Musings on the Evolution of the Server Market

I've been doing a lot of thinking lately about trends in the server marketplace, in part based on conversations with server buyers but also as a student of history. To summarize, I think the world has decided there should be three basic types of servers:

  • High-end servers (aliases: enterprise servers, mission-critical servers, vertically scalable servers, large SMP servers, "system of record" servers, "data center in a box"). These servers are becoming more important every year as businesses and governments cope with massive amounts of data, as security needs grow, and as the consequences and costs of business process failures rise. Preeminent among these servers are IBM's zEnterprise machines, although IBM's high-end Power servers are also firmly in this category.
  • Workload-specific servers (aliases: appliances/appliance servers, application-specific servers, workload-optimized servers). These servers generally run one or a few highly related workloads that are packaged together and, at least to some degree, tweaked and tuned. They often include integrated disk and/or solid stage storage. There's a range of capabilities in this category, from the highly flexible IBM PureSystems to more closed offerings such as Oracle Exadata as examples.
  • Commodity servers (aliases: X86 servers, volume servers, horizontally scalable servers). Obviously there are lots of these servers sold every year, and some buyers, such as big Internet companies, design their own hardware to their own specifications, bypassing vendors such as HP and Dell. Vendors such as Lenovo will also put pressure on HP and Dell in particular. IBM and Cisco have been trying to differentiate themselves with unique capabilities in this crowded market segment. Intel dominates this part of the server market, although it's still an open question whether ARM and/or AMD will be able to make further inroads as CMOS microprocessor technologies reach their natural limits.

There is some blurring between these categories, notably in the small but important supercomputer market which blends characteristics of workload-specific and commodity servers.

IBM has been carrying the high-end torch for years, building the world's most impressive, capable, and innovative enterprise servers. Consequently IBM always has a target on its back — it has always been thus. After all, if you don't have anything to compete, then the only option is to try to dismiss the category entirely. Also, while one of the defining characteristics of a high-end enterprise server is its general purpose nature — the ability to run multiple disparate workloads with varying service level requirements even within one operating system image — I would expect IBM to continue improving the "consumability" of its servers. An excellent recent example is the IBM DB2 Analytics Accelerator which combines zEnterprise, DB2 for z/OS, and Netezza technologies into a single, integrated, extremely high performance information system for both transactional and business intelligence/data warehousing. It "just works." In such ways these servers are workload-optimized while still retaining the full, open flexibility that general purpose high-end servers also have.

As I've mentioned before, the server business is tough. In some ways it resembles the global commercial aircraft industry which is highly competitive but also highly concentrated with only two major manufacturers: Boeing and Airbus. In the server market it's much the same now: IBM and Intel, perhaps with Oracle lately playing the role of Bombardier or Embraer (regional aircraft manufacturers for niche roles) — an even more volatile market segment. There's a simple reason: server (and processor) research and development is extremely expensive. Both IBM and Intel have built business models that, while different, work for them. IBM's server business model is analogous to Apple's, with lots of vertical integration, high value added, revenue stability and predictability, and a broad range of in-house capabilities. Intel's is more like Microsoft's, still its closest partner as it happens.

I am expecting the server market to continue along these three basic tracks for some time to come. I'm also expecting IBM and Intel to continue leading the industry. The vast majority of businesses and governments need some of what both these companies produce.

by Timothy Sipples August 21, 2012 in Cloud Computing, Systems Technology
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