Cover Story

Server vendors go after upcountry markets

IBM, HP and Sun Microsystems have fast expanded their SME reach in upcountry markets and established a local presence. These new markets have helped server vendors garner additional revenues, both x86 and Unix, as well as helped expand the server market says Akhtar Pasha.

We briefly touched upon a small development that was taking place in the server market in our March 2007 anniversary issue. At that time we had predicted that server vendors would slowly expand to smaller upcountry markets that would help the server market expand further end by 2007. This has come to pass.

Expanding footprint

A year back HP had a presence in only eight upcountry towns. Looking at the opportunity and growth it has increased its presence to 20 upcountry towns such as Indore, Lucknow, Chandigarh, Jaipur, Jamshedpur, Guwahati, Nagpur, Aurangabad, Surat, Baroda, Rajkot, Kottayam, Calicut, Jalgaon, Coimbatore and many more and had many successes in both x86 and Unix. HP plans to add another five small towns by November 2008. Likewise IBM has expanded its presence into 13 upcountry towns such as Jaipur, Jallandhar, Indore, Surat, Coimbatore, Nasik, Nagpur, Cochin, Vizag and others. Sun Microsystems has also expanded its marketing into 17 smaller towns such as Coimbatore, Guwahati, Dehradunall predominantly x86 markets.

Ashok Pamidi, Director for Commercial Accounts, SMB & Enterprise Partners, TSG, HP India Sales Pvt Ltd said, “We saw solid growth in these 20 upcountry towns during Q3 and Q4 of CY 2007. In these two quarters we sold more than a thousand units. In effect we have sold about 2.4 servers per customer in these upcountry markets.” About 70% of the servers sold by HP were for ERP deployments while the remainder went into infrastructure, databases and mail servers. Pamidi added, “Investments in these upcountry towns are reflected in our server growth.” Interestingly about 20% of HP’s total server revenues came from these upcountry towns of which 90% came from x86 server sales. Some of HP’s upcountry customers are Anshupati Textiles (Vardhman Group Segment), Shegaon Sansthan (Trust), PSNA College (Education), Dainik Bhaskar (Media), JMT Auto (Auto Components) and Prism Cements (Process Manufacturing).

Kamal Dutta, Country Manager, Business Critical Servers, TSG, Hewlett Packard India Sales Pvt Ltd., said, “Until last year we did not have an entry-level Unix server product and the bulk of our server business was from major verticals such as telecom, BFSI and manufacturing. Two major things have worked for HP in these upcountry markets. Since Sun Microsystems is the leader in the volume segment of the Unix market we were finding it difficult to sell our products that were priced upwards of Rs 10 lakhs. But with the introduction of the HP Integrity rx2660 we have broken the entry price barrier for Unix server market and made the technology affordable with prices ranging from Rs 4 to 5 lakhs.” He added, “Of the 950 units of Unix servers sold by us in FY 2007 (accounted till November), 140 units came from rural areas (upcountry) and most of these were riding with SAP ERP deals.” Rajesh Dhar, Country Manager, Industry Standard Servers, HP India said, “A lot of government departments are getting into rate contracts in these upcountry markets which is good for the server industry as it will help the server market to expand further.”

Jyothi Satyanathan, Vice President, pSeries, IBM India & South Asia said, “In upcountry markets, we are seeing manufacturing ‘re-emerging’ and the server market is riding on the ERP bundles that we are doing be it with x86 or Unix servers. Additionally growth in upcountry markets is driven by manufacturing and education. The momentum is there and we are seeing more conversion of accounts in these smaller upcountry markets.” Ajay Mittal, Business Unit Executive Systems x, India & South Asia, IBM India Pvt Ltd added, “For us the market is not that big and currently less than 10% of the total server sales are coming from these upcountry areas. But these markets are signs of maturity in the market.”

Between June and July 2006, Sun Microsystems was building a strategic regional partner model to get into upcountry markets and the results are visible. KP Unnikrishnan, Director, Marketing, Alliances & Teleweb Sales, Sun Microsystems India Pvt Ltd., said, “We have seen some aggressive sales and have added 70 new customers in the July to September 2007 period and the deals have predominantly come from small regions. Additionally we have got into SAP deals, which were not there earlier, with the expansion of our product portfolio especially Niagara systems. We have introduced servers at various price points from workstations starting at sub-40K price points, and UltraSPARC servers are available at sub Rs 2 lakhs.

“IT awareness has ramped up dramatically in these small town; they understand that IT is an enabler.” Some of the Sun deals that came from upcountry market are Espire Infolabs, Altair Engineering India Pvt Ltd, Sopra Group, ArvinMeritor, Dow Corning, Sri Narayana Gurukulam College of engineering and Victor Gaskets.

Local support

There are a couple of key drivers that are helping server vendors to expand their markets in upcountry areas. Pamidi said, “The upcountry market has given us access to a completely new set of customers. Additionally we have formed strategic alliance with ISVs in smaller pockets. Since ERP solutions are getting verticalized, it is important for us to form an alliance with ISVs to cater to these small markets.” HP has an alliance with WRENCH for PLM/CAD/CAM/CAE customers, with InfraSoft to address co-operative banks and with SAP and Oracle for ERP. It has added Redington and Ingram Micro who have a footprint in upcountry markets. Pamidi said, “These upcountry customers are looking for local support as they are expanding their business globally and domestically and therefore it makes sense to have local offices for support.” This year HP has done 50 odd road shows with SAP in upcountry markets. Dutta said, “Even smaller companies in upcountry markets believe that they need solid infrastructure for their business and are investing in business technology solutions that they can trust. Though x86 servers have a better price-performance ratio we are seeing a trend wherein they prefer to use Unix servers for their business applications. During January 2008 we are planning to bring virtualization into rx2660 servers that can help small businesses virtualize their servers using HP-UX11i,” he added.

Mittal said, “Some large businesses are also expanding in small pockets and need to be supported.”

Tailormade solutions

Vendors are partnering with specialized partners to go to market and road shows to develop upcountry server markets. Some top deals captured by IBM were enabled by bundling servers with ERP packages. For example IBM was working with ISVs such as Caritor and OBT to bundle IBM p5 505 servers with a one year SAP license for maintenance and support on the Windows platform. The prices started from Rs 50 lakhs for a 30-user license depending upon the configuration. Other packages that contributed to IBM’s server sales in upcountry market were for a bundle of an Oracle 10g five user license with an IBM p5 505 server (1-way) running AIX/Linux (RHEL 4) priced at upwards of Rs 2.95 lakhs (excluding taxes) with three year hardware maintenance. SEAL Infotech catering to the retail segment helped bundle a SAP retail solution and it has clients that include Shree Krishna Collection, Cotton Country, Vasanth & Co, D-Mart and the like. IBM is also planning to introduced Blade Center ‘S’ wherein small business can start off with two or three blades with a starting price of Rs 3 lakhs going up to Rs 10 lakhs for five-six servers in a single chassis.

For HP most Unix server deals came from the HP Integrity rx2660 entry-level server. Dutta said, “The rx2660 entry-class server handles robust application tier workloads and is versatile enough for porting, application testing and development. Additionally, the rx2660 is cost-effective for small deployments, offering business-critical computing and HP-UX strengths. It is a new 2-socket (2 processor/4 core) server based on the HP-developed zx2 chipset and the dual-core Montecito (Dual Core Intel Itanium2) processor from Intel. It has a new look, feel and architecture, which gives customers significantly expanded computing capabilities such as a large memory footprint and supports three OSs namely Windows, Unix and Linux and is priced at between Rs 4 to 5 lakhs.” Additionally HP is enabling Tick Mark Ordering Systems wherein there is no need to configure servers. One needs to give us the number of SAP users required and the servers gets configured automatically, said Dutta. HP has also recently launched the HP Integrity blade BL860c, the Integrity line’s smallest form factor to date and the industry’s best dual-core Intel Itanium blade server, which is targeted at small customers in upcountry markets. Dutta added, “These upcountry markets partners play an important role. They can add value on the top of the servers-such as installations and maintenance for three years with 24X7 warranty support.”

Sun Microsystems’ alliance with Intel will see the writing of a new chapter in its efforts to woo the x86 server market. Sun has introduced Quad-Core Intel Xeon processors in its Sun Fire X4450 and X4150 servers. It will give customers a choice of OS between Solaris, Windows or Linux.

Going by the increasing demand being generated from the upcountry towns, server vendors are now increasingly focusing on expanding their reach in them by adding more tailormade solutions. Additionally they are also bundling interesting offers to attract more customers in these towns. It is expected that upcountry towns which have already started to contribute significant revenues for server vendors with help expand the overall server market.

akhtar.pasha@expressindia.com