IBM and Compaq have each unveiled servers that have been designed to attract market share from Dell. Both IBM and Compaq share the same strategy of attacking Dell's perceived lack of ability to deliver software and services on top of inexpensive hardware.
Dell popularity in the SME sector, however, means that it is capable of adopting a price-cutting strategy through its direct, build-to-order sales model.
Compaq yesterday made the SME server market a three-way fight with the introduction of a new line of ProLiant ML300 Series servers, the ML330, ML350, and ML370. Paul Miller, the director of marketing for mainstream servers at Compaq, said the company was enlisting channel partners such as the PC Connection Sales Corporation to deliver a wide range of IT service offerings and customer support with the servers.
According to Miller, the $1,199 (£826) cost of Compaq's ML300 series servers running 800MHz Intel Pentium III processors could not be matched by an equivalent Dell offering.
"SMEs do not have the dedicated IT staff. They need a partner to help them understand IT," said Miller.
"Because of the strength we have in the channel, we can deliver both the products and the services," Miller said. "Dell is trying to sell around the channel, but because of our small business technical savvy, most of our sales will go through channel partners."
IBM fired the first volley at Dell in the SME server market last week with the introduction of its 850MHz Intel Celeron IBM eServer x200VL, which is priced at $699.
IBM sources said the new eServer x200VL is targeted at Dell's PowerEdge 500SC, an SME server which was reduced by $50 to $649 last week.
With the eServer x200VL, IBM, like Compaq, is offering service and support above what it believes Dell can offer, said Jim Gargan, the vice-president of IBM's eServer xSeries servers.
Self-managing features from IBM's Project eLiza initiative, including software rejuvenation, predictive failure analysis and IBM ServerGuide, are each bundled within the new IBM eServer x200VL.
"What we are doing with the x200VL is clearly establishing an entrance in the small business market," added Gargan. "We're providing world-class solutions for small business budgets.
"We are clearly communicating that we can meet Dell prices, but they cannot meet our value."