HP this week really stirred up the Converged Infrastructure world by introducing three new solution offerings, one an incremental evolution of an existing offering and the other two representing new options which will put increased pressure on competitors. The trio includes:
HP VirtualSystem - HP’s answer to vStart, Flex Pod and vBlocks, VirtualSystem is a pre-integrated stack of servers (blade and racked options), HP network switches and HP Converged Storage (3Par and Left Hand Networks iSCSI) along with software, including the relevant OS and virtualization software. Clients can choose from four scalable deployment options that support up to 750, 2500 or 6000 virtual servers or up to 3000 virtual clients. It supports Microsoft and Linux along with VMware and Citrix. Since this product is new, announced within weeks of the publication of this document, we have had limited exposure it, but HP claims that they have added significant value in terms of optimized infrastructure, automation of VM deployment, management and security. In addition, HP will be offering a variety of services and hosting options along with VirtualSystem. Forrester expects that VirtualSystem will change the existing competitive dynamics and will result in a general uptick of interest it similar solutions. HP is positioning VirtualSystem as a growth path to CloudSystem, with what they describe as a “streamlined” upgrade path to a hybrid cloud environment.
When Cisco began shipping UCS slightly over two years ago, competitor reaction ranged the gamut from concerned to gleefully dismissive of their chances at success in the server market. The reasons given for their guaranteed lack of success were a combination of technical (the product won’t really work), the economics (Cisco can’t live on server margins) to cultural (Cisco doesn’t know servers and can’t succeed in a market where they are not the quasi-monopolistic dominating player). Some ignored them, and some attempted to preemptively introduce products that delivered similar functionality, and in the two years following introduction, competitive reaction was very similar – yes they are selling, but we don’t think they are a significant threat.
Any lingering doubt about whether Cisco can become a credible supplier has been laid to rest with Cisco’s recent quarterly financial disclosures and IDC’s revelation that Cisco is now the No. 3 worldwide blade vendor, with slightly over 10% of worldwide (and close to 20% in North America) blade server shipments. In their quarterly call, Cisco revealed Q1 revenues of $171 million, for a $684 million revenue run rate, and claimed a booking run rate of $900 million annually. In addition, they placed their total customer count at 5,400. While actual customer count is hard to verify, Cisco has been reporting a steady and impressive growth in customers since initial shipment, and Forrester’s anecdotal data confirms both the significant interest and installed UCS systems among Forrester’s clients.
A recent RFP for consulting services regarding strategic platforms for SAP from a major European company which included, among other things, a request for historical and forecast data for all the relevant platforms broken down by region and a couple of other factors, got me thinking about the whole subject of the use and abuse of market share histories and forecasts.
The merry crew of I&O elves here at Forrester do a lot of consulting for companies all over the world on major strategic technology platform decisions – management software, DR and HA, server platforms for major applications, OS and data center migrations, etc. As you can imagine, these are serious decisions for the client companies, and we always approach these projects with an awareness of the fact that real people will make real decisions and spend real money based on our recommendations.
The client companies themselves usually approach these as serious diligences, and usually have very specific items they want us to consider, almost always very much centered on things that matter to them and are germane to their decision.
The one exception is market share history and forecasts for the relevant vendors under consideration. For some reason, some companies (my probably not statistically defensible impression is that it is primarily European and Japanese companies) think that there is some magic implied by these numbers. As you can probably guess from this elaborate lead-in, I have a very different take on their utility.
Hewlett-Packard reported its financial results for the quarter ending on April 30, 2011, early in the day on May 17, a day sooner than expected. Dell reported its financial results the same day, at its normal time at the end of the day. In many ways, as we will see in a minute, the results were similar. Yet the financial market reaction was dramatically different. HP's stock price dropped by 7% during the day, while Dell's stock price rose by almost 7% in after-hours trading. Bloomberg News, in its article on the two companies' results, headlined what it saw as the reason for the different performance: "Dell Shares Rise After Corporate Spending Gives Company Edge Over Rival HP."
I am not a stock analyst, nor is Forrester in the business of analyzing or forecasting stock performance. But the divergent responses of the stock market to the financial results of HP versus Dell do have implications for vendor strategy, while the underlying results show where the tech market is headed.
First, let's compare the actual numbers. HP's revenues in the quarter were up by 3%, and right in line with expectations, while Dell's revenues were just 1% higher, and lower than expectations. Dell's sales to business rose by 3%, while HP's sales increased by 8%. Dell's sales to consumers fell by 7%, slightly better than the 8% drop in HP's sales to consumers. So far, very similar numbers between the two vendors, with HP actually doing better than Dell in the quarter. So, why the market perception that Dell outperformed HP?
Entering into a new competitive segment, especially one dominated by major players with well-staked out turf, requires a level of hyperbole, dramatic positioning and a differentiable product. Cisco has certainly achieved all this and more in the first two years of shipment of its UCS product, and shows no signs of fatigue to date.
However, Cisco’s announcement this week that it is now part of Microsoft’s Fast Track Data Warehouse and Fast Track OLTP program is a sign that UCS is also entering the mainstream of enterprise technology. The Microsoft Fast Track program, offering a set of reference architectures, system specification and sizing guides for both common usage scenarios for Microsoft SQL Server, is not new, nor is it in any way unique to Cisco. Fast Track includes Dell, HP, IBM, and Bull. The fact that Cisco will now get equal billing from Microsoft in this program is significant – it is the beginning of the transition from emerging fringe to mainstream , and an endorsement to anyone in the infrastructure business that Cisco is now appearing on the same stage as the major incumbents.
Will this represent a breakthrough revenue opportunity for Cisco? Probably not, since Microsoft will be careful not to play favorites and will certainly not risk alienating its major systems partners, but Cisco’s inclusion on this list is another incremental step in becoming a mainstream server supplier. Like the chicken soup that my grandmother used to offer, it can’t hurt.
Intel has been publishing research for about a decade on what they call “3D Trigate” transistors, which held out the hope for both improved performance as well as power efficiency. Today Intel revealed details of its commercialization of this research in its upcoming 22 nm process as well as demonstrating actual systems based on 22 nm CPU parts.
The new products, under the internal name of “Ivy Bridge”, are the process shrink of the recently announced Sandy Bridge architecture in the next “Tock” cycle of the famous Intel “Tick-Tock” design methodology, where the “Tick” is a new optimized architecture and the “Tock” is the shrinking of this architecture onto then next generation semiconductor process.
What makes these Trigate transistors so innovative is the fact that they change the fundamental geometry of the semiconductors from a basically flat “planar” design to one with more vertical structure, earning them the description of “3D”. For users the concepts are simpler to understand – this new transistor design, which will become the standard across all of Intel’s products moving forward, delivers some fundamental benefits to CPUs implemented with them:
Leakage current is reduced to near zero, resulting in very efficient operation for system in an idle state.
Power consumption at equivalent performance is reduced by approximately 50% from Sandy Bridge’s already improved results with its 32 nm process.
Since Oracle dropped their bombshell on HP and Itanium, I have fielded multiple emails and about a dozen inquiries from HP and Oracle customers wanting to discuss their options and plans. So far, there has been no general sense of panic, and the scenarios seem to be falling into several buckets:
The majority of Oracle DB/HP customers are not at the latest revision of Oracle, so they have a window within which to make any decisions, bounded on the high end by the time it will take them to make a required upgrade of their application plus DB stack past the current 11.2 supported Itanium release. For those customers still on Oracle release 9, this can be many years, while for those currently on 11.2, the next upgrade cycle will cause a dislocation. The most common application that has come up in inquiries is SAP, with Oracle’s own apps second.
Customers with other Oracle software, such as Hyperion, Peoplesoft, Oracle’s eBusiness Suite, etc., and other ISV software are often facing complicated constraints on their upgrades. In some cases decisions by the ISVs will drive the users toward upgrades they do not want to make. Several clients told me they will defer ISV upgrades to avoid being pushed into an unsupported version of the DB.
Egenera, arguably THE pioneer in what the industry is now calling converged infrastructure, has had a hard life. Early to market in 2000 with a solution that was approximately a decade ahead of its time, it offered an elegant abstraction of physical servers into what chief architect Maxim Smith described as “fungible and anonymous” resources connected by software defined virtual networks. Its interface was easy to use, allowing the definition of virtualized networks, NICs, servers with optional failover and pools of spare resources with a fluidity that has taken the rest of the industry almost 10 years to catch up to. Unfortunately this elegant presentation was chained to a completely proprietary hardware architecture, which encumbered the economics of x86 servers with an obsolete network fabric, expensive system controller and physical architecture (but it was the first vendor to include blue lights on its servers). The power of the PanManager software was enough to keep the company alive, but not enough to overcome the economics of the solution and put them on a fast revenue path, especially as emerging competitors began to offer partial equivalents at lower costs. The company is privately held and does not disclose revenues, but Forrester estimates it is still less than $100 M in annual revenues.
In approximately 2006, Egenera began the process of converting its product to a pure software offering capable of running on commodity server hardware and standard Ethernet switches. In subsequent years they have announced distribution arrangements with Fujitsu (an existing partner for their earlier products) and an OEM partnership with Dell, which apparently was not successful, since Dell subsequently purchased Scalent, an emerging software competitor. Despite this, Egenera claims that its software business is growing and has been a factor in the company’s first full year of profitability.
A lot has been written about potential threats to Intel’s low-power server hegemony, including discussions of threats from not only its perennial minority rival AMD but also from emerging non-x86 technologies such as ARM servers. While these are real threats, with potential for disrupting Intel’s position in the low power and small form factor server segment if left unanswered, Intel’s management has not been asleep at the wheel. As part of the rollout of the new Sandy Bridge architecture, Intel recently disclosed their platform strategy for what they are defining as “Micro Servers,” small single-socket servers with shared power and cooling to improve density beyond the generally accepted dividing line of one server per RU that separates “standard density” from “high density.” While I think that Intel’s definition is a bit myopic, mostly serving to attach a label to a well established category, it is a useful tool for segmenting low-end servers and talking about the relevant workloads.
Intel’s strategy revolves around introducing successive generations of its Sandy Bridge and future architectures embodied as Low Power (LP) and Ultra Low Power (ULP) products with promises of up to 2.2X performance per watt and 30% less actual power compared to previous generation equivalent x86 servers, as outlined in the following chart from Intel:
So what does this mean for Infrastructure & Operations professionals interested in serving the target loads for micro servers, such as:
The drum continues to beat for converged infrastructure products, and Dell has given it the latest thump with the introduction of vStart, a pre-integrated environment for VMware. Best thought of as a competitor to VCE, the integrated VMware, Cisco and EMC virtualization stack, vStart combines: