For years the x86 server market has been the reliable cash cow of the reseller business. Over a three-year cycle most resellers could bank on their clients replacing one set of working servers with a brand new set, driven by the need to run the latest software or hardware.
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With virtualisation technology, clients are taking a long, hard look at their server base and questioning why they need to buy one server to run one application - as is typical - and why their servers run at no more than 15% of their full capacity, devouring electricity 365 days a year.
Virtualisation technology allows clients to run several virtual servers on one physical server. It is a development of the physical disc partitioning that is a mainstay of mainframe operations, and for high-end Unix and Solaris boxes. The newest versions of virtualisation, and reductions in price, mean it is likely to move out of the enterprise data center, where it is widely used in server consolidation, into the infrastructure and virtual desktop market.
IDC reported in August that x86-based servers had "experienced their slowest growth in 23 quarters", growing just 3% year on year to $7bn worldwide. It found that average selling values for servers had fallen 8.4% over the year.
"We are seeing that medium to large servers are still popular, and are not aware of any decline in the smaller servers - server sales overall are still popular," says Matthew Gower, vice-president of UK and Nordic sales at distributor Avnet Technology Solutions.
Phil McLean, industry standard servers business development manager at Hewlett-Packard, says the UK market for x86 servers grew by 15%, and HP x86 sales grew by 25% year on year.
"The market is still pretty buoyant. Customers still have the refresh cycle they need to work to. It often makes more sense to purchase a new server than try to buy additional warranty for existing systems," he says.
McLean concedes that many of his large business customers are looking at virtualisation, while pointing out that, in the Unix market, virtualisation is hardly new.
HP recently launched its BL495c BladeServer, a dual AMD processor server with two solid-state drives that can be fitted with 128GB of memory. The server, says McLean, is the first one HP made specifically for the virtualisation market. Its base price is £2,000 without the memory. The server uses less electricity and generates less heat - two features much in demand for new virtualisation projects.
Virtualisation took off in the server market after the dramatic stock market debut of US software company VMware last year. The company championed virtualisation technology for the x86 server base with its ESX product set.
Part-owned by EMC, VMware rode high on a market for virtualisation expected to double from $5.5bn to $12bn by 2011. The company controls 85% of the market for virtualisation software, and until July this year appeared to be unstoppable.
But less than 12 months after its stock market debut, VMware's board removed its founder and chief executive Diane Greene, and stated that it was unlikely to achieve the 50% sales growth forecast it had previously given.
The sales forecast was cut because VMware is facing heavyweight competition for the first time. A central part of virtualisation technology is the hypervisor, software that allows controlled access to the host servers' memory and processors. VMware's hypervisor has been extremely successful, but Microsoft, HP, Sun, IBM, Oracle and Novell have announced their own hypervisor technologies and will give them away as free downloads. Several of the new hyperÂvisor products are based on open source technology.
"In November last year we set a guideline price for our HyperV product of $28, but we saw the market commoditising hypervisor technology very quickly," says Microsoft's Neil Sanderson, head of virtualisation at Microsoft, justifying the company's decision to offer its HyperV product as a free download. "We think there are substantial opportunities in virtualisation and we have partners who are very excited by the opportunity. Some estimates suggest that 10% to 12% of new servers will be virtualised," he says.
As well as announcing new virtualisation products, Microsoft has relaxed the licensing provision on its server software. "You can move the licences between key server applications like Exchange and Sharepoint on physical servers as much as you like. We used to say you could move a virtual machine to a server and be licensed, but you could not move it back for 90 days," says Sanderson.
Citrix is a second strong potential competitor for VMware. It is co-operating with Microsoft on joint virtualisation opportunities, and is marketing XenServer, a virtualisation product it bought after acquiring the XenSource business for $500m.
"Companies that virtualise with XenServer are able to make use of larger, more powerful dual socket servers, which have a total of eight processor cores and 16Mb RAM. A single 32bit workload can only effectively address 4Mb RAM. However, by virtualising, a customer can use all processor cores and available memory and so will only need around 25% of the physical servers they needed in the past," says Roger Baskerville, Citrix's regional director for server virtualisation in the UK, Ireland and South Africa.
"For many years the lack of platform choice has resulted in price points that only larger corporations could justify. XenServer is typically a third of that price point, and, as such, is resulting in speedy XenServer adoption with a full-featured solution. This in turn means more enterprise and SME customers are virtualising as a matter or course," he adds.
Sun Microsystems' services marketing manager Laurence James announced its XVM virtual server management console at the beginning of the year. It has seen 6.5 million downloads of Virtual Box, a program that allows a laptop user to run Windows XP, Vista, Windows 98 and DOS on the same machine. James agrees that there is a slowdown in the x86 market, and virtualisation is high on customers' agendas.
"Customers are stepping back and asking how to virtualise. I have seen customers take 100 workloads, put them on one platform, and find it does not work, because they have not done any analysis," he says. "It needs skills we have lost in the industry: the capacity planner and the performance management analyst."
Peter Stroud, managing director of London-based Panacea Services, cut his teeth in the computing industry on an IBM 4341 mainframe in the 1980s. The disk partitioning and analysis skills he learnt then have come back into their own, he says.
"You had a screen with six or seven different partitions that ran six or seven different programs. If one crashed it did not affect the others at all," he recalls.
A typical Panacea financial client is used to running 300 physical servers, but is no longer interested in replacing them, says Stroud. Instead, they want to cut the number of physical servers as quickly as possible, driven by the cost and shortage of electricity, and the expense of renting server rack space. Stroud says it is common to replace physical servers on a 10 to one basis. Three hundred physical servers are cut to 30. Virtual machines are put in their place.
Many of Panacea's services use VMware, but Stroud says he will give serious consideration to the new competitors entering the market.
Still the market leader?
VMware's Lewis Gee, vice-president of northern EMEA, is unworried by the threat of new competition. The company's new chief executive is Paul Maritz, a former senior Microsoft executive, who, says Gee, is well used to overseeing the expansion of large businesses.
"We are focused heavily on virtualisation technology - that is what we do. We still believe we are two to three years ahead of our competitors from a technology perspective. Our hypervisor product is also free - in fact, Microsoft followed us," says Gee.
The company will continue to make money on the back of the virtual management technology it sells, especially one element of it called VMotion, which allows live server applications to be swapped between virtual machines with no downtime, according to Gee.
Craig Pennington, vice-president of operations at NTT Europe Online, a managed hosting company, says VMware has protected its market through slick programming.
"VMware's ESI Server 3i weighs in at a featherweight 32MB. Microsoft's Hyper V will come in at around 1.5GB," he says. "Small means more reliable, less vulnerable and easier to embed in physical hardware, something that Dell, HP and IBM had already promised for 3i in 2009."
Pennington is used to consolidating servers for customers, who want to buy fewer, more powerful machines. "There is definitely an advantage in having fewer physical devices and since virtualisation is memory hungry, you need servers that carry a lot of RAM. Purchasing servers with four or more multicore processors, and upwards of 16GB of RAM will be fairly normal if your goal is to consolidate the number of older physical servers you have," he adds.
South Gloucestershire Council is a typical VMware customer. Senior IT officer Kevin Howell says that, when he was looking at virtualisation, VMware was practically the only company on its shortlist. Now he has the software underpinning his two datacentres, there is little reason to consider changing it.
The council continues to buy new servers, but at a hugely reduced rate. "We were adding between 12 and 20 new servers every year, but we are not doing that any more," he says. "We are putting between eight and 10 processes on one server. Applications that have a lot of processing power are, however, kept to one physical server at the moment, and we don't virtualise them."
Unlike others who say virtualisation means customers no longer care about the hardware they buy, Howell says HP BladeServers are a key part of the virtualisation project, since the council was under a central government obligation to cut its carbon footprint. HP BladeServers were chosen because they have no individual fans but are cooled instead by fans mounted inside a BladeEnclosure. The fans and power supplies for the BladeServers are monitored automatically, and will vary their demand for electricity according to server load.
Management and control
If there is a downside to virtualisation, it lies in one of the technology's greatest strengths. Virtual servers can be built in minutes. The IT department of one City institution bought VMware, for example, and cut 60 physical servers to six. It cut the tape units required to back up the new servers from 30 to three. But in only 18 months the department had created 200 virtual servers, and was backing up two to three times as much information as it needed to. Overall system performance had slowed down and the system was crashing.
"It took us six weeks at £900 a day to sort out processes, get rid of all the duplication and start again. We had to forbid entry to the datacentre," says Panacea's Stroud, who fixed the problem and restored the financial systems to good working order. "If you don't have mainframe type disciplines, you will find IT departments can be very creative. You can easily create a monster," he says.
Virtual server sprawl is a real challenge, agrees Jason Jackson, channel manager at virtualisation consultancy PlateSpin, a company recently acquired by Novell.
"One of the dangers is that you will create another environment and will need another set of management systems to manage that environment. What happens if you have multiple hypervisors? How many systems do you want to manage your new virtual environment?" he asks.
In a recent customer survey, Jackson says that 60% of his customers said they anticipated running multiple hypervisors across their varied servers. Multiple hypervisors aren't in themselves a problem, says Jackson, provided they are managed and planned for correctly.
The planning and management of the new virtual world for servers is resellers' greatest opportunity. But many would prefer to rely on the replenishment purchase order, the delivery, the installation, the two-day build process for traditional physical servers. It has provided a good living historically, but customers won't live with the expense and the electricity bills for very much longer.