Telecom companies MTN and Vodacom are blazing a trail into Africa. In their wake are a host of local companies providing services and solutions to the companies operating across sub-Saharan Africa.
Serving these players are IT companies such as Siemens, IBM and Stratus, a provider of high-end servers that are virtually 100% reliable. With Mosaic Software, Stratus is involved in six projects across the subcontinent to install switching networks for banks. Stratus assures the banks that their networks will suffer less than five minutes downtime a year.
For IT companies, business may be booming in Africa, relatively speaking, but times are tough elsewhere. Managing IT costs remains the single biggest challenge facing chief information officers and other IT executives. And server vendors and integrators are under pressure to deliver products and services that will help IT managers bring their data centre costs under control.
Their success seems unlikely: industry bellwethers Intel and IBM reported poor sales of servers and PC-related products in their last quarter. "We believe the economic recovery is being pushed out," says Intel chief financial officer Andy Bryant. The chip maker shipped 6% less processors in the second quarter, ended June 30, than in the first quarter.
IBM's sales suffered from "customer caution", says chief financial officer John Joyce. IBM's server revenue fell 16% in the second quarter compared with last year. The only server line that showed sales growth was its lower-margin Intel-based offering. As those systems get more powerful, they offer a less costly option to Unix systems. IBM's Unix server sales fell 27%.
More powerful Intel systems appear to be hurting Sun Microsystems. Sun's 2002 fiscal year revenue fell 32%. Despite its drop in revenue, last quarter Sun managed to bolster its total market position in both revenue and shipments compared with the previous quarter at the expense of newly merged competitor HP, according to International Data Corp's (IDC) worldwide quarterly server tracker for 2002. Sun also maintained its lead in the Unix market, with more than 78 000 units shipped and US1,75bn in revenue.
Sun says across the server market it increased its revenue by 13% in shipments quarter-over-quarter. Sun attributes much of this to its high-end systems that grew by 74%, representing the strongest growth of any competitor in any segment of the server market. In addition, Sun increased unit shipments by 14% in the entry-level server market, growing faster than HP, Dell and IBM and suggesting that its UltraSPARC and Solaris-based product lines continue to be viable alternatives to the Wintel (Microsoft/Intel) server market.
They will need to keep their wits about them. Microsoft is an ambitious player in the server arena with almost 25% of bottom-line revenue generated in its server business. It has an offering that spans the length and breadth of the market. According to Microsoft product manager Desmond Nair, the high-end products are competitive when features such as the number of transactions per minute and the price per performance are compared.
"It allows companies to run a high-end solution economically," says Nair.
Microsoft forecasts 20% growth in its server business. It is making inroads into the high-end server market.
Lending more weight to Microsoft's Windows platform is Stratus, which has come down from its lofty heights (where its products cost about $400 000 or more and were guaranteed not to fail), with a product that costs from $25 000 upwards. Its new range of fault-tolerant systems, which are still guaranteed not to fail, provides continuous computing technology for Microsoft environments. "The need for Web-enabled interfaces to critical back-end systems and the increasing importance of Windows-based applications such as databases and e-mail used for transactions may drive the demand for this type of computing, where business continuity and continuous data processing are critical," says Stratus Computer Systems MD Danny de Beer.
Stratus is the only server maker to disclose recorded "availability" levels for its products based on reported service incidents from the installed base. The Server Uptime Meter is updated daily and can be viewed on the Stratus website.
Meanwhile, server vendors are battling it out in a market that is consolidating around a few core technologies, notably the operating system and the chip technologies (see graph). "Proprietary operating systems will decline as consolidation aims at lower administration costs," says Gartner vice-president and enterprise servers & storage research director Josh Krischer. "Fuelling this is the fact that independent software vendors are grouping themselves around clear winners."
Local research company BMI TechKnowledge says smaller players appear to be losing market share to dominant players such as Sun, Compaq, HP and IBM. "Smaller vendors are slowly disappearing or being swallowed up by larger players. This scenario is not unique to SA, but mirrors the international trend."
These days both hardware and software vendors are paying closer attention to customer demands and the solutions. "Every IT department is on a drive to reduce operational and capital expenditure," says Jan Dry, systems architect at Persetel Q Vector, Comparex Africa's data centre company. "Server vendors have responded with a host of solutions - ranging from capacity-on-demand and extended warranties to server-consolidation technologies and offerings built on the open-source operating system, Linux. Even the trend towards high availability is about saving the costs associated with downtime."
IT departments are also looking for more flexible terms for payments on server capacity and maintenance. As a result, the "capacity on demand" ownership model is becoming popular because it allows companies to take ownership of a large, multiprocessor server and only pay for processing power as they switch it on, says Dry. "It is rare to have computer in which the CPU [central processing unit] does not spend at least 50% of its time idling, waiting for disk activity, network activity or, most likely, waiting for a user to do something," says Krischer.
This makes it impossible to extract the best return on your investment, he says, and users could benefit from exploring offerings such as the pay-per-usage model developed by Unisys.
To achieve the best returns from server investments, companies must manage these as part of a fabric of services and products that form an IT infrastructure, argues HP product manager Andrew McNiven. He proposes companies design an adaptive infrastructure built on four key pillars:
- Automated systems provisioning where the deployment of server, storage and networking resources are automated;
- Intelligent fault resilience, or the ability to reduce unplanned downtime through the use of software and hardware tools that predict, diagnose and respond to faults or potential faults;
- Virtual presence and control, or the ability to access and manage server, storage and network resources securely, using remote management tools, regardless of where the resources are physically located; and
- Dynamic resource scaling, or the ability to scale computer and storage resources up and down in response to business needs.
If you build this adaptive infrastructure on industry-standard building blocks and accepted interconnect technologies, says McNiven, "then you have an infrastructure that is modular, extensible and interoperable".
Vendors are also offering extended warranties on their systems. Where a high-end server used to come with a one-year warranty, now the warranty often lasts for two to three years.
Linux is also becoming an increasingly popular alternative to the Windows platform as IT departments rebel against the high rand cost and new licensing structures of Microsoft server software. "Several local companies," says Dry, "are replacing low-end and midrange Unix servers with cheaper Intel-based solutions that use the Linux operating system."
The low-cost end of the server market is as important, if not more so, as the high end and vendors are scrambling to provide solutions. For instance, Sun Microsystems has launched an enterprise-class, low-cost system that is pre-integrated with either Linux or the Solaris operating environment and bundled with the Sun ONE (Open Net Environment) software stack and Java.
Entry-level servers show strong growth, says Senior IDC analyst John Humphreys. "Linux-based servers are exploding at 15%-20% growth every year."
"To date, organisations have been wary of using Linux for mission-critical applications, but that is changing. As an open-source platform, Linux is cheaper than Windows or commercial Unix variants and it runs on Intel hardware, which is traditionally more affordable than Risc (reduced instruction set computer) based hardware," says Dry.
As Intel continues to deliver CPUs, with faster clock speeds in line with its published roadmaps and as user confidence in the new Itanium 64 bit processor grows (see next story), more organisations will deploy Lintel (Linux and Intel) solutions in the data centre, he says.
Linux is also making inroads into the top-end of the market, where IBM's i-Series mainframes still dominate. Several large European institutions are already using mainframe-ready versions of Linux to escape notoriously high mainframe software licence costs.
Distribution company Rectron CEO Mark Lu, who predicts an upturn in the local server market in early 2003, says the greatest growth will be in the small to medium enterprise market. "There will be an increasing commoditisation of entry-level server products in line with PCs and other offerings central to the corporate network. We believe the server market will follow the desktop PC market and future purchases will be made on price first, then specification and performance. The brand will not play as big a role in the purchase decision as it has in the past," he says.
Rectron has recently established a server division, where it is assembling nonbranded server offerings based on the Intel Xeon platform. "Companies find brand name servers, which usually carry a price premium, do not necessarily outperform nonbranded or vendor-branded offerings. In fact, these white box' products often come with a superior specification at lower prices. Market forces are increasingly dictating that white box products are the more prudent purchase," says Lu. Rectron's servers, which are targeted at SMEs and mid-sized organisations, offer performance levels that approach traditional high-end servers, but without the dollar price tag. Lu predicts the Rectron servers will cost about R30 000-R40 000.
Dry says the trend towards server consolidation is accelerating as companies look to save data centre space and reduce administration costs by moving applications hosted on many smaller servers onto large, centralised boxes.
Companies are investing in larger servers, with more powerful processors, to reduce the costs of database and enterprise application software licences, which are increasingly based on the number of processors used to run them rather than the number of seats in use. In an Oracle database environment, the cost-savings accrued by using fewer but more powerful processors can amount to millions of rand, says Dry.
Sophisticated partitioning technology allows companies to run separate operating systems on "virtual" servers within the same machine in certain high-end servers. That allows customers to move applications that run on different platforms onto the same machine without needing to port them over to a new operating system.
New technologies and the solutions around them are much in evidence, but the market still needs to be convinced. Chief information officers recently surveyed by Merrill Lynch reported that over the next three to five years, they planned to increase spending on servers by just 10%.
Sasha Planting
