The server market in India is clearly undergoing a major transformation from box-selling to solutions selling
By Varun Aggarwal
After recording a flat growth in 2008 and negative growth in Q1 2009, the Indian server market is expected to bounce back. In 2008, the overall server market in India stood at $700 million according to Gartner. Of this x86 servers contributed $318 million, while the remaining came equally from Itanium-based servers and RISC servers.
However it was in the first quarter of 2009, when the server market took a major beating. According to Gartner, the server market shrank 30 percent sequentially from $150 million in Q4 2008 to $130 million in Q1 2009. The biggest fall was experienced by the x86 server market, which dropped from $75 million in Q4 2008 to $60 million in Q1 2009—a drop of 21 percent.
“No doubt the economic slowdown has had a negative impact on the server market. But we are positive about the market and expect good growth going forward,” opines Anoop Nambiar, Country Manager, Business Partner Organization, IBM India and South Asia.
Despite a bad Q1, Gartner believes that the market will recover the lost ground and will be marginally down by a percent in 2009.
“After the initial slowdown, the server market is back on the growth path. We are seeing good spending coming from the government for e-governance projects and IT automation of various departments. Education is another sector where demand for servers is on the rise,” says Arunangshu Basu, National Server and Alliances Manager, Dell India.
The IT and ITES sector, which had seen a lull in their infrastructure investments due to unfavorable business scenario, have now resumed their spending albeit to save cost. “The sector is increasingly investing in server refresh for infrastructure consolidation and virtualization,” adds Basu.
Telecom is another sector that is likely to see increased demand for servers. With new entrants in the process of rolling out mobile services and existing players focusing on bringing 3G services to the market, server demand from this sector would only increase.
Intel expects server refresh to dominate demand over the next 6-12 months on the back of the launch of its Nehalem architecture Xeon family. “Servers based on our new Xeon processors provide significant productivity gains and energy savings. The strong ROI benefits will compel customers to look at refreshing their server infrastructure and that’s what will drive demand,” says Sandeep Aurora, Director, Sales and Marketing Group, South Asia, Intel.
Emerging trends
As the server market moves on the path of revival, there is a major transformation underway in terms of how customers buy servers and how vendors are positioning their products.
Opines Naveen Mishra, Senior Research Analyst, Gartner, “The Indian customer is coming of age when it comes to buying servers. Apart from technology, they are keenly looking at other important aspects like power consumption, floor space requirements and manageability.”
Agrees Santanu Ghosh, Country Manager, Business Critical Systems and Nonstop Servers, TSG, HP India, “Earlier when we talked about TCO, it was mostly about the acquisition and the maintenance cost over the lifecycle of the product, but now customers want to know about parameters like the power and cooling costs, floor area, etc. When you factor these aspects, the older TCO calculations account for only 25-30 percent of the actual TCO.”
As a result, HP has recently launched its G6 Proliant servers based on the Intel Nehalem platform—which has the concept of modular power supply—that gives customers a choice of power supply with the server. “When a server is designed, it has a lot of expandability built into it. The power supply that comes with a server is in accordance with the maximum expandable configuration. Our servers now come with a modular power supply which can be switched to 400W, 800W, 1200W or 2000W depending on the current capacity and utilization,” explains Rajesh Dhar, Director, Industry Standard Servers, HP India.
According to Dhar this could mean an annual power saving of Rs 25,000 for a Rs 1.5 lakh server. HP has also incorporated its proprietary sensor technology in the rack servers, which was earlier available only with blade servers. “Our rack offerings come with sensors that have the ability to switch off a fan that is not being used and automatically increase or decrease the speed of a particular fan. This further saves cooling cost,” Dhar adds.
HP’s staunch competitor IBM has also refreshed its entire server product range in keeping with the changing dynamics of the server market. In May, IBM overhauled its entire System x, BladeCenter and Express server portfolio to address the challenges of hefty costs of power usage, IT management pileup and under utilized or idle processors. The new portfolio, IBM claims, offers a power saving of at least $100 per server per year, drives server utilization up to 80 percent, achieves 9:1 server consolidation and reduces operating cost by 90 percent.
“Infrastructure consolidation, virtualization, and green IT have been leading the change in the server market, even among SMBs. Despite the difficult economy, Indian companies are eager to invest in green technologies,” states Nambiar.
Nambiar points to a recent survey done by IBM that found that nearly 63 percent of the polled Indian SMBs have already deployed green server rooms to increase energy efficiency or have a pilot project underway. “A majority of the SMBs polled also said that within 12 months they are planning to virtualize their server technology, consolidate storage systems or retrofit their server rooms to become energy efficient,” he adds.
Dell too has refreshed its server line. “We have innovated extensively on server power and cooling by introducing completely new thermal designs and better efficiency supplies. We will also introduce newer servers both in the rack and blade form factors,” informs Basu.
Market strategies
While technology innovation is driving vendors’ product strategy, sales strategy, especially in the fast-growing SMB segment, is being led by offering vertical-specific bundled solutions. HP has identified 25 new microverticals and more than 200 ISVs that have specific business applications for each of these microverticals.
“We have invested substantially in creating Proof-of-Concepts for SMB customers in each of the focus microverticals. For instance, in the healthcare space, we have tied up with an ISV called Shrishti—who has locally-made hospital management software. Using which we have created a bundled offering for under Rs 10 lakh that can computerize a mid-size hospital end to end,” says Dhar.
HP has also created a digital library bundle based on Open Source software developed by MIT Labs to help colleges easily convert all their paper records to digital. Another solution bundle created by HP is a school ERP system.
IBM too has been aggressively promoting what it calls the Smart Business platform, aimed at providing vertical-specific SMB solutions. “Smart Business is our integrated IT platform that delivers pre-loaded and pre-integrated applications with IBM software. Currently, 30 ISV have ported their applications on this platform. The initiative is backed by customer financing program,” said Nambiar.
IBM claims that the unified offering can save over 60 percent cost. “The acquisition cost is reduced as the integration, validation, and testing of the total solution eliminates the need for expensive sizing and installation services during implementation. The administration cost is also reduced as we automate patch management, simplify user definitions, streamline backup and recovery, and make support more proactive and effective, thus reducing downtime. The total savings will depend on the solution, but 30 percent reduction in acquisition cost and 30 percent reduction administration cost is common,” states Nambiar.
Partner drive
With aggressive go-to-market strategies, vendors are doing everything to enable their partners so that the server-led solutions opportunities in the SMB segment are realized. IBM recently launched a campaign called IBM BladeCenter Express Bus, where along with its business partners it went on a multi-city road show to showcase real-time benefits of blade server and Smart Business offerings.
“With the server market expanding, we are creating tools to make it easier for partners to sell. We have created a widget using which partners can access any partner-related tools, programs, offers, pricelist in a single window. Other major initiative is the mobile price tracker, which allows partners to access the latest information on IBM run-rate products, options, prices, schemes and rebates on their mobile phones. The application also helps partners configure base models with required options and arrive at a final price. In addition, we have invested in the Online Price Request Application (OPRA) which allows partners to pass on their leads and incorporate price requests online,” informs Nambiar.
Dell which launched its SMB channel program two quarters ago is also aggressively enabling its partner network. Recently, it conducted an eight-city campaign called SMB Experience Roadshow bringing its partners and customers on the same platform to inform them about the virtues of its server and storage offerings and emphasizing on the benefits of technology refresh.
“We along with our partners are studying customer environments and helping them calculate the cost of
running older inefficient servers, and the ROI of replacing them with latest technology,” says Basu.
Conclusion
The server market is clearly undergoing a major transformation from boxselling to solutions selling. And to capitalize on the server opportunity partners will have to follow a solutions-based sales approach.
http://www.crn.in/Serving-Solutions-Market-Focus-001Sept009.aspx
