In Which We Serve

Netware and Unix-based servers will be left all at sea once NT Server rules the waves. Marc Ambasna Jones reports

Despite the fact that Microsoft NT Server is still in relative infancy, and is not yet the networking world beater that Microsoft expects it to be, PC server manufacturers are gambling their future on it. Unix and Netware have their strengths and will take a long time to be undermined by NT, but this isn?t dispelling vendors? belief that PC servers will dominate the market. ?The Intel server market is the server market,? claims Pim Dale, Dell director of UK server business. He claims the worldwide server market is worth 1.6 million units and is set to grow 30 per cent next year. Much of this is because of the uptake of NT, the continued strength of Netware and the power of the Pentium Pro chip. It is a view shared by the other big vendors, which also claim, in true big firm tradition, that the smaller, second-tier server vendors will start losing market share rapidly. For some time now PC server vendors have been sending out strong signals about 1997 and how it will be the year of scalable PC-based networking. While technologies such as clustering will undoubtedly be the main feature of the server market this year, it is not really this aspect of the market that is worrying everyone. Of more concern is the fact that big vendors are preparing themselves for a pitched battle, which will undoubtedly result in aggressive price cutting and could mean a loss in margin for the precious networking solution. IBM?s drop down the server rankings, mainly caused by duff disk drives, has illustrated how competitive the server market has become. Hewlett Packard and Siemens Nixdorf have leapfrogged IBM into second and third place in IDC?s latest round of market statistics, proving that no vendor, with the possible exception of Compaq, can afford a dent in the supply chain. Although it is often dangerous to take such statistics, from one research company and apply them as a barometer for the whole market, there is little to suggest that IBM?s disk drive misfortune has done anything but give its competitors a bunk-up in server sales. Dataquest is compiling a report on server market shares, which David Cosham, manager of IBM?s server division, says puts IBM in second place behind Compaq. Cosham says the disk drive problems, which affected its third quarter figures, should be behind the company by now. Despite this glitch, IBM has managed to keep its end up for the year as a whole. ?We?ve managed a 56 per cent year-on-year growth,? says Cosham. This is second only to Dell in terms of annual growth. In fact, the server market has never had it so good. Internet and intranet solutions will, according to Novell UK MD Tom Schuster, make networking mission-critical across all businesses in the next few years. Both solutions demand powerful servers, so only a court jester would suggest that resellers avoid the server business. As straight hardware sales, the jester may have a point, at least in the long run. Current server sales, particularly in the low end, are mirroring the desktop PC industry and that?s one mirror most dealers won?t want to be caught looking in. Of course, the answer is not to sell straight hardware and look more towards providing something like an intranet solution. ?We?re introducing some products early in the new year that could see Compaq breaking some watershed price points at the low end,? says Hugh Jenkins, Compaq systems group product manager. ?This will drive Compaq?s business beyond its traditional stomping ground and into small to medium-sized companies. We hope this will bring in new business to the channel which is focused on the SMEs.? Compaq is not the only one looking to get a bit fruity on the price front. Dell has its own agenda for 1997 which could, with Compaq, set the competitive tone for the rest of the year. Dell has been another company that has seen its server share increase in recent months. It claims that its server business is growing by about 40 per cent a month and that Dataquest?s third-quarter survey of the PC industry puts it in third place in the server market. ?The server market will commoditise as the desktop did and we?ll be selling at prices that surpass the competition, so we will be driving that commoditisation,? says Dale. To infiltrate the SME market, it is widely held that price cutting is a prerequisite. It had to happen. The thing is, can the channel cope with the new competitive demands? Are we not just entering into a new cycle where the number of networking dealers may dwindle because they either couldn?t move quickly enough or just couldn?t live with continued networking hardware erosion? There are solutions. Vendors are aware that despite the intended commoditisation of the server, small companies are still not up to speed on networking. Reseller expertise is still crucial if vendors are to successfully install networking technology throughout the SME sector. IBM believes it has a good answer with its Server Guide product, a shrink-wrapped package including device drivers for Netmanager and Lotus Notes and supporting Netware; NT4, Unixware, SCO Unix and so on. It is an easy guide to setting up a server solution, which resellers can sell on and develop further as a value add and which users will find valuable, especially if they cannot afford specialist networking technicians. Cosham believes this is the key to cracking the SME market. It?s not just about price, although that will inevitably come into it more and more. The combination of aggressive pricing, ease of use and easily accessible channel support will determine, as in most market sectors, who the leaders will be. ?I?d expect to see second-tier vendors shrink in share because they will not be able to compete on all these fronts,? says Cosham. ?It will also be interesting to see whether Compaq can stay in the lead. When you?re out in front, everyone always guns for you.? IBM is definitely gunning ? Cosham believes IBM will be on the server map in a big way next year in the SME and corporate markets. ?If I told you what we?re aiming to do in sales next year, you?d fall off your chair,? he says. ?IBM is keeping its sales targets close to its chest, which is perhaps a good thing if we don?t want to bump our heads on the floor. ?Of course, whatever the targets are, they won?t be easy to achieve. Compaq is not going to relinquish its position easily. With an across-the-board strategy next year, Compaq will be targeting more markets with more products. It won?t be standing still trying to take the shots and survive ? it has plans for its own brand of shooting.? Jenkins says: ?You?ll see Compaq deliver its first NT cluster systems, hopefully by the first quarter. We?ll start with a two-server cluster with the aim of progressing that technology throughout the year. Microsoft has done a great job in positioning clustering as a natural extension of NT.? In fact, NT clustering will be the new battlefield on which the PC server will fight on all fronts. Jenkins believes that the large-scale deployment of clustering systems will not be seen until 1998, but 1997 will definitely be the year in which the seeds are sown. ?I expect our salesforce and channel to talk to customers throughout the year, about NT clustering, and helping out with pilot projects,? says Jenkins. ?The bread and butter business of selling NT Server and Netware servers should make the idea of clustering a little more attractive to the channel. It?s critical that we work shoulder to shoulder with our partners in this high-end business, as they will be on the front line, providing and servicing the solutions.? The corporate sector is expected to see large changes in its server business this year. Clustering, without doubt, is the latest buzz and although many corporates are already either Netware or Unix-based, Microsoft?s NT server strategy cannot be ignored. Microsoft?s Wolfpack agreement has drawn in the big guns in enterprise networking and won their support. Clustering is crucial to NT?s future as an enterprise networking system and Wolfpack will go a long way in helping Microsoft carry it forward. With companies like Compaq, Intel, Tandem, Digital, HP and NCR involved in the development of the strategy, Microsoft has won good friends. IBM announced at Comdex that it will also join the party, but only as a supplier. It has its own clustering strategy, based on its Phoenix technology, to develop. ?We can differentiate,? says Cosham, ?because we have Phoenix. We will be porting this to Intel-based clustering systems, and we have the blessing of Microsoft. It will give us more bells on our servers.? It will be interesting to see how this develops. Big Blue?s server strategy seems a little reminiscent of its early 90s PC and OS strategy, except this time it has taken the sensible step of guarding its options. With enterprise networking moving more and more towards an open environment, it?s important for all server manufacturers to keep a close eye on software development and not rule out any emerging technology. Wolfpack has given the big vendors a way in which they can do this. It will also heighten the server competition. The PC running NT is now a serious threat to the more traditional enterprise networks running the more scalable Unix. With clustering, NT can enhance its functionality and give the PC server something with which it can really hit the opposition. The Pentium Pro chip has also enabled PC server manufacturers to compete with the likes of Sun and Digital on pure hardware power while being more competitive on price. Although Digital has chopped the price of its Alpha chips in an attempt to compete with the Pentium, there seems to be an almost unavoidable drive towards Intel compatibility. This will not upset Microsoft. Dale says: ?With the Pentium Pro and NT4, the technology is there to enable about 90 per cent of all useful networking requirements.? He says that new technologies like clustering will only help the PC server?s cause and adds that other technologies, such as intranets, will also enhance the PC server?s reputation. This is a view which is generally shared by the other vendors, most of which have their individual intranet solution strategies. ?The IBM Network Station, combined with our PC server technology, gives us an intranet solution,? says Cosham. IBM thinks it has an edge in the intranet market. With the Network Station and Lotus Notes in its camp, it is expecting huge growth this year in IBM intranet solution sales. Jenkins says: ?It?s a massive opportunity in medium to large companies.? Compaq is looking to develop its corporate business and the intranet is one way in which it thinks it can break down a few barriers. Yet Dale believes it is only a matter of time before all servers will be linked to the Internet and will therefore be in a position to deliver intranet solutions. Selling intranet solutions will, after all, be the domain of the reseller, and individual manufacturers may find it increasingly difficult to try to gain the high ground here. This is mainly because all servers will be intranet capable, leaving very little room for vendor differentiation ? that?s the theory anyway. The main point to consider here is that the basis for all of this will probably be Intel. And it is almost certain that Microsoft will have some role in it. This is good news for the PC server, which has come on in leaps and bounds. But more importantly, corporates intending to venture into clustering and intranet solutions will require a lot of reseller handholding. Even Dell has retained its channel mix to meet the demands of the new era in enterprise networking, sensibly recognising that a direct salesforce could not cope on its own. With corporate customers looking to consolidate on larger, high-powered and more centralised servers, sparking memories of old mainframe setups, and with clustering already in beta testing, the high-end server business is bracing itself for a healthy looking couple of years ahead. With the emergence of shrink-wrapped solutions and the threat of a widespread price war, the low-end server market is looking a little more desperate, although no matter how much you try to shrink-wrap a networking solution for the small to medium-sized enterprise market, there will still be a demand for specialist knowledge for some time to come. Vendors can sometimes be rather too quick to assume that the market is all at one level, whereas in fact, it is often about 10 paces behind.