Hardware Today: Coping With a Midrange Crisis
The term "midrange" used to define a very precise segment of the market. In the past, when you talked about low-end servers, midrange boxes and high-end mainframes, everyone knew what you were talking about. Those days are now over, and the lines of distinction have gotten rather blurry.The midrange market remains healthy, although the definition of midrange has gotten blurry.
"I see vendors whose primary strength is in the midrange, being squeezed between the increasing capabilities of high-quality desktop systems from the bottom and the decreasing cost of server systems from the high end," said Bob Gezelter, a software consultant from Flushing, New York specializing in the midrange market.
In the past few years, the steady encroachment of souped up x86 boxes, in particular, is lessening the traditional divide between low-end, low-priced white boxes and expensive proprietary midrange systems. As of late, the combination of dual-core technology and 64-bit architectures are driving this trend.
"The big midrange server news is the introduction of processors that extend the functionality of 32-bit operating environments and applications, as well as the introduction of multicore technology," says Mark Feverston, Unisys director of platforms for systems and technology. "Though both of these were introduced in the first half of the year, their real impact will be felt starting in the second part of this year."
As dual-core and 64-bit received substantial coverage in last week's Midyear Server Report Card, we will focus, instead, on other trends shaping this market.
Consolidation Gains Momentum
Consolidation is certainly one area that vendors and analysts alike find noteworthy.
"Momentum in blades is picking up, spurred by the fact that server consolidation is seen as the major area of infrastructure investment for 2005," says Jon Collins, an analyst with Quocirca, a U.K.-based IT research firm. "Consolidation spending is being driven by efficiency gains."
In the past few years, the steady encroachment of souped up x86 boxes, in particular, is lessening the traditional divide between low-end, low-priced white boxes and expensive proprietary midrange systems.
Unisys Feverston agrees. His company has noticed an accelerated rate of both server and application consolidation among its customers, as well as the continued standardization of IT infrastructure technologies.
"Consolidation and standardization help end users see quicker response to new business requirements due to a reduction in integration efforts and the offer of greater solution availability/choice," says Feverston.
This, he believes has resulted in a consistent increase in server shipments for Unisys, including a healthy mix of new-name business. The Unisys ES7000 server family, in particular, has been upgraded recently to take advantage of the consolidation and standardization trends.
"Revenue for midrange enterprise servers grew 6.1 percent year-over-year, its second consecutive quarterly increase in that segment," says Matt Eastwood, program vice president of worldwide server research at IDC. "This may reflect increased IT spending to run more scalable workloads and consolidation/virtualization initiatives than can be deployed onto volume servers."
IBM, too, is experiencing strong midrange sales. Jay Bretzmann, director, IBM eServer products, says iSeries customers remain committed to the platform but recognize the need stay modern with Web-based applications. The trend this year, he says, is to innovate at the software level to upgrade hardware investments. Accordingly, IBM developed the iSeries Initiatives for Innovation program, which provides up to $50,000 to more than 2,500 software partners and application tool developers to create and deliver business solutions on the iSeries platform for midmarket clients.
"In the last 90 days, IBM has added 156 tools for its premier midmarket system, the iSeries platform," says Bretzmann.
HP has also made great strides this year in standardizing its midrange offerings on the Integrity server line. Although Integrity server sales exceeded the $1 billion mark in 2004, HP is not resting on its laurels. New enhancements include faster Intel Itanium 2 processors, integrated virtualization capabilities across multiple operating systems, expanded high-availability and disaster recovery features for HP-UX 11i and Microsoft Windows Server 2003, and production releases of the OpenVMS and Linux operating systems on Integrity.
In an increasing number of areas, the technologies available to the largest companies are now economically feasible for the smallest private organizations.
Such developments are having a significant impact on business dynamics. In an increasing number of areas, the technologies available to the largest companies are now economically feasible for the smallest private organizations.
"HP OpenVMS, and many of the Unix systems, including Linux, provide the full functionality of large corporate servers costing millions of dollars on systems within the scale and budget of a small business," says Gezelter. "No longer does the size of the business dictate the level to which it can exploit IT."
On the manufacturer's side, Gezelter has observed the reappearance of identical functionality over a wide scale of organizations, from the very small to the multinational. Gezelter says this trend first appeared with the advent of Digital MicroVAX II two decades ago. Today, small, robust midrange server systems are available for less than $10,000, a sum that is even smaller, when adjusted for inflation, than the $20,000 price-point of the MicroVAX II generation.
What are the implications of this market shift for end users? For one thing, the features and capabilities formerly available solely to large firms are now also present in products aimed at the small and midsize business (SMB) market. As a result, IS organization can now trod a seamless growth path from the garage to the Fortune 500 data center, without changing the IT platform.
"On an economic level, the emergence of high-quality server hardware at modest prices [$5,000 to $10,000] is a great enabler," says Gezelter. "The availability of enterprise-level technologies, such as those in OpenVMS, on inexpensive platforms reduces the development and operational risks of IT projects and produces a higher quality product."
While all major vendors continue to push hard on their midrange product lines, in truth, many of these machines could be characterized as high-end white boxes or, in some cases, low-end mainframes. The functionality and technical breadth that once separated the midrange from the low-end is factually a thing of the past.
"I see 'midrange market as now a purely marketing term, no longer a term with substantial technical significance," Gezelter concluded.