After shrinking by 4 percent last year, the server market stabilised in H1 2002 to the extent that a contraction in the Intel space was offset by modest growth in the UNIX segment. On the technology front, IBM and HP rolled out dual processor blades. With Big Blue releasing the 16-way x440, Intel boxes continued their charge up the performance ladder, says Prashant L Rao

It has been a tough year so far for server vendors. That said, while things haven’t improved, they certainly haven’t worsened from last year, which saw a dismal showing in servers. In fact, many vendors believe that good tidings wait around the corner, with Acer going as far as to predict a boom in 2003.

But the more things change the more they stay the same. In the Indian server market, the leaders stayed the same: Sun in UNIX and HP in Intel though IBM mounted a very strong assault in the Intel space. The January-September period has seen the market in a slump, with modest growth in the UNIX space being offset by shrinkage in the Intel segment. H2 remains a toss-up. IDC is predicting modest growth; HP is sceptical, while IBM and Acer are optimistic.

Blades are starting to pick up as the technology has been accepted, says Vaibhav Phadnis

The Unix players

Sun: Top of the heap
Sun Microsystems continues to dominate the UNIX server market in India. The company managed to increase its market share from 37.8 percent in the first three-quarters of 2001 to 51.7 percent in 2002.

• Strengths: Sun is building up on its traditional backbone of SPARC-Solaris. The company released Solaris 9 this year. It is pushing the UltraSPARC III to 1200 MHz shortly. The upcoming UltraSPARC IV will bring Sun on par with IBM in processor technology—it will support two processors on a single chip. The company’s mid-range offerings include the 3800, 4800 and 6800 servers. Top-of-the-line are the Sun Fire 12K and 15K. Last year, a couple of 15Ks had been installed two weeks after the India launch. Today, there are 10 Sun Fire 15Ks in the country, each costing between $1 million and $15 million. “We sold eight Sun Fire 15Ks and one 12K this year,” says K P Unnikrishnan, country head, marketing, Sun Microsystems India. Last year saw the company come out with a coherent Linux strategy. Sun Linux and the LX50 are Sun’s first steps towards having a credible entry-level offering that can compete with Wintel on price-performance.
• Weaknesses: Though Sun took the first steps towards competing in the Standard Intel Architecture Servers (SIAS) space, it still has miles to go in this endeavour. Starting Q1 2003, Sun will push the LX50 as a ‘solution in a box’. In blades, Sun trails HP and IBM; while both of its competitors have blades for sale, Sun has yet to announce a launch date.
• Opportunities: Now that it has a Linux distribution and a good entry-level Lintel box, Sun can come out with a slew of such offerings and make a dent in the SIAS segment. Sun CEO Scott McNealy’s visit to India should help the company galvanise support around its Sun ONE platform, which in turn should help it drive ‘solution’ sales.
• Threats: As we said last year, Wintel servers are getting more powerful. Just how powerful can be seen by IBM’s launch of a 16-way Intel box that takes on Sun’s lower-end SPARC servers. Sun needs to be quick in beefing up its entry-level UNIX boxes and keeping them competitively priced vis-à-vis top-of-the-line Intel servers.

HP:Destination Itanium
No other vendor has quite the number of server lines that HP has in the UNIX space: PA-RISC, Alpha, NonStop, Itanium; the combined product range of HP and Compaq is extensive. HP’s long-term goal is to shift to Itanium, but as that processor is not yet ready for prime-time the company is continuing with existing lines in the medium-term. HP’s share of the UNIX server market for the first three quarters dropped to 30.5 percent in YTD 2002 from 38.2 percent in YTD 2001.

• Strengths: HP has a wide product line starting with entry-level blades and scaling up to the Superdome. Its long-term plans are clear: it will migrate to Itanium.
• Weaknesses: Too much choice. HP has more technology/product lines than any other major vendor. True, IBM has four server lines, but only one of them is in the UNIX space, the pSeries. HP has three of them powered by the PA-RISC, Alpha and Itanium 2.
• Opportunities: HP is the only vendor betting the shop on Itanium. If that chip takes off in 2003-04, HP’s fortunes will soar.
• Threats: Existing product lines have had their lifecycles expanded. It’s still unclear when the shift to Itanium will take place. Sun is taking advantage of the confusion to build on its dominant position.

IBM: SMEs in its sights
Globally, it has been a good year for IBM. The company is the world leader in the server market for third quarter of 2002 as per IDC. In India however IBM is yet to replicate that success in the UNIX space. As the year ends, IBM is getting aggressive about taking on Sun and HP with a bunch of new pSeries servers aimed at the SME segment. IBM is targeting the 100-user SAP or Oracle environments with its 630 and p610 servers. The p630 starts at Rs 20 lakh. “The p630 is capable of running an entire company’s applications with 2 or 4 CPUs,” says Puneet Gupta, country manager, pSeries, IBM India. In addition to the p630 server CDAC deal, IBM has sold the p630 to 10 other customers. Surjit Chana, vice-president, marketing operations, server group, IBM, says, “We will do whatever it takes to be number one in the Indian UNIX market in 2003.”

• Strengths: Technology is IBM’s biggest ace. Here it has a generation lead on Sun with the Power 4 chip offering two processors on a chip. Sun is still talking about this for the upcoming UltraSPARC IV. In ERP implementations, IBM claims to have the majority of the market with installations at Tisco, Bajaj Auto and Hero Honda. Recently the company won a big order from CDAC to set up a Linux cluster across 62 p630 servers.
• Weaknesses: In the past, IBM has perhaps not been as aggressive in marketing its UNIX boxes as its rivals. That appears to be changing now with the company gunning for Sun and HP.
• Opportunities: If IBM can make its mid-market strategy work and sell its p630 and 650 servers in big numbers to this segment, it will help the company give HP a run for the runner-up slot.
• Threats: Sun is catching up in technology. Once the UltraSPARC IV is out, IBM’s processor advantage will be lost.

IBM’s share of the market is rising. In Q3, for the first time, IBM beat HP in revenues and unit shipments, claims Jyothi Satyanathan

The Intel players

HP:The winner
HP took the crown that was held by Compaq last year with a 37.2 percent share of the SIAS server segment in 2002.

• Strengths: In keeping with its tradition of being the first off the mark in adopting new technology, HP was the first vendor to launch a Gallatin-based server, the ML570 G2. HP was also the first vendor to launch blades in India. Globally, HP leads in blades (53.9 percent), SIAS (32.2 percent) and its lead extends to 2-way (34.3 percent), 4-way (40.8 percent) and 8-way servers (45.8 percent). In the Linux-Intel segment HP has 28.7(percent) share by units world-wide.
• Weaknesses: Of late the company has been second in a couple of announcements, notably the first Xeon blade and the first 16-way Intel server. The company is working on a 16-way server powered by Intel’s 64-bit Madison that is expected by end-2003 and will run on both the UNIX and Windows platforms. That puts HP in a catch-up position. It needs to get back the mantle of being in the lead in announcing new technology on the Intel platform.
• Opportunities: The Proliant is perhaps the strongest server brand around. HP is leveraging that to the hilt with its performance parameter slot occupied by Proliant models. HP will target a larger number of resellers than it has in the past through the Proliant Gold Partner programme. The other push is on blades; if HP hits the bulls-eye with this one, it will have only IBM to contend with. “Blades are starting to pick up, the technology has been accepted,” says Vaibhav Phadnis, business manager, industry standard servers, HP India. HP has started shipping 2P blades and is in the process of conducting a feasibility study for one of India’s largest banks to find out where blades can have the maximum impact, in server consolidation (2P) or in Web farms (1P). Solutions for server consolidation built around VMware will be another focus area. HP is targeting a 30 percent growth quarter-on-quarter in the Intel space.
• Threats: Last year we had conjectured that Dell would perhaps be the most likely contender for Compaq’s crown. In the end it was Big Blue that gave HP a run for its money in the Intel space. While HP leads in the SIAS segment, its share is down by 11 percent while IBM’s is up by 6 percent. Worse (from HP’s point of view), IBM has beaten HP to the punch in launching a 16-way Intel server. HP’s own 16-way box will debut by end-2003 giving IBM a year’s lead at the top of the Intel space.

IBM: eXtraordinary
For a company that has four server lines, three of which have nothing to do with Intel, IBM was the wildcard entry. It executed brilliantly to come out with dual-processor Xeon blades and the first 16-way Intel server, the x440, with technology from IBM Labs. “IBM’s share of the market is rising. In Q3, for the first time, we beat HP in revenues and unit shipments,” says Jyothi Satyanathan, country manager, xSeries & Intellistations, IBM India.

• Strengths: IBM drew on technology from its mainframe business to offer features like logical partitioning using VMware to offer multiple OSs on a single Intel box. Its 16-way x440 can run as many as 128 OSs. “The x440 is hurting Sun at the entry level by taking on jobs considered UNIX only,” adds Satyanathan. In blades, IBM was second to market but it made up for that by being the first in launching Xeon blades.
• Weaknesses: Right now IBM is very focused on the Intel market, and it is hard to pinpoint a flaw in the company’s Intel strategy. In the past it was slow to adopt the latest technology in this space, but that’s no longer true.
• Opportunities: If IBM can keep pushing up the performance ladder with boxes that deliver entry to mid-range UNIX-class performance on Intel hardware, it could start cannibalising Sun’s market and expand the Intel market upwards. The company is not resting on its laurels; it plans to set up technology centres in Mumbai and Bangalore that will also be marketing and demo centres where customers can bring their applications, test them on IBM hardware, and then make a purchase decision.
• Threats: HP has aggressive plans for the Intel market. Now that the Compaq-HP merger has been executed, expect the company to work on regaining lost ground in 2003.

Acer: Anticipating recovery
Acer had a good year. In a shrinking market it managed to repeat last year’s performance and grow its market share.

• Strengths: Last year the company made a transition to Tualatin. This year it shifted to Xeon processors for all dual processor and higher servers. The company is marketing storage solutions to supplement its four-way box deals as it has found that customers buying four-way look for a cluster plus a DAS/SAN solution. “SAN was a factor in 10 percent of our deals, significantly up from last year,” says Sam Oommen Thomas, senior product marketing manager, Acer India. The company has started looking at EOUs, corporates and the BFSI segment. While Acer has traditionally sold desktops and notebooks to software houses, it is just starting to pitch servers to this segment. The company also launched a 2U Xeon rack server aimed at the ISP/ASP market. It plans to come out with more models in the rack space.
• Weaknesses: Acer does not have any products at the very high-end and it lacks an 8-way box.
• Opportunities: In the next 6-12 months the focus will be on pushing storage to existing clients as well as new customers. Storage will be big business in 2003. “Lots of organisations have a critical mass of servers and they are looking at more sophisticated storage offerings. Storage is also an important part of CRM,” says Thomas.
• Threats: As the SIAS market moves up the performance ladder, Acer will be left behind unless it addresses its lack of high-end servers.

At the end of the tunnel
Going forward, the Intel space will see intense competition between HP and IBM. In the UNIX space, Sun will have its work cut out if it wants to replicate its smashing performance of 2002. Technology waits for no vendor, Intel machines get better every year, and who knows, 2003 might well see Itanium finally entering the mainstream.