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Console servers become cash machines

Who would have thought that boring console servers would ever become interesting again?

Every so often, something unsexy and boring becomes interesting. Few people drool over console servers, even those who deal with them on a regular basis, but an announcement by Opengear, an open-source console server company, manages to make them look sexy by appealing to resellers' wallets.

By using free open-source software like Nagios and Powerman in addition to writing their own code, Opengear passes along significant price reductions compared with their competitors like Avocent, Lantronix, Perle Systems, and Digi International.

While the primary beneficiaries of lowered prices are their customers, Opengear has identified and targeted another group that benefits--their partners.

Opengear's VARs see up to 25 percent profit margins on console servers, notable because the market standard is about 3 percent to 5 percent.

I talked to Opengear representatives who told me that their numbers are going up, with a record number of sales booked in December. The console server market is about $200 million annually, and Opengear is unusually optimistic about 2009.

Part of that optimism may come from their management. CEO Bob Waldie is an open source veteran and one of the pioneers of embedded Linux who has taken a number of open-source start-ups through to acquisition (most recently, SnapGear which is now part of McAfee).

However, part of Opengear's cheery outlook might be good old-fashioned schadenfreude: Among their publicly held competitors, Digi International cut their first-quarter sales forecast by almost 15 percent and Lantronix was just delisted from the NASDAQ.

The channel often needs to sell console servers to manage their data centers, and Opengear is counting on gaining ground in what used to be a pass-through market. Is it sexy? No. But it is smart.

By keeping it simple and open source, the company is able to offer their partners something that competing products can't--high returns.