A year of appliance servers

In May last year, we reported that many vendors had begun to move into the appliance server market, listing all the usual...

In May last year, we reported that many vendors had begun to move into the appliance server market, listing all the usual suspects such as Dell, Fujitsu Siemens, IBM, Hewlett-Packard and Compaq.

Amid all the hype Martin Hingley, vice president for Emea systems at IDC, described them as "a very interesting proposition which will take away from the server market", although he stressed they were hybrid products.

He added that vendors were doing with appliance server products what VARs would have done in the past. "They're pulling the point of integration back into the value chain. But I don't think many people have sorted it out yet - they're just experimenting with it."

Which was interesting, especially bearing in mind comments by Tony John, IBM xSeries brand manager for the UK and Ireland, to MicroScope last month when he questioned the market's readiness for appliance servers.

"The hype last year was around the product, it wasn't about implementation or deployment. I don't think we've convinced everyone. We need more education, we need to sell it more. There's a lot of mileage for that," he argued.

Matthew Keep, Sun workgroup server product marketing manager, partly agrees. He says there was a lot of transition in the appliance server market last year. Until the middle of 2000, most players were "pretty small" and didn't have the marketing capital to push their brands or value propositions.

He points out that Sun acquired Cobalt Networks - which he describes as "the leader in general server appliances (outside NAS) in units and revenues" - in September last year (paying $2bn (£1.4bn) for the privilege). "It's only now that the big boys have got involved that people are starting to notice," he argues, quoting research which suggests unit sales in Western Europe will grow from 56,000 last year to 351,000 in 2004 with a value of just under $3bn.

A very different story
He describes it as still a "very nascent market" and argues selling an appliance server is a very different proposition from a traditional server sale. "From the reseller perspective, many sales guys are used to speaking speed, processor and memory. Appliances are totally different because they don't involve the hardware specification. It's the application, what network services you want to deliver, defining the feature set, the performance level and then, beneath that, you bolt on the hardware."

Although Cobalt is based on AMD processors and runs Linux - which puts it at variance with Sun's historically singular approach to the server market based on its own Sparc processor technology and Solaris operating system - Keep argues the underlying hardware architecture and operating system don't make any difference to appliance servers.

"You use whichever technology is best suited to the application. The hardware platform is completely discretionary. We've not said to the Cobalt engineers 'you must go to Sparc'."

Ask him who he perceives as the major players in this market and he names his own company, as well as Dell, Compaq and Hewlett-Packard. Then there are the smaller specialists, such as F5 and Cacheflow. But Keep believes consolidation in the market will continue, warning that the big players in appliances will be those which are already strong in the general purpose server market.

One company which may not be in agreement with Sun or IBM over appliance servers is HP. At least, it's not what you'd expect from a vendor which has just announced "one of the broadest ranges of server appliances in the industry designed to meet the needs of service providers and enterprise customers".

Last month, the vendor unveiled 18 HP-branded products - the distinction is important because a number of the products are Intel's NetStructure appliance server line, which HP struck an OEM deal to sell in December last year. The products cover a number of areas, including caching, Web hosting, network and traffic management.

All part of a cunning plan?
Intel was forced into a rethink of its NetStructure server appliance strategy because it was in danger of competing against its traditional server processor customers like Compaq, Dell and IBM.

To avoid the charge of conflict, it decided to adopt an OEM approach instead. Following the announcement of its change in strategy, John Humphreys, an analyst in IDC's Commercial Systems and Servers research programme said. Intel would be able to exploit one "of the broadest product lines of Internet infrastructure hardware while taking a role as a developer and manufacturer of appliance technologies".

In a press release issued in December, Humphreys argued Intel may have been planning to make the switch all along after increasing industry awareness of the appliance market to increase adoption.

"Intel's direct customer sales approach in the appliance market was short and sweet," he said. "Its direct participation in the market focused attention on the space and brought about a lot more competition which, in turn, has put pressure on server and networking companies to bring additional appliance products to market. This strategy to bring attention to this market was almost certainly always in Intel's plan." If so, it worked.

Just how important Intel's products are to HP was demonstrated by the presence of Richard Lissenden, European marketing manager for Intel's communications products group, in the press release accompanying the announcement." Under this agreement, HP's extensive NetServer offering will be complemented by Intel's NetStructure technology to deliver one of the broadest server appliance offerings in Europe," he said.

Alberto Bozzo, operations manager for HP's NetServer business in Europe, was also bullish: "This new server appliance offering complements a series of partnerships with best-in-class vendors equally committed towards the service provider sector in Europe," he declared.

Billy MacInnes

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