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IBM campaign targets Dell servers

Big Blue's new sales campaign takes aim at Dell's lukewarm backing for blades and lack of eight-processor servers, then offers a price break on its rival machines.

IBM has a two-powered plan to lure Dell customers to its servers: Point out the holes in its rival's line-up, then offer price cuts on machines that fill the gaps.

Next week, the company plans to launch a sales campaign--"Dell on Ice"--that will offer 15 percent discounts on its BladeCenter system and on its x440 top-end Intel server. The campaign targets Dell's blade servers, which the computer maker has not been pushing hard, and Dell's lack of a high-end machine with more than four processors.

"It will be a Dell 'win back'-focused approach," Jeff Benck, director of xSeries product marketing at IBM, said in an interview.

Big Blue is devoting a team of hundreds of sales and technical resources staff to the campaign, according to Benck. The program runs through the end of the year and is available to Dell customers who aren't IBM customers.

"If you take away Dell pricing advantages, they're a pretty soft target," Illuminata analyst Gordon Haff said.

At the center of the push are IBM's BladeCenter system, which houses up to 14 two-processor blade servers in a single chassis, and the x440 server, which can accommodate as many as 16 processors.

Round Rock, Texas-based Dell has scrapped its plans for an eight-processor server, CNET News.com first reported in July. The company argues that linking two-processor or four-processor systems into a group that performs like a high-end system will prove sufficient for its customers.

Once-anemic Intel-based servers are growing in capability and market share. Research firm Gartner has projected that this year, Intel servers will replace Unix servers as the largest single section of the server market.

As for blade servers, Dell believes they are still too new for most buyers.

"We haven't abandoned blades. But demand isn't as strong as once perceived," said Reza Rooholamini, a director in Dell's Enterprise Systems Group.

Dell predicts that demand for blades will take off in about a year, said company spokesman Liem Nguyen, who declined to comment on the IBM marketing program.

According to IDC statistics for the first quarter of 2003, Dell sold more blade servers in the United States than did HP or IBM, but it lagged the other two worldwide, Dell said.

Jostling for position
The marketing push illustrates that IBM is taking seriously its commitment to promote its xSeries Intel servers and to get behind its higher-end products, such as its pSeries Unix server line. In addition, it shows that the Armonk, N.Y., company isn't worried only about competition from server market leader Hewlett-Packard.

Dell has been successful in selling Intel servers. It took second place in revenue last year, according to research firm Gartner, but is encroaching on top-ranked Hewlett-Packard. IBM is in third place.

HP is a harder target than Dell, according to Haff.

"HP can point to faster processors for the moment, a quite broad product line and a very respectable management story," he said.

One factor is that HP has products that compete with IBM's blades and eight-processor servers. Another is that the company is a step ahead of Big Blue in some regards: This week it introduced dual-processor blades that use Intel's latest 3.06GHz Xeon DP processor and put a faster 2.8GHz Xeon MP chip in its four-processor blade.

Benck said IBM will release blades with 3.06GHz processors within 90 days. It also plans to launch its first four-processor blade in the second half of the year. He promised that IBM's four-processor blade would be technologically superior to HP's bulky model, which Benck described as a standard server turned on its side rather than a blade.

Though the BladeCenter chassis accommodates Intel servers, it doesn't bear the xSeries brand that is carried by IBM's Intel server line. That's because the system will be able to house blades that use the PowerPC 970 variant of the IBM Power processors that are used in its Unix servers.

But the Power blade appears to have slipped in schedule. It will ship to early customers in the fourth quarter, with full production beginning in the first quarter of 2004, Benck said. Previously, IBM said the product would ship in volume this year.

Benck said a blade using AMD's Opteron processor is an option under consideration. IBM began selling the standalone eServer 325, which uses the Opteron, last week.

Hot stuff
Competition between server makers is affected by the technological challenge that's involved in creating blade servers. Companies that have the engineering skills to deal with this challenge can therefore get ahead.

One of the biggest problems is dealing with the heat that processors throw off; systems that get too hot can produce errors or crash altogether, and the densely packed electronics of blades mean it's harder to move the heat sources apart. The situation applies to other computing equipment as well, and some IBM engineers have suggested a return to water cooling as a way to handle the problem.

Benck disagrees, saying customers want to stick with air cooling.

"The last person to water cooling wins," Benck said.

Benck touted IBM's engineering skills in the area but said Intel must pull its share of the load.

Wall Street customers--demanding buyers who often stack up hundreds of servers in mammoth data centers--recently brought the heating issue up at an Intel-sponsored meeting, he added.

"It was an indication that Intel needs to help solve this problem as well, and they will need to take some ownership of it," Benck said.

Intel has been bumping up against the upper end of its heat limits, because it's been rapidly moving to processors that run at a faster clock cycle, likely in response to competitive pressures from AMD, he said.