Indeed, in the first quarter of 2003, Dell sold just 400 eight-processor servers, a tiny fraction of the 246,000 total it shipped, according to IDC analyst Mark Melenovsky. Dell plays a small part in the eight-processor Intel server market, which had sales of $237m in the first quarter of 2003, he said. Dell's decision reflects a debate in the computing industry about the best way to handle server work. Traditionally, heavy-duty applications ran on single machines such as Unix servers or mainframes that today have dozens of processors. This technology, called SMP, for symmetrical multiprocessing, also is known in industry jargon as "scaling up." Increasingly, though, computing companies are emphasising an alternative called "scaling out," spreading work across a large number of vastly less-expensive low-end servers. Some tasks, such as hosting Web sites, are amenable to this approach, but with others, such as hosting large databases, it's more difficult. Although the scale-out approach has major support from companies such as Oracle, it's still a young technology, and there's still a lively market for multiprocessor servers. Skipping much of the higher-end server market hardly spells economic doom for Dell. Melenovsky pointed out that lower-end systems are getting more powerful, the eight-processor server market accounted for a small fraction of the $5.1bn Intel server market in the first quarter, and, in the long run, Dell's approach is likely to prevail. "To a large extent, their strategic position is pretty close to the mark of where we think a lot of the market is going to head," Melenovsky said. A four-processor server will be a building block out of which bigger multiprocessor servers will be assembled. That transition will take place over the next four or five years, he predicted. Hand has a faster schedule. He said scale-out technologies are ready today, bolstered notably by Oracle's 9i Real Application Clusters database software. The time has come for Dell to take on the disbelievers and help tip the balance, he said. "Now is the right time to drive strategic investments behind scale-out. If the market is left to debate what is the right one, then this transition will be delayed," Hand said. "I think it's ready now. It's not unusual to find skepticism when there's any level of change out there." Fighting over the high end
Dell has been gaining server market share. But its ambitions for selling higher-end hardware haven't always been fulfilled. In 1999, it began selling the eight-processor PowerEdge 8450 based on Intel's Profusion chipset. "They failed miserably with the Profusion product a few years ago," Brookwood said. In 2000, Dell signed a deal to sell Unisys' 32-processor Xeon server, but cancelled the deal a little more than a year later. And in storage systems, Dell aggressively funded in-house efforts before eventually opting to sell systems from storage specialist EMC. While Dell is retreating, Unisys, IBM, Hewlett-Packard and NEC are getting more aggressive with high-end Intel servers. "Clearly, the large-scale SMP market is the bigger market today and will continue to be for awhile," said Tim Dougherty, director of marketing for IBM's Intel server group. "As two-way and four-way systems get more powerful, that'll change." Part of the efforts by Dell competitors to build large servers are linked to a push by Microsoft and Intel to gain a foothold in the high-end server market, where unit shipments are small but revenues are immense. Microsoft has begun boasting that Windows Server 2003 has attained some of the high-end server abilities previously reserved for Unix and mainframes. And Intel, helped in particular by the higher performance of its Itanium family of chips, now sells processors used in servers the size of a pair of refrigerators. Hand has no doubts, though. He believes Dell's close contact with customers gives the company a better idea of coming trends. "Dell is a very pragmatic company," Hand said. "A lot has changed since we started on larger SMP boxes a couple years ago. Market conditions have changed a lot, technology has changed a lot and customer input has changed."
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