Compaq changes server strategy

The company refocuses its corporate strategy along two fronts, selling volume Windows NT and Linux server computers and targeting niche markets for its version of Unix.

3 min read
Compaq is refocusing its corporate strategy along two fronts, selling volume Windows NT and Linux server computers and targeting niche markets for its version of Unix.

The move means major changes for the Tru64 Unix operating system and the Alpha processor technologies inherited from Digital Equipment as well as Compaq's fledgling Linux effort. The company will focus the Tru64 OS on a handful of specialized markets while expanding Linux's presence on its Intel-based ProLiant servers, as it maintains its high-volume market strategy for Windows NT.

"What we are doing, and what we believe all will do long term, is specializing our Unix in select markets," said Steve Kirchoff, vice president of strategic marketing for Compaq's Enterprise and Services group. "We are seeing this need...so we are moving early."

Compaq will bet Tru64 Unix on four specific markets: high-performance technical computing, telecommunications, business intelligence, and select high-end corporate "enterprise" applications, such as e-commerce, Web hosting, and enterprise resource planning.

Software developers are the linchpin of Compaq's Tru64 strategy. Kirchoff characterized the approach as "a highly focused strategy that goes after highly profitable markets with selected ISVs [independent software vendors]." Compaq has in the past successfully courted software developers to bolster its enterprise NT strategy.

But analysts suggested Compaq might be circling the wagons against an initiative from IBM, Intel, and others. Project Monterey, which is a cooperative effort between IBM, Intel, SCO, and Sequent, seeks to produce a version of Unix for Intel's 32-bit and 64-bit chip technologies. Monterey has enormous potential because it supports Intel's next-generation Merced processor and will draw on SCO's enormous base of users.

Compaq is a bit player in Monterey, placing its bets on Microsoft and 64-bit Windows support for Alpha.

Compaq's posturing around Linux also casts a potential shadow over its Tru64 Unix, as the company ramps up more ProLiant server and AlphaServer systems for Linux. But Compaq executives dismissed any favoritism of Linux over Tru64 or an abandonment of the Unix it acquired with Digital Equipment.

"Our commitment to Tru64 Unix goes indefinitely into the future," said Don Jenkins, vice president of marketing and product management for the Unix software division of Compaq. "We don't have any plans to de-emphasize Tru64 Unix anytime in the future."

Much of Compaq's Linux strategy revolves around increasing its presence on ProLiant servers, the industry's highest-volume server. International Data Corporation reported that Compaq sold 184,000 ProLiants during the first quarter, about a third more units than IBM's total for all server categories.

Compaq executives say little about Alpha when discussing Linux, despite its growing popularity among the Linux community.

"Since the Digital acquisition there have been continued concerns about [Compaq's] commitment to Alpha," said Lindy Lesperance, analyst with Technology Business Research. Those doubts have increased in the minds of Compaq's customers and business partners since Eckhard Pfeiffer stepped down as chief executive in April, she explained.

"The company is in a position where it has to manage costs," said Lesperance. "They need to get rid of the dogs of the business. Some would certainly argue that's Alpha and Tru64."

If Compaq's Alpha business is going to be successful, the company has to "start telling a story that makes sense to everybody," said Jim Williamson, research manager at IDC. "They've done that to an extent. They've rebranded their Unix and put a lot of support behind it and also behind Alpha.

"But it's almost like they're missing something, like they don't have a story why people want to buy big servers from Compaq any more," he added.

Compaq's renewed strategy of niche markets for Tru64 and the volume space for NT and Linux may be that story in motion. In an executive memo circulated around Compaq last week, Ben Rosen pledged continued support for Tru64 and Alpha and an additional $100 million investment in software partnerships, marketing efforts, and field programs.

"The company has agreed at board level to put a lot of resources behind Tru64. That is also making a statement as a company that we are committed to Alpha as an architecture," Kirchoff said.

All of this follows a study released by IDC yesterday indicating NT's worldwide server market share would increase to 30 percent by 2003, up from 13.8 percent last year. Unix will maintain its leadership position, with 41 percent share in 2003. That will translate into about $27 billion and $37 billion in end-user spending for NT and Unix, respectively.