Dell sharpens its blades

New servers, software deal show desire to cut deeper into the datacenter

Dell’s aggressive re-entry into the blade server market last week is another indication that corporate buyers are seriously considering the technology for strategic roles in their enterprises.

Coupled with the unveiling of the aggressively priced PowerEdge 1855 blade servers last week was the strategic development announcement Dell made with Microsoft. Under the agreement, the two companies pledged to create a change management solution that will make it easier for large IT shops to update and manage hundreds of Dell servers scattered across an enterprise.

Industry observers think the two developments will work in concert to help fuel Dell’s move into the higher reaches of the enterprise, where it could face a different level of competition from more experienced enterprise server rivals such as IBM and Hewlett-Packard.

“With its systems management focus, Dell is not only painting a picture of what a scalable enterprise is, but [it is also] immediately focusing on what users need the software to solve,” said Jessica Yang, research analyst at IDC. “It is about change management and making it easier for users to implement that change. I think these messages will resonate quite well with enterprise users.”

Historically, Dell has rarely entered markets that are not fully mature, but some believe its concerted move into blade servers may be the exception. They believe Dell may be doing so in order to influence standards development in that market.

“In some ways, it looks like they are getting into this market a little bit early,” said Rob Enderle, president of Enderle Group. “Maybe they must have decided the market is commoditized enough. And by getting in the market a little early, they can have some say in setting standards.”

Some would proffer that blades are being driven toward commoditization by corporate users’ appreciation of how flexibly and cost-effectively blade servers can be adapted to rapidly evolving server strategies in larger companies.

“Users are beginning to focus on the fact you can do so much more with blades in terms of dynamically positioning them and their ability to offer a pay-as-you-go approach,” Yang said. “You can add to them more easily than you can a stand-alone tower server.”

Another element that could supply additional momentum is Dell’s continued focus on its professional services organization and the role it could play in helping the new blade servers and systems management

strategy gain traction. In an interview earlier this month, Dell CEO Kevin Rollins emphasized, however, that Dell will continue to promote services hand in hand with hardware (see “Kevin Rollins Talks Services,” page 20).

“We will not lead with services and then come back to the hardware pitch like some of our competitors do,” Rollins said. “You have to look at our growth rate and say it must be working, otherwise you would not be growing at 30 percent to 35 percent in services on 18 percent hardware growth.”

Another factor, one still developing, that could play into Dell’s blade server strategy is the company’s ongoing evaluation of incorporating AMD’s Opteron chips. What might be spurring the company’s interest is some underlying tension between Dell and Intel caused by Intel missing some promised chip delivery dates.

“Because [Intel] missed some projections, Dell was hurt in the back-to-school sales area, and they’re sweating bricks about Christmas,” Enderle said. “Dell is incredibly upset at Intel, worse than I’ve ever seen them.”

Copyright © 2004 IDG Communications, Inc.

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