What would you do if you found yourself operating in a sector where the outlook ‘remains highly challenging’ at a time when existing macroeconomic conditions are limiting IT spending, an area where platform migrations, business challenges and technology changes all combine to cause significant change across the industry?
This is a question server vendors and their channel partners are having to address given the state of the market right now, and the challenges it faces as articulated in a recent analysis by Gartner. The market research company also highlighted the challenges facing the x86 segment of the server market as new servers based on extreme low energy processors start to gain market share.
The downward trend in the server market is backed up by sales figures. In June IDC reported Q1 server sales declined 12% year on year in EMEA, a second consecutive quarter of annual revenue decline. IDC figures for worldwide sales for Q2 showed a 4.8% decline in revenue. IDC noted server demand in Western Europe in the second quarter was "particularly soft".
Gartner also reported Q2 server revenue in EMEA was down 11.6% and shipments fell 4.4%. Research director Adrian O’Connell noted the figures represented a third consecutive quarter of decline in shipments, and a fourth consecutive fall in revenue. "The EMEA market continues to struggle as a result of broader economic challenges," he said.
IDC research manager for Enterprise Servers, Jed Scaramella suggested the changing dynamic of the server market was being reflected in the sales performance of blade and density optimised servers in Q2 compared to x86, RISC and Unix servers. He said IDC had observed "an increasing trend towards form factor specialisation in the market as both blade and density-optimised servers continue to outperform the market. Together they grew 15% in annual revenue and now represent 22% of the market. These modular form factors are expected to continue to gain adoption, with blades targeting virtualised environments in enterprises and density-optimised servers targeting large-scale homogeneous environments in data centres."
Given these circumstances, what should resellers do to adapt to the changed nature of the server market? And might the requirement, according for Gartner, for vendors to "focus on excelling at execution" give partners a more prominent role in their server strategies or a smaller one?
Orchestration
Adam Grennan, country manager at Cisco Ireland, accepts that the server market is changing, "not just in terms of CPU advancement but also the way in which the overall architecture is being built". It’s being driven by customers applying different requirements to their data centres. "We are seeing a move to converged compute where CPU, storage and IO are coming together on the server platform," he remarks. "This has many benefits, particularly in terms of provisioning either inside or outside of a cloud infrastructure. The buzz right now is all about service orchestration and time to provision, ie how fast can we make an application available to the business by presenting the required amount of CPU, memory and IO."
As a result, Grennan says server platforms are being "re-architected" to take those requirements into account. For example, servers are being built that are optimised for virtualisation rather than having virtualisation added to them as an afterthought. For resellers, he adds, this provides them with the option to differentiate at the services level. "The skillset required to manage this converged server architecture has changed," he argues. "The support partner needs to understand server storage and networking to provision and get the most out of new platforms like [Cisco’s] UCS."
Curiously, Ciaran Hynes, channel sales director at HP Ireland’s enterprise servers, storage and networking (ESSN) division, does not focus too much on the server hardware at all. Instead, he argues that as customers are forced to take more aggressive measures with all aspects of their business, the advent of cloud computing will provide them with alternatives that suit their desire for strategy change. He believes the manner in which organisations map their requirements to what is available from the four elements for delivering services (traditional onsite infrastructure, on-site private cloud, off-site managed cloud or off-site public cloud) will drive change in the IT sector "rather than energy efficient servers".
Needless to say, HP has a strategy to suit this perspective, known as "the converged cloud strategy" which Hynes claims provides all four elements "in an integrated, non-proprietary and open manner". Partners will have "a very prominent role" in the strategy going forward, he adds, in helping "guide customers effectively along this journey of dispersed deployment".
Hynes reveals that many partners have already made significant investments in training and he believes it is important for them to invest in boosting their skills "as now more than ever, the customers will need them to act in the ‘trusted advisor’ role". Partners will need to invest time in understanding the various cloud solutions. HP has a number of certifications available, such as private cloud solution Blade System Matrix, which covers deployment, migration of data and cloud ‘bursting’ to off-site clouds.
Customers will adopt the new converged cloud strategies over time, so there won’t be a ‘big bang’ approach, nevertheless, he suggests they evaluate "what is available now so they can understand and advise on the merits of each".
Relocation
Unlike Hynes, Tom Wolohan, senior solutions architect at Datapac, says that energy efficiency is an important consideration going forward. He agrees with Gartner that customers are moving away from x86 technologies with the emergence of the public and private cloud. New energy efficiencies from ARM processors and others "will drastically reduce power consumption within data centres". The reduction in energy costs they bring will provide a huge incentive for companies and organisations to relocate their IT environments into the cloud". In turn, this will "decentralise the role of the IT department and bring the reseller close to providing an all-in-one solution".
In Datapac’s case, the emphasis is on helping organisations "take full control of these advances through managed services. IT-as-a-service is now a more prominent and inevitable conduit for all parties involved". But like HP, it offers "a hybrid solution where possible to assist clients in moving their environment to the cloud".
It is significant that whatever the involvement of companies such as Cisco, HP, Datapac and others in the server market, they barely mention the hardware at all. Paul McCord, director for channel sales at Dell Ireland, offers a cursory mention of "the changing face of the server market" in terms of the increase in blade servers and "the upturn in acceptance of low latency or extreme low energy processor based servers" but merely as "another strand to be managed in their portfolio offering to their respective customers".
He makes the point that resellers "have managed changing technology as a given for years at a hardware, software or services level, and have typically moved more quickly to adapt than many mainstream vendors". Those words echo the view of Datapac’s Wolohan who believes rapid changes and advancement in computing technologies come with the territory as far as channel partners are concerned. If anything, those changes have increased in frequency: "The changes in the last five years have accelerated beyond what was achieved in the previous 15 years," he states.
McCord does suggest, however, that as server infrastructure becomes more easily managed and long lasting, resellers "have to develop differing areas of expertise away from the classic managed service model, but the evolution of that has been a daily concern for resellers for some time".
All of which brings us to the key issue of "execution". Gartner placed a strong emphasis on vendors "excelling at execution" in the current market. For many, execution is a significant part of the role they expect channel partners to fulfil. McCord says execution "has always been the key element of the success of any vendor or reseller", The current economic situation in Europe and Ireland has brought that into very sharp focus. For vendors, execution means getting equipment, ideas and services to market in the most efficient and cost effective way possible for customers.
Resellers have added their credibility to vendors by building services and capability around vendor platforms "and enhancing the overall offering to the customer. That will not change in essence". There is less money around at the moment and some business will be based on short term expediency, retention or ‘keeping the lights on’ but "the central tenet of value-add does not and will not change for long term success. Those who, in the main, hold their nerve and continue to add intellectual and tangible value to what they sell will be standing at the end of it", McCord argues.
That shouldn’t come as a surprise to most channel partners. It was ever thus. Vendors have placed a high emphasis on the virtues of value add and professional services from their partners for some time. Grennan at Cisco believes resellers that develop their skills to reflect the new server environment can gain a competitive advantage in delivering improved provisioning and service orchestration. "In essence, the channel partner becomes more prominent than ever," he claims, "given the increasing scope and ability of these newer server platforms and the blended skillset required. The ability to add greater value has increased significantly with quality partners required to support vendors’ strategies in the area."
Customer requirements
From a partner perspective, Edel Creely, managing director at Trilogy Technologies, says that server hardware is not something it tends to focus on "other than as part of an overall solution" and "not something that we focus on in isolation".
Where and how server hardware is used depends on the relationship Trilogy has with different vendors and the other solutions it has in its armoury. With IBM, for example, Trilogy’s focus could be around particular software, while with Cisco it works around the data centre piece as well as looking at opportunities around the network and unified communications. "It depends on the solution offerings," she explains.
Partners concentrate on their areas of expertise within a particular stack that might incorporate server hardware. "We can’t do everything for every vendor. We focus on our competencies." Virtualisation is often at the heart of what Trilogy does and as Creely points out it would be "very unusual for any partners to be doing servers without virtualisation".
It might not always be about what partners can bring but about what customers want, she cautions. For example, there may be instances where a customer has a particular strategy in place based around a specific vendor, be it IBM, HP or Dell, so that could be the biggest factor when it comes to deploying server hardware in any given solution. The most important consideration, according to Creely, is to build solutions to meet specific customer requirements and to do that resellers like Trilogy need "to choose what we feel is most appropriate for them".
The reduced emphasis on server hardware in any solution may well be linked to the move by a number of vendors to incorporate server hardware into wider technology or solution stacks. This trend is leading, as Grennan noted earlier when he spoke about "converged compute", to the optimisation of server hardware for specific purposes or applications, such as virtualisation. In turn, channel partners are defining their areas of expertise within these ‘stacks’ or incorporating specific server hardware technology into solution stacks of their own. Potentially, they might incorporate several elements of a vendor’s technology stack into their own solution offering.
As vendors move to wrap the server hardware they can provide with associated technology and software to create a broader proposition, they are encouraging their partners to do the same thing. In some cases, it is probably something partners have been doing for quite some time, usually by incorporating software, storage and associated technologies from other vendors to create their own solutions. The difference now is that vendors are seeking to gain a wider share of those solutions with their own technology and to provide partners with the necessary accreditations and certifications to deploy and support them.
While server hardware occupies a place in the overall solution, the capability to provide the support and services around the solution should make the role the partner plays with the customer even stronger going forward. Creely says the service component of any solution is important to customers, so it’s up to channel partners and vendors to convince them of their bona fides. "Customers want to know what the support is going to be like," she states, making it important that vendors have a good channel and good partners representing them. This puts channel partners in a potentially strong position of being recognised as playing a significant role for vendors and customers alike.
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