How Intel’s datacentre strategy is helping it retain market dominance

Intel’s tactic of binding together software-defined infrastructure, cloud and HPC components in its datacentre strategy could keep it ahead

Intel’s practice of binding together software-defined infrastructure, cloud and high-performance computing (HPC) components while devising its datacentre server strategy, as well as its Cloudera investment, could help it maintain its competitive advantage, say analysts ahead of the chipmaker’s launch of new server products next month.

At the IFA conference, Intel will reveal new products and plans to usher in a new era of computing devices using its latest technology. 

“Intel has his eyes right on the ball,” said David Kanter, analyst at the Linley Group. “It has a very, very deep understanding of the datacentre market and it is innovating in the area to maintain its competitive edge.

“Intel is pushing the definition of server by thinking about software-defined networking and storage while designing processors.” 

Kanter said this holistic approach will pay off when Intel is fighting competition from microprocessor suppliers such as Arm.

“It lost sight of the market a bit around 2006-2007 and lost a lot of market share, but it is back in action by thinking about software-defined storage and big data,” he added.

In its Q2 2014 earnings statement, Intel reported 19% annual growth in its datacentre business group to $3.5bn. Its platform volumes were up 9% and its cloud, networking, HPC and enterprise revenue all grew more than 15% in the second quarter.

“Our second-quarter results showed the strength of our strategy to extend the reach of Intel technology from the datacentre to the internet of things,” said Intel chief executive Brian Krzanich. “With the ramp of our Baytrail SoC family, we have expanded into new segments, such as Chrome-based systems, and we are on track to meet our 40 million unit tablet goal. In addition, we hit an important qualification milestone for our upcoming 14nm Broadwell product, and expect the first systems to be on shelves during the holidays.”

Datacentre growth

The chipmaker estimates that its datacentre business will grow by 10% in this year alone. Its datacentre group delivers platforms designed for the server, workstation, networking and storage computing market segments.

Some 20% of Intel’s total revenue comes from its servers, so growth in this segment remains important for the company. Its server processors are based on the x86 architecture, which accounts for more than 90% of the market.

“Intel currently dominates the datacentre market by a vast margin,” said Nebojsa Novakovic, HPC architect at Singapore's Computational Resource Centre. “In that space, it does not face any competition from Arm, which more serves the mobile and tablet device market.”

But Novakovic added: “Intel needs to do more. A lot of its success is down to the lack of innovation from its competitors.

“It now needs to invest not just in new chip design, but in the whole datacentre ecosystem.”

Intel took a step in this direction earlier this year when it invested $740m in the startup Cloudera, which provides enterprises with Hadoop software – the open-source software system – to manage big data challenges. This gave Intel an 18% stake in Cloudera and was the single largest datacentre technology investment in its history. 

Intel’s previous datacentre investment was in 2007, when it invested $218m to acquire a 2.5% stake in virtualisation provider VMware.

The Cloudera deal means Intel can marry its datacentre architecture, based on Xeon technology, with Cloudera’s enterprise analytic data management software, powered by Hadoop.

Big data analytics

“By aligning the Cloudera and Intel roadmaps, we are creating the platform of choice for big data analytics,” said Diane Bryant, senior vice-president and general manager of Intel's Datacentre Group. “We expect to accelerate industry adoption of the Hadoop data platform and enable companies to mine their data for insights that inform the business. This collaboration spans our datacentre technology from compute to network, security and storage, and extends to our initiatives for the internet of things.”

Experts say more enterprises jumping onto the big data analysis bandwagon will be good news for Intel because it will bring more high-end server processor sales.

IDC has forecast that the big data market will grow by 27% in the next five years to $32bn, expanding about six times faster than the total IT market. “Think about it: Intel will be able to push more processors as part of the deal,” said Patrick Kennedy, advisory director at PWC. “But it is a lot of money and we will have to see how that plays out.”

Cloudera is one of the main players in the enterprise Hadoop area, which is gaining momentum. “There are other equally good players, such as Hortonworks and Pivotal,” Kennedy added.

Novakovic agrees that Intel has bet a lot of money on Cloudera. “It is technically a fantastic investment which can push Intel’s hardware sales, but how financially sound it is, we will have to see,” he said.

“When a hardware investment goes wrong, you still have something tangible, but it’s very tricky when it comes to investing in a software or cloud company.”

Number one position

Gartner’s worldwide semiconductor industry research has put Intel in the number one position for the 22nd year in a row.

But Intel needs to remain committed to binding its software-defined infrastructure elements, as well as cloud and HPC components, into its datacentre strategy to retain its lead, experts said. “It needs to keep its efforts up as competition heats up,” said Kennedy. “Imagine if HP went mainstream with large-scale production of memristor – that would completely change the market dynamics.”

A Memristor is a type of resistor in which the flow of electrical current in an electronic circuit is determined by the amount of charge that has previously flowed through it. In 2008, scientists at HP Labs built the first working memristor.

Kennedy added: “Intel is making progress in the datacentre segment, but a majority of its innovation and success will come from its work in the internet of things area.” 

According to Gartner, Intel is making a concerted effort to participate meaningfully in IoT. “Intel's IOT Group draws on its resources in embedded software, security and services to ensure that its effort bears fruit,” the analyst firm said.

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