By Chris Whyatt
Powerful, cheap and easy-to-use, the latest server solutions have triggered a billion dollar boom in the small-to-medium-sized business (SMB) sector
|~|437008body.jpg|~|Demand for low-cost/entry level servers has driven up sales in the Gulf states.|~|Never before has there been a better time for the small to medium-sized business (SMB) to bag itself an affordable, enterprise-class server.
Leading vendors are positively tripping up over each other to cater for low-end and mid-level businesses with servers that offer many of the features you would expect to find only within a big corporate server solution.
That the market is now awash with a multitude of SMB solutions is unsurprising.
Middle East server sales have soared at a phenomenal rate — according to IDC, first quarter 2005 server revenues in the Middle East and Africa (MEA) rocketed 15.4% year-on-year to US$288million.
In a region where SMBs make up the bulk of the workplace, these figures are illuminating.
Serviceability, technological advance and price performance are the three key market drivers being discussed today.
It is a more pragmatic outlook in comparison to the hype which surrounded the release of blade servers 18 months ago; the arguments for and against blades continues to bubble back and forth below the surface.
On inspection of the Middle East server space, a clear pattern emerges: the more fresh technologies filter down to the SMB, so the market booms.
“In the Gulf States, both vendors and end users are moving towards IT infrastructure consolidation. Demand for low-cost/entry-level machines is driving sales in the volume server segment, particularly among SMBs,” notes Roshana Rehan, an IDC CEMA research analyst, in her Gulf States Commercial Systems and Server 2005-2009 Forecast and 2004 Vendor Shares October report.
“Low IT penetration in the smaller Gulf markets provides considerable sales opportunities for vendors,” she states.
Another recent IDC study reveals that the worldwide server market experienced a 3.8% growth, to US$25.9billion, during the first half of 2005, when compared against the same period a year ago.
Given that the region is one of the world’s fastest emerging markets, faith in a wealth of options to accommodate the SMB is not hard to come by.
The IT needs of an SMB are, by common consent, simple. ‘File’ and ‘print’, with a secure local area network (LAN), maybe wi-reless, including internet access; a departmental one-way server and PCs; a network printer; office productivity software, plus any additional applications needed are some of the key ones.
“I think the SMB is one of the fasting growing segments of the market in this region. In the UAE and Saudi, despite the growth we are seeing in the oil sector, telcos, and Government projects, we are seeing a lot of dynamism in the SMB space, especially in retail and distribution businesses,” says Wael Abdoush, systems and technical manager for IBM Middle East.
“So, there’s a big market and potential for growth, every vendor playing in this market is looking closely at what is happening with SMBs. The key point is what will be the right routes to market and the right channels to use, and what is the right strategy?,” he continues.
“Everyone is touting SMB at the moment, because there are so many opportunities for people to start their own businesses, or set up smaller subsidiaries of bigger offices,” says Andrew Lamb, business development manager servers and storage for Acer.
“The server market is becoming very commoditised on the whole,” he adds. If a fresh buzzword has unwittingly usurped ‘blades’ in the server sector, it’s ‘commoditisation’ (where price becomes paramount).
“The market has commoditised over the last couple of years and price plays a major role. That trend seems to be continu-ing, especially in the entry-level space,” agrees Ryan D’Souza, HP Middle East’s server products manager.
These views were echoed by executives at other vendors we spoke to within the region. This trend among SMBs — a push to reduce excessive costs whilst maintaining an upwards curve on the productivity charts — is tangibly stiffening the focus of the major server players, who are now delving deeper to pull out more advanced server offerings for SMBs.
In turn, those SMBs are now reaping the rewards, with a technology that is both scalable and affordable beyond previously imagined limits.
New ranges of systems are being designed and released that build a bunch of enterprise features into smaller server capabilities.
John Foster, volume product manager for Sun Microsystems in the Middle East, says Sun’s new AMD Opteron x64bit Sun Fire X2100, X4100 and X4200 servers do just that.
“We’ve tried to introduce a real differentiator. It’s important you have reliability right down the line, so — at the same price —the systems all have redundant power, fans, cooling, disks, they are hot swappable, with full lights out management, and they all use the latest AMD processors available,” he claims.
Foster feels that Sun currently has the most efficient and reliable x64 system available, due to its use of the AMD Opteron which he says is superior to Intel’s chip because it uses less power and generates less heat.||**||Dual-core flood |~|opteronbody.jpg|~|AMD’s dual-core Opteron chip is at the hub of Sun’s latest x64 server solutions.|~|Fighting talk, when you consider the industry’s migration to 64-bit.
The move to dual-core — two processors on an integrated circuit (IC) plugged into the same socket allowing faster connection, reduced power consumption, and more efficient simultaneous processing of multiple tasks — can be identified as the chief technological tool for the current flood of enterprise-worthy solutions at SMB levels.
Dell has four families of products in its server range (known as PowerEdge) starting at the top with its blade solution, then tower range, rack dense, and lastly SC (simplified computing) solutions, specifically designed for SMB type customers.
“SC solutions then filter into the bottom end of both the tower and rack dense servers,” says Jim McMahon of Dell.
“What we also offer for SMB is exactly the same product that a large corporate enterprise would use, but the components to build up to the feature set of the corporate user are optional, so we’re obviously conscious of cost of ownership. Essentially it’s the same platform, but with the features sold as optional items,” he adds.
The rapid demise of the 1MG cache processor means there is likely to be a very fast transition to dual-core, which for the chip makers is a boon.
“The onset of dual-core will benefit the SMB environment to a great extent,” says Ferhad Patel, Intel’s market development manager for META (Middle East, Turkey and Africa).
“They need fewer servers now, especially because of space constraints — so they get more performance [using fewer servers],” he adds.
“Some of the technology that we have integrated is evident. What you will notice is that fans now slow down. You don’t want a bunch of noisy servers getting on your nerves all the time,” he contends.
Patel says that if businesses are not using the full capacity servers can now drop down a couple of voltages or frequency in order to reduce and dilute disruptive noise levels.
“By the end of 2006, 85% of our servers will be dual-core,” he estimates.
Other industry figures go so far as to predict that by this time next year people purchasing single core processors will be an extinct breed (and quad-core has already been spoken of).
“This is because of power and heating and those other challenges. You are finding that multiple core systems are not just the domain of the high-end customers, they are moving right down into low-entry level businesses as well now,” says John Foster at Sun.
“And for some very good reasons. Typically, you get about 75% better performance, but 20% more price point when you move to a dual-core environment,” he says.
Dell — which only uses Intel processors — also sees massive performance improvements, quoting up to 53% on some of the industry benchmarks.
Vendors know that customers buying pr-oducts are increasingly consc- ious of any changes or modifications made to server systems — and migration to dual-core 64-bit servers is their main concern.
In contrast, HP is an advocate of AMD’s Opteron chip and has incorporated it into its range of servers aimed at SMBs looking to implement rack servers in a two-way space.
HP’s D’Souza points to Ope-teron’s flexibility and efficiency, especially in the firm’s rackmount range of servers.
The SMB is generally lacking when it comes to sustainable IT infrastructure, or a dedicated IT support staff.
Often the IT decision maker is the company owner who has an absolute need and desire for just one simple, affordable and comprehensive point of purchase; what vendors term a ‘one-stop shop’.
“Packaging it ready made, so it’s easy to install and deliver, is essential,” says IBM’s Abdoush.
Acer, for example, deals purely with the hardware element. However, having learnt the lesson of advertising just the hardware — according to Lamb — it now works in conjunction with its business partners to offer a solution in a specific SMB bundle; consisting of a server, a number of desktop and laptop PCs, along with tapped-on services like installation and setting up of the network, support (a set number of support calls per annum), plus office products, mailings and fax software.
This kind of ‘bundling’ is now typical of the way in which a SMB shops. “The bundle isn’t 100% Acer, but this gives the guy a one-stop shop,” says Lamb.
“Someone running an SMB, their core business is certainly not IT. They need somebody to look after their IT, and they like to have a one-stop shop where they know they are paying X amount of dollars and where they know they are getting everything,” he adds.
Microsoft — which doesn’t normally bundle its products together — announced its SMB server product package two years ago, which Murat Kansu, server business group director for Microsoft MEA, says has paid dividends.
Its SMB bundle consists of a specially-tailored version of its Windows Server operating system, Small Business Server 2003, along with other Microsoft products.
Small Business Server 2003 and its Premium Edition also include additional security products: “It provides security as a built-in feature, it’s configured, you don’t need expert support at all,” says Kansu.
“We have simplified the installation and management of Small Business Server in such a way that a normal person, without an IT professional, can install this product very easily,” he claims.
Music to the ears, surely, of a brimming — but IT wary — start-up. Dell, HP, and FSC, its hardware partners in the region, can’t be complaining either.
Kansu also mentions another potential SMB requirement: web site building. Microsoft’s product bundle provides web site features where, if an SMB wants to build its own web site, the infrastructure technology is there.
“You might have an external agency to design your artwork, but you handle the content side of it and the technology that you need,” he says.
“Exchange is also in the bundle, and you can easily start to communicate with your customers, partners, suppliers — also communication inside the small business is highly improved,” he states.
“In this region e-mail is not as relied upon — file cabinets are still crucial — so it simplifies the productivity and workflow big-time,” Kansu contends.
A new Microsoft SMB offering with extra security and management features will be available early next year, Kansu reveals.||**||Factoring costs|~|gettyserverbody.jpg|~|IBM advises all its customers to consider the TCO before purchasing a server solution.|~|Systems are now generally being made to feel more customer serviceable, with some offerings in the SMB server space possessing only one cable (rather than a bunch), meaning a malfunctioning server can be addressed with bare hands and most of the components can be updated without bringing the system down (i.e. the powerdisc and fans).
Simplification of the ecosystem of the SMB server is a common theme. “Technology is coming on all the time. The whole idea is integration, and making it as simple as possible for the SMB environments,” says Intel’s Patel.
“We are seeing a growth in remote management. As they expand and open multiple branches — as is the trend in the Middle East — SMBs can have a central IT expert. Not only for the server but also for the client,” he states.
“Intel’s Active Management technology [for the client] will give SMBs the ability to do a reboot independent of the operating system, for example. The technology that was only previously benefiting corporates is now filtering down into SMBs. That is happening now,” he claims.
Stripping away the technical barriers for non-IT people, or at least providing them with easy-to-use back-up systems, is having a positive financial effect.
As SMB’s are all too aware, initial cost savings can be blown away at one swoop by a system failure and their subsequent inability to deal with it.
Additionally, aforementioned bundling packages and cost- savings go hand in hand. However, when choosing an SMB server, value is not considered solely on purchase price.
The development of server offerings available to SMBs and their growing desire for greater technology, has seen a parallel sophistication in how they consider their IT investments.
Ongoing IT maintenance costs are being increasingly taken into account, with total cost of ownership (TCO) and return on investment (ROI) at least now lodged within the consciousness of those responsible for IT at SMBs, if not quite at the forefront of their mind.
“[understanding of] ROI and TCO has improved from a couple of years ago, but it’s still not as high as we would like,” says Ryan D’Souza of HP, who claims that SMB customers become complacent because their server only lasts, on average, three years.
“Very few vendors have the bandwidth to get into those discussions on a case-by-case basis, because the breadth of that customer base is so large in the Middle East. But we do try as far as possible to get that message across through marketing, roadshows, and events, and this does generate some awareness,” he adds.
Other vendors are just as eager to spread the word. IBM advises all its customers to consider the TCO in making sure that when they make an IT investment, they will be getting the right return.
Abdoush insists that purchase price, although important, is not the only factor in the decision. He says customers must look at the total picture, pointing out that all its SMB models — comprising xSeries, pSeries and iSeries servers — come with a three-year warranty.
Rajesh Deepchandani, marketing manager for storage and servers Fujitsu Siemens Computers in the Middle East, places more importance on ROI, judging it to be more relevant for SMBs than TCO.
Addressing this said issue, many vendors — Sun and Dell to name but two — are designing sets of systems as a product line, which entail common components within them, making the systems easier to service and easier for spare parts stockholding.
With regards to TCO, different companies have different ways of calculation. Most common is to take on board acquisition costs, and then the running costs of the systems themselves.
But — warn a host of vendors surprisingly singing from the same songsheet — a lot of customers forget to include expensive administration costs.
Other costs factored in are the potential upwards growth of the business: so upgradability and expandability of the systems is key.
The industry as a whole agrees that upgrading of systems with additional components as your business grows, is a much better option than having to default with upgrades or replace the system.
Communication between vendor and customer, as with any two-way relationship, is critical. And different ways of reaching out to SMBs are used by vendors, with varying degrees of success.
Dell claims it is unique because of the way it deals so directly with its customers, offering a bespoke server building service to customers (albeit at the higher end of the SMB sector) which for the company eliminates wasteful inventory costs.
“They can buy online, or approach us when they want something changed, modified or added,” said Jim McMahon.“We even offer a specific service for customers, CFI (customer factory integration), where if there’s anything they want us to do that other customers may not require, we even offer that,” he claims.
Other vendors simply like to undercut pricing structures. HP, for example, offers financial incentives for both the customer and the channel partners.
In Egypt a 5% cashback (for every server purchased) is due to be launched. And its Technology Refresh programme is useful for SMB customers: at the end of a server’s lifecycle — generally three years — a discount voucher valued anywhere up to a US$1000 can be redeemed against a refresher technology.
“The SMB needs to have some sort of guarantees in terms of what return it gets on its invest-ment. It’s a trade-in programme which secures their investment, going forward,” says D’ Souza.
While SMBs perceived lack of understanding of general IT trends and their absence of dedicated IT resources isn’t as glaring as it once was, what is patently clear — above anything else in the server space — is that vendors in the Middle East are more SMB-focused than ever before. Expanding server ranges targeted at all sizes of small-to-medium businesses and making enterprise-class technology available to them is pretty good proof.
Integrating comprehensive security solutions into its products, making the server easier to install and maintain, offering incentives on price performance, and bundling the server as part of a complete, easy-to-purchase package, is evidence bordering on conclusive.
Encouraging SMBs to migrate to 64-bit and dual-core along with the rest of the industry is also an encouraging sign.
So having a powerful, cheap, and easy-to-use server pulling the strings at the heart of an adaptable, thriving and safe IT infrastructure, is now as realistic a goal for the SMB user as it is for the big corporations. For SMBs, server time is now.||**||