Technology: The Great Indian Server Dust-Up [Pg. 1]

TECHNOLOGY
The Great Indian Server Dust-Up

Who said servers are boring? IBM India and Sun India are engaged in a no-holds barred battle for the Indian server space that'll do Coke and Pepsi proud.

By Venkatesha Babu

"The synergy between our product lines is outstanding."
"The coming together of two losers won't produce a winner."
"They can't meet customer requirements."

It's colas. It's cars. No, it's servers. These lines are, as you'll realise when you read the story that follows, live quotes from execs of server makers. Servers? Not those vertical metal-and-plastic stacks that form the backbone of networks? Yes. And yes. Why would anyone want to fight over servers? Well, why would anyone want to fight over coloured water for that matter? For profits, of course. The global market for servers was worth a cool $60 billion in 2000, and the Indian market, Rs 1,428 crore (excluding workstations). But continuing disillusionment with dotcoms, the slowdown in the tech sector, and the recession in the world's pre-eminent tech economy, the US had taken their toll by the middle of this year. By the second quarter of 2001 (April-June), the growth in the global market for servers had declined by 16.4 per cent and in the Indian market the growth was just over 3 per cent. And this was before the events of September 11. That means the only way a company can grow is at the expense of others.

That's what's been happening in the global market and the competition-in its original undiluted rabid form-has cascaded down to the Indian market as well. In the period between April and June, for instance, Compaq increased its share by 4.6 per cent, and Acer by 1.9 per cent, but the rest-that includes IBM, H-P, and Sun-saw their shares decreasing.

H-P And Compaq

Will the new H-P-that's what it circles are terming the behemoth that will be created by the merger of Compaq and Hewlett-Packard -become a force to reckon with in the server space? The numbers seem to indicate they will. For instance, if one were to add Compaq's and H-P's sales numbers for the April-June quarter, the result will account for almost half the market. More significantly, it will be almost twice the magnitude of IBM's sales, and four times' Sun's.

While integration issues remain, the companies themselves are bullish about the new entity's prospects. Arun Thiagarajan, H-P's honcho in India believes the synergy between the product lines of the two companies is outstanding, and Compaq's Balu Doraiswamy-it isn't clear who will be CEO of the new H-P yet-says the complementary strengths of the two players involved will make H-P the company to beat in the server market.

However, both companies had their fair share of problems coming into the merger, and the way the US market has treated the stocks of the two companies since the announcement was made clearly shows that no one expects too much from new H-P.

While the competition in the server market can be viewed as Sun vs the rest (and that suits the company very well, thank you), or each company vs everyone else, or Sun vs IBM, it is the last that is relevant to this story. But we're getting ahead of it. You have questions to ask, right?

Some Frequently Unasked Questions
About Servers And The Server Market

If this is your last day at work, or if you want it be that, walk up to your chief executive and ask him what a server is. Most people-that may include you patient reader-do not know what a server is, or what it does. The easiest way to identify this lot is to push the entire organisation into a room where someone is talking about client-server architecture and thin or thick clients, and watch for those who nod more vigorously than hop-heads.

Even the Concise Oxford-no self-respecting journalist's workspace is complete without one-can tell you what a server is: ''Computing. a. A programme which manages shared access to a centralised resource or service in a network. b. A device on which such a programme is run.''

If that's too difficult to comprehend, just treat servers as inanimate workhorses that form the backbone of networks and which are capable of handling huge amounts of data traffic. Then, there are servers and servers.

There are low-end pc servers and in this market Compaq is King. Other companies do have a presence in this market. Recently, Compaq, H-P, and IBM decided to adopt Intel's ia-64 bit Itanium chip as a standard for low-end servers. Sun didn't and decided to put all its eggs in the UNIX basket persisting with its own Ultra Sparc line of processors.

The market for high-end servers is a different cup of java. This has traditionally been a three-player market with Sun, IBM, and H-P competing for the opportunity to serve.

On Why IBM India And Sun India Are Taking
Potshots At Each Other, And What H-P Is Up To

Having crossed that rather sensitive hurdle of enlightening the Luddites, let's move on to the issue of competition. Last year was great for server makers. The Indian server market grew by 76 per cent in terms of volume and 40 per cent in terms of value. Think growth-think dotcoms, think Internet Service Providers, and think data centres.

Hewlett-Packard India's Vice President Ravi Aggarwal has an almost wistful lilt in his voice as he remembers those glory days. ''Last year, there was great potential for server and storage sales because many new dotcoms were opening shop and several businesses were becoming e-enabled.'' But the dotcom bust is upon us now, ISPs are fading fast, and several data centres have been put in cold storage. That spells doom for the UNIX server market, which, according to data provided by IDC India, shrunk by 22 per cent between April and June 2001, as compared to the same period last year.

Going by the same data Sun has seen its share decrease by 0.7 per cent, and H-P by 6.9 per cent, while IBM has seen its, increase by 2.6 per cent. And while a series of IBM ads tout how Sun's servers are more expensive and consume more power than its own, a recent mailer from Sun (It is titled Turning This Page Can Be Injurious To IBM's Health) indulges in some old-fashioned product feature comparison before concluding that its own offering is better.

If one were to go by marketshare alone, then the new H-P (when it emerges) will be the largest player in the UNIX servers market in India. ''The synergy between our product lines is outstanding,'' says H-P India President Arun Thiagarajan, ''and we will be able to deliver what the customer requires''.

But in terms of attitude, it is Sun that wins hands down. If its CEO Scott McNealy is renowned for his brash utterances, then its India CEO Bhaskar Pramanik doesn't lag behind either. ''Compaq has stopped work on its Alpha processors; H-P has announced the end of its PA-RISC line. And customers want their servers to be supported for years after their purchase.'' And then, on a more combative note, ''The coming together of two losers won't produce a winner.''

Despite Pramanik's bravado, the new H-P will start off with some advantages. Compaq is the undisputed leader of the low-end server market, and H-P does have a significant presence in the medium- and high-end markets. That could be a killer-combo, but then, the two companies have to work out issues related to conflicting products, and integration first.

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