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"Server appliances" threaten manufacturers' revenues

Compaq debuts some of its new "server appliances," systems built around a single goal, like speed or low cost, in a way that could radically undermine the server business.

Compaq debuted some of its new "server appliances," systems built around a single goal, like speed or low cost, in a way that could radically undermine the server business.

As previously reported, Compaq's TaskSmart C-series server is the first of a coming wave of systems intended to do a specific job either faster or more cheaply than a general purpose server. The C-series is specialized for Internet "caching," a technique that quickens Web surfing by temporarily storing files closer to users.

Other server appliances will be focused on price, in much the same way that PC makers design low-cost systems for buyers who don't need every last ounce of computing muscle for common software applications. In the server segment, this portends cheap Intel Celeron processors running freely available Linux operating system software.

Such servers could become a problem for manufacturers, if general purpose server sales start to decline as customers find they can make do with better-tailored machines. Nonetheless, most major companies will soon jump into the market, afraid to ignore perceived demand.

Analysts predict as much. "It's going to be a riot," said Kim Brown, a Dataquest analyst.

The TaskSmart C-series, which uses for its operating system a customized version of Novell Netware, starts at $9,999, Compaq said.

Other TaskSmart systems are in the pipeline, focusing on tasks such as setting up virtual private networks or easily upgrading data storage capacity. Compaq is focusing on making the products easy to use.

Dell also has licensed the same Internet caching software from Novell, while Hewlett-Packard too has described plans for some Internet appliances, perhaps based on Linux. Indeed, the "open source" OS is already in use in server appliances from companies such as Cobalt Networks.

"We think Linux is going to have most of its appeal in the appliance market," said Brown.

One well-known example of a server appliance is the "Raw Iron" project from Oracle, which puts the company's database software atop Sun Microsystems' Solaris operating system. Intel and Microsoft also are investing in the server appliance arena.

IBM is taking a different strategy, placing stronger emphasis on general purpose servers, executives have said. In June, Big Blue bought up Whistle, a company that builds an inexpensive, all-purpose server for email, Web surfing, and other Internet services.

The Whistle boxes are geared toward small companies such as the offices of dentists or lawyers. IBM sees them as a good way to sell services--in this case, connection to the Internet--to the small and medium-sized business market.

For most manufacturers, however, "cannibalized" sales aren't a cheery prospect, given data from International Data Corporation showing that Compaq's server revenues aren't keeping pace with its lead in Intel-based server shipments. Mary McDowell, general manager of Compaq's Industry Standard Server Division, acknowledged the problem in a recent interview.

Because the arrival of server appliances threatens the bottom line, server manufacturers and Intel will likely have to beef up their high-end products, Brown said.

"Celeron is overkill for the processor, and Linux is free. Who needs SIMD instructions for a file servers?" he asked, referring to the new multimedia and 3D instructions available on high-end Intel chips. A more sensible chip for most appliance needs would be Intel's StrongARM, available for $20 or $30, or even 233-MHz Pentium II chips for $15 or $25, Brown said.

"These guys have to scramble out from under the appliances as quick as they can," Brown said. But at the same time, if they don't have an appliance product, they'll be even worse off. "If they ignore [appliances], they'll really get slaughtered."

The TaskSmart C-Series is available in three models, the C1200R, C1500R, and C2000R, all of them rack-mountable, a space-saving configuration. The C1200R and C1500R are available now, and the C2000R is scheduled to arrive later this month.

The different models are distinguished by the number of network cards they can use, how much memory they have, how many hard disks come with the box, and what fancier data protection features are supported. The C2000R can use as many as five Ethernet cards and up to six 9.1GB hard disks, and comes with 1GB of memory.