computing at lower costs. The dollars they're saving go right to the bottom line."

High-performance servers. Dell's push toward Unix in high-performance computing "has been a very successful area for us," says Russ.

"Users can perform increasingly complex tasks with the same level of computing power. It's not unusual for Dell to sell a bundle of 30 servers in a high-performance cluster as customers move from Unix to Linux." Dell offers services to help customers migrate from one platform to another.