Virtualization and the Future of the Server Market

Arthur Cole

Market realities can be a real pain in the tokhes (that's the actual spelling; I had to look it up in the Online Yiddish Dictionary), but you can't curse the mountain because it blocks your view of the ocean.


The market reality for the hardware server makers is this: Virtualization is going to cut the demand for hardware of all kinds, but the server market will get it worst of all. With one server now doing the work of perhaps 20 in a short time, demand for all but the most basic commodity servers is about to hit the skids (with perhaps a nod for the very large mainframes, a la IBM's prediction).


The first strike against servers is that virtualization is so politically correct right now. It cuts energy. It extends hardware lifecycles, preserving landfill space. And it's good business, to boot. Virtualization meets so many needs that businesses and governments are banding together to promote it. Down Under, everyone's cheering an effort by EDS to "rationalize" more than 10,500 servers spread across eight data centers in Australia and New Zealand, cutting power and cooling costs significantly and slashing EDS' hardware budget 65 percent, as explained at Computerworld Australia.


And although the big hardware vendors will always talk up whatever hottest new server they've got, you can't help but see a strong effort to diversify, perhaps leveraging server knowledge into appliances, like HP does with the NeoView for data warehousing.


And Google, which sees big gains from broadening its search technology in the unstructured enterprise market, is heading straight for appliances as well, in case any client wasn't ready to leap directly to a hosted solution. And even then, says EE Times, they've turned manufacturing over to Dell.


However much IBM talks mainframes, the company certainly seems determined to stick with its broad server line as long as possible, offering system i, p, x and whatever else to address today's segmented market as long as possible before it devolves into either mainframes or blades. IBM is even reworking its internal structure to make sure both the i and p maintain their different identities as much as possible.


But who knows what will happen long term? The commodity server business could turn out to be quite profitable for IBM, HP and even Sun. But it won't be where the action is anymore. Business realities being what they are.

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