Servers in India had a great year in FY04-05, due to consolidation as well as large-scale projects from various verticals driving the demand. Statistics reveal that in the year 2004-2005, 67,093 servers were shipped in India. Blade servers made an entry into the market, and it is certain that they are here to stay.

In the IT business, servers have been one category, which witnessed tremendous growth not just volume wise, but also in terms of revenue figures and new advancements that were made. The market saw a positive growth in 2004-05. IDC estimates X86 server shipments in India grew an impressive 26% year-on-year basis, while non-x86 grew by 50%.

For both these segments, the biggest growth driver has been banking and telecom. While MNCs like IBM and HP dominated the Indian sever market in the last fiscal, Indian players like HCL pushed their server offerings with aggressive marketing. HCL did shake off the MNC onslaught to post a 62% growth in unit terms to about 10,000 shipments.

Another interesting trend last year was the aggressive marketing by Sun, which forayed into the x86 space with its new line of Linux servers. IBM's emphasis over the last year was consolidation of clustered systems for high performance computing and  access to new applications on different hardware platforms.

One of the most noticeable trends over the year was the blade server getting more attention and being viewed as a mainstream product. In India, vendors like Sun, IBM and HP are pursuing the blade market aggressively.

How the tide flowed
HP: According to published data, in 2004, HP shipped two broad genres of servers, which are different types of processors namely, Itanium and PA-RISC. Approximately 1,400 servers were shipped during FY 04-05 in India.

While an estimated 65% of servers were PA-RISC based servers, what is interesting to note is that Itanium as a processing architecture is finding wider acceptance and is being increasingly used to run mission-critical applications. As per published numbers of the last quarter ending March 2005, of the total estimated 500 servers shipped in India, nearly 50% was Itanium.

According to an IDC prediction, the global server market would be a worth almost $7 billion by 2007-08. Blades will be the fastest growing area within the X86 architecture servers segment. Globally, there will be very aggressive growth within the ISS portfolio.

The low-end server market is primarily based on 32-bit architecture. The market in recent times seems to be waking up to the fact that their applications can benefit from processors that have 64 extensions allowing higher memory access to boost performance. Vendors like Intel and AMD are bringing such products in the marketplace.

In the mid-range and high-end buyers, primarily two processing architectures dominate the Indian market, the Reduced Instruction Set computing (RISC) and Explicitly Parallel Instruction Set computing (EPIC). It is this market in which HP is a leader. The vendor shipped more numbers of mid-range servers than its competitors in CY 2004. The published numbers of the last quarter ending March05 were around 60% of the total high-end servers shipped.

IBM: It was a great year for IBM's server and storage business in India. With a 30.5% market share in India in Q4-04, IBM grew 2.5 times to that of market growth rate, having a clear 10% lead over its nearest competitor (Source: IDC). IBM experienced a huge traction in FSS, telecom and SMB segments.

The factors that lead to the growth could be attributed to technological superiority, wide choice of technologies; improved market coverage and a focus on key growth segments. IBM has been the market leader for x86 servers for 2004, quarter on quarter.

It closed 2004 with 35.7% market share (Source: IDC), with a growth rate of 20.5% (more than the market growth of around 16%). IBM was the first vendor to ship more than 5,000 units, over two quarters (Q2-04 and Q4-04).

In the non-x86 space, IBM has been showing rapid growth, especially with the launch of its Power5-based servers. In Q4-04, IBM managed to outgrow competition to secure the second position in the UNIX space, with a market share of 30%. IBM was the only vendor to gain share quarter on quarter in this space, registering a growth of around 25% Y-O-Y. With rapid improvement in technologies and performance, customers are increasingly looking to IBM solutions in the RISC/non-x 86 spaces.

One of the highlights of last year was the welcome customers in India gave to blade servers in their datacenters. This category is poised to make it big in the overall server pie. As per IDC information, Acer sold about 4352 server units and has a market share of 7%.

Sun: If IDC's APac Quarterly Enterprise Server Tracker Q4 2004 is taken into account, Sun has maintained its leadership position in the non-x86/Unix server market segment in India for 2004. It has been the fastest growing vendor for non-x 86 Unix servers. Sun's lead in the RISC/Unix server market in CY 2004 in India was a commanding 67.9% in unit shipment share, which was 49.1 points higher than its closest competitor.

“The SMB segment would benefit from blade systems, which are good design setups for fitting a large number of servers into a small space and are also robust, reliable implementations of enterprise architecture”  Rajesh Dhar, Country Manager, ISS, HP

Sun's RISC/Unix server shipments grew 63% in CY 2004 compared with CY 2003. Sun's non-x86 UNIX revenues grew an impressive 32% year-on-year in 2004 compared with the overall market growth of 28%. Sun also led the non-x86/Unix server market with an impressive 47.4% revenue market share in CY 2004.

For channel partners, revenue that came out of server sales, deployment and service, varied anywhere between 10%-75% of their total revenue. Server hardware sales varied between 4% and 70% of this.

Significantly, service is becoming a major revenue generator and growing at a much faster rate than others and the channel has put in a lot of focus to grow in this area. Leading vendors in the server market, according to channel partners, are IBM and HP followed by Sun, HCL and a host of other players.

New technology
HP: HP's EPIC is a newer architecture compared to RISC and offers significant advancement in technology over traditional RISC architectures. Apart from providing super fast processing powers and parallel instruction set execution, it also has the flexibility to run popular operating systems like Linux, windows and HP-UX and scale to 128 processors within high-end servers.

“With Itanium, we can differentiate our product offerings from competitors. Partners will now have reduced competition, more margins and easier sales compared to our competitors”  Kamal Dutta, Country Manager, Business Critical Servers, HP

HP is working closely with Intel to increase the base of Itanium servers and bring out more options for Itanium customers choice of processors performance and price. New technologies around Itanium included features like virtualization that helped customers increase their utilization; greater choices in partitioning technologies to help customer isolate application environments and provide more flexibility in buying and using servers based on capacity on demand.

Blade servers
A new and emerging technology, the blade server market is rapidly expanding in India. HP's blade systems are designed to drive cost savings and efficiencies and become the foundation for simplified planning, growth and more efficient administration.

“Technological superiority in servers, improved market coverage and focus on certain segments has helped us win some customers like UTI Bank, Aviva Life Insurance, HDFC Bank, IndusInd Bank and Hutch in 2004”  Mukul Mathur, Country Manager, Business Partners, IBM

Blade systems offer a data center environment that is flexible and scalable, allowing for quick responses to change while significantly lowering TCO. Given the pooling and virtualization capabilities of blade systems, enterprises can efficiently use software to allocate and reallocate resources on demand, without manual intervention. The intelligence of blade systems allows for more efficient management, higher productivity and greater data center efficiency, leading to long-term business value.

IBM: New launches for IBM in 2004 included the OpenPower, which is an attractive option for the SMB segment. The X3 architecture is an ideal platform for customers running chaotic, multi-user, memory intensive applications like Enterprise Resource Planning (ERP) and other commercially oriented application-level solutions.

“In today's dynamic business environment, organizations are viewing technology as a strategic investment that helps drive greater business value and become more competitive”  Vaibhav Phadnis, Director, Server Business Group, Microsoft India

For customers who typically scale out (in terms of their IT infrastructure), IBM introduced the xTended Design Architecture (xDA), leveraging the performance of XeonDP processors with 64-bit Extensions. IBM introduced the 3rd Generation of Enterprise X- Architecture–the X3 early this year. It takes the three major components of industry standard server technology-processors, memory and I/O-and powers them with advanced features to help standard systems perform at new levels.

ACER: New technology introductions from Acer can be summarized under four heads:

Performance: EM64T technology-based Xeon and Pentium 4 servers, servers with PCI Express (PCIe) technology to deliver the best in I/O performance.

“Marketing and promotion campaigns would depend upon and vary as per the customer need as well as the server vendor in question”  Anil Valluri, Country Director, Client Solutions Organization, Sun Microsystems

Availability: Servers with memory Mirroring and Memory sparing features, hot-Swap SATA and SATA RAID 5 controller delivers cost-effective data availability in the SME vertical.

Serviceability: Acer's 'ePanel', a LCD-based server management console that fits directly on to the chassis, allows users to easily monitor system status and troubleshoot problems. One doesn't have to access the OS; Acer Remote Management Controller–2, which adds full remote access to the server regardless of its condition.

Security: Server lifetime anti-virus, ready for 64-bit platforms: the only anti-virus in the world, which support 64-bit OS.

SUN: Sun launched the Solaris 10 Operating System (OS) optimized for AMD64 Technology. Optimized for chip multithreading, Sun's dual core UltraSPARC IV processor enables enterprises to scale up to nearly twice the horsepower of previous Sun systems in the same footprint and featuring better price-performance.

This year also saw the introduction of the AMD Opteron processor into Sun Fire systems. Running 32-bit and 64-bit applications, Sun's Opteron processor-based server is 45% faster than comparable systems and runs Solaris, Red Hat Linux, SUSE Linux or Windows operating systems with Microsoft Hardware Compatibility List (HCL) certifications.

Sun continued to innovate in blade computing with the new dual processor x86 Sun Fire B200x. In April 2005, Sun Microsystems introduced its first dual-core server based on the new industry-standard Dual-Core AMD Opteron[TM] processor, and announced dual-core for its entire x64 product line. The Sun Fire V40z server powered by AMD64 dual-core technology is an enhanced 4-socket, 8-way server. It integrates four microprocessors–each with two complete CPU cores. It is designed to help customers achieve twice the performance and power efficiency over competitive x64 single-core server offerings based on Intel processors. This results in half the operational costs.

Sun's range of servers powered by AMD Opteron processors fueled Sun's growth in overall unit market share on a year-over-year basis. The company exited 2004 more than 15 share points ahead of its nearest competitor in the High Performance and Technical Computing (HPTC) market. As the HPTC market continues to shift to clusters of smaller, more powerful servers, Sun is well positioned to deliver the types of solutions to meet the needs of customers in a wide variety of industries.

Software
The vendor made available to Indian customers the Windows Server 2003 x64 Edition in three editions–Enterprise, Standard and Datacenter in the last financial year. Also available were SQL Server 2000 Workgroup Edition; Internet Security and Acceleration (ISA) Server 2004 Enterprise; SQL server 2000 Express; Exchange Intelligent Message; Windows 2003 Service Pack 1 and Windows Small Business Server Service Pack 1.

Upcoming launches include SQL Server 2005 and BizTalk Server 2006–the next editions of Microsoft's database and enterprise application integration offerings. Microsoft would also be launching Windows Server 2003 Release 2, the next release of Windows Server, later in 2005.

What sold well
Common Technologies from all principal vendors, courtesy Intel appeared to have had good sales last year. The new introductions were very cost effective and scalable too. Bus Speed, 64 Bit Processors and HT Technology are in. Blade servers and Itanium base servers are coming in. Also the Rack mounting servers are becoming the new 'sales mantra'.

The EM 64 T Technology based on Intel Nokona Processor (a 64-bit processor for servers) was instrumental in the server biz. The last fiscal also witnessed models with larger scalability, higher memory upgradeability and PCI slots 133 / 100 / 66 MHz. These models were very cost-effective and reliable. IBM x226 showed considerable business interests among customers.

Intel EM64 bit on XEON for 64 bit memory addressability sold exceedingly well because of which customer requirements could be fulfilled better and gave them scalability. Among the others, AMD Opteron with inbuilt Cache in the processor appeared cost effective and began to gain acceptance and market share. Blade Servers (Intel & AMD) were popular for better manageability, low power consumption, high availability and adaptive enterprise infrastructure.

The Dual Core CPU on the AMD Opteron Processor, which changes the multi CPU capability in a box and lowers the TCO, is creating new industry benchmarks forcing Intel to follow suit. Dual Core CPU from Intel in the Xeon processor is to be announced very shortly. Cluster Server Technology for High Availability and Load balancing also sold quite well in OLTP applications because the transaction load has increased with enterprise clients. This is available at a much lower price point.

New features like 'Capacity On Demand' and 'Virtualization' helped to bridge the gap between what one wants the business to accomplish and the infrastructure tools needed to get there. This ensured decrease in development and deployment cycle times by using pre-built, reusable services building blocks. This also reduced cycle times and costs by moving from manual to automated transactions and made it easier to do business with business partners by increasing flexibility.

Virtualization introduced enormous flexibility in customer's dynamic business environments. This ensured simple, quick, and cost effective processes resulting in higher productivity and profitability. Features like TCO, track record/market share, service network and breadth of service offerings together with the partner capabilities to deliver that makes the channel partner choose a vendor and his services. Reliability and scalability of the product, its pricing, support and channel enablement policy are the other key criteria.

Marketing and promotion
While technology upgrades are a big plus, vendors need to constantly create a differentiating factor for themselves in the server space. They also have to adopt newer and better promotion and marketing campaigns especially for their business partners to boost sales. From new channel initiatives to better promotional campaigns, vendors seem to have done it all.

According to Kamal Dutta Country Manager, Business Critical Servers, HP, "Channels can benefit hugely with architectures like Itanium. We did multiple road shows with our channel partners in B-class cities for creating awareness for Itanium processor-based servers and their advantage. We also came up with low-end offerings based on Itanium."

Adds Rajesh Dhar, Country Manager, ISS, HP, "Our first step was to articulate to channel partners and therefore to their customers, everything they needed to know about the blade system. Towards that end, HP set up three proof of concept centers in Delhi, Mumbai and Bangalore, where we show customers extensive demos on blade servers and get their applications tested. We have identified 25-30 partners across the country and have provided them with relevant training in the blade systems." Even before it launched the product, the vendor conducted training across 29 cities in the country and sent mailers to our customers about the blade system.

"We have thus created enough number of reference sites for customers to see and buy the product. We are also rolling out new initiatives for channel partners, who would act as blade ambassadors and help us sell better," informed Rajesh.

Mukul Mathur, Country Manager-Business Partners, IBM said, "We have deployed a new simplified PartnerWorld program, which will consolidate all four PartnerWorld tracks (Software, Developers, Systems & Services, and Personal Systems) into a single one. This simplifies access to support and makes it easier to do business with IBM."

New programs include the IBM SystemSeller 2005, which is an IBM Cross-System Business Partner Program. It encompasses servers and storage to allow Business Partners to further penetrate the SMB marketplace with a set of competitive and profitable offerings from IBM, which are readily available and are aggressively priced.

IBM is also offering a Growth rebate for IBM Business Partners to grow their businesses in the SMB market segment, while maintaining and increasing their presence in the other market segments. Initiatives here include the Power Dhamaka, a two month promotional program launched for all business partners for selling p-series and OpenPower. It will reward partners for not just closing a deal, but also for generating a lead and the both are mutually exclusive.

Initiatives like 'Business Partner Innovation Center' (BPIC) are on the anvil in 2005. It is designed to accelerate partner participation with IBM in emerging solution and technology opportunities. The 'Blue Harvest-x series' specifically designed to reward their achievements for this year and 'Know Your IBM' (KYI), a global, permission-based interactive marketing program are to help eligible Business Partners to heighten and reward their competency to sell IBM products and solutions.

"Our primary focus is to help them develop skills to best meet customer needs. We conduct in-depth training sessions for our channel and reseller partners on sales scenarios as well as technical content. These sessions not only help our partners understand our products better, they also help them understand customer needs and trends – so they can offer the best solutions to customers," explained Vaibhav Phadnis, Director–Server Business Group, Microsoft India.

Keeping abreast
"Some ways to reach out to the channel are regular knowledge transfer through Acer Altos/ partner meets/ mailers and newsletters, build to order fulfillment mechanism coupled with aggressive delivery commitments. Other ways are ensuring best after sales support through one of the widest support network available in India, being the first to get new products and technologies in the market (first to market)," felt Ravi Hansdak, Assistant Manager, Marcom, Acer India. He added that regular Knowledge transfer, regular sales and support training, more product-based solutions coverage, promotional activities and product bundles, are best ways to reach out to the channel.

Ravi Jain, Product Manager, Server xseries and Installation, IBM India, said that channel partners are viewed in the same way as end customers. All programs–be it educational training or market offerings, are tailored to suit channel partners, who are therefore well equipped with better products and aggressive marketing programs to take on the competition.

"In order to help our partners to do good business, we provide them with domain knowledge and offer them required training on the products. We also provide our partners incentives for selling Sun products," informed Anil Valluri, Country Director, Client Solutions Organization, Sun Microsystems.

Sales initiatives from channel
Along with the vendors, channel partners too have to do their bit to improve server sales and they constantly do so. Prateek of Progressive Infotech, Delhi said, "We have a dedicated, trained and certified sales team for server business–both pre and post-sales, which helps customers in advisory/consulting for OS migration and server consolidation, server sizing vis-a-vis application, deployment services."

Better customer orientation and product awareness, providing need-based IT solutions and human resource deployment, regular interaction with prospective customers and keeping them updated with the latest information on server technologies are critical according to Sabyasachi Ghosh Server Specialist & Business Head, and Dilip K Banerjee Director (Marketing) Syntech Informatics, Kolkata. "At the same time, we are constantly upgrading our resources and skill-sets in order to provide state-of-art solutions. Vendors play a major role in developing this infrastructure within and that is exactly how their business grows," they add.

Ravi Verdes of Frontier Business Systems, Bangalore, said, "Our efforts have been directed to increase reach with increase in our branches, upgrade and equip skills based on service verticals with a special emphasis on 'Customer First Approach'. We have also identified and focused on certain potential low competition market segments and increased market coverage."

"Vendors do their bit for the campaigning, but we need to do a considerable amount of in-house marketing and promotions as well. A server is not like a PC, it requires special skills to fine tune, integrate and install so that the required applications run well on the server platform and the customer requires us to help him in these. As competition picks up, we have to work out new strategies to ensure that our customers get full satisfaction from our services and products" believes E Manikantan, VP of Vitage Systems, Bangalore.

Trained server technicians-people who understand customer requirement are very critical for the business, believes Nitin Shah, MD, Allied Digital. "Sales personnel must be well equipped to provide the customer not just sales support but also technological information while providing the solution. They must be able to give consultation keeping in mind the vendor as well as the customer need," he felt.

The road ahead
The server market is poised for at least a 30% YoY growth. Target customer verticals range from SMB, healthcare, media companies, pharma companies, Government, banking, telecom, BFSI, EoU, education, PSUs to telecom, computer services industry, oil and petroleum and many more.

Channel partners are thus looking to increase their focus on the server business and adopt better selling strategies in the coming fiscal. This is to ensure that they outgrow the average predicted market share.

As far as the future goes, in the enterprise space, more and more customers will look at server consolidation in a bid to simplify their IT infrastructure and eliminate legacy systems and technologies. Customers will start adopting open standards as it allows them to save costs in the long run.

Server performance and leveraging that power across the companies various workloads will become a key value proposition. Long term ROI will be at the back of the mind for all CIOS while making an IT investment decision. This was probably not the case a few years ago when servers were brought to fulfill immediate requirements and were brought on the basis of what was most affordable at that point of time.

Blade Servers will gain further significance. Any customer with a requirement of five servers or more will start adopting blade server technologies. With the massive growth in data across organizations, storage consolidation and management will become a hotly debated and relevant topic.

DQC NEWS BUREAU
(Bangalore), with inputs from DQC NEWS BUREAU, New Delhi

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