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Servers & Workstations:Changing Contours

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CIOL Bureau
New Update

The servers and workstations market performance in 1998-99

was influenced by higher user demand levels and increased preference for Intel-based

systems over RISC systems, a trend in evidence last year and more accentuated this year.

With corporate users finding price/performance benefits from the Intel platform, RISC

vendors found growth elusive.

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The prospects of this segment are hitched to the fate of

manufacturing, government and R&D user segments. Since none of these sectors worked

wonders, servers and workstations did not pick up. Also, with the improving performance of

Intel processors and the launch of the Pentium III, PC servers and workstations have

cannibalized market segments away from RISC/Unix to Intel/Unix or Intel/NT platforms.

High-end servers



The high-end category is defined as non-Intel servers with an ASV of Rs 4 crore
and above. This segment experienced a slight unit growth and double value growth, which

means the ASV shot up to Rs 646 lakh from Rs 449 lakh in 1997-98. The segment was

characterized by S/390 from IBM. In India this segment has seen the monopoly of IBM and

the absence of global majors such as SGI, Hitachi Data Systems and Fujitsu.

The shift from bipolar CMOS technology in mainframe market

has offered a cost-effective alternative to customers. Frequent introduction of new

systems by IBM has contributed to the transition to CMOS. Although CMOS technology has

enabled vendors to design lower cost systems, there is a compromise in terms of

performance. Moreover, as the software costs associated with OS/390 are lower, the outlook

for the high-end server market seems to be optimistic.

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Also, though the sanctions on India have been lifted by the

US government, the latter is averse to exporting potentially dual-use high-end servers to

India, which means customers like research organizations will continue to suffer.

Midrange and low-end servers



The medium range servers are defined as non-Intel systems with an ASV between Rs
40 lakh and Rs 400 lakh, while the low-end servers have an ASV below Rs 40

lakh. These two

segments account for almost the entire RISC/Unix-based shipments in the market. The

segment has shrunk in unit terms from 2412 to 2141 and in value from Rs 689 crore to Rs

459 crore. Sun and HP retained their dominance in the market. In the overall server

segment, HP notched up almost 30% of the market and 33.8% in value terms. Calling it the

"most powerful system in open systems computing," HP announced the availability

of the V2500 Enterprise Server, part of the HP9000 family of servers, which has been the

engine driving HP's exceptional server performance. Also coming from the HP stable was the

N-Class-a PA 8500 RISC processor-based enterprise server that can be upgraded to the

much-awaited 64-bit processor from Intel (IA-64) when it becomes available.

Sun maintained its lead, increasing the share from 31% to

37% of the market. To check its vulnerability in the lower-end of the workstation market

it launched the competitively priced Ultra 5 and Ultra 10 workstations. Sun also

introduced a range of competitively priced SPARC-based servers and workstations.

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HP has replaced SGI in the second slot for traditional

workstations and its presence in both the workstation segments ensures the top slot for it

by a substantial margin. HP has a wide range to offer in the traditional market, including

the B-class workstations suitable for the lower end, especially for 2D CAD, C-class

machines for 3D modeling and simulation, and J-class at the high end suitable for

computational analysis. HP cornered a significant 37% of the personal workstation market.

Its decision to rebrand the high-end Vectra PC and add the Kayak XA workstations to the

existing range ensured this share.

Last year SGI recorded unit sales of 355 and a market share

of 26.4% as against the previous year's 28%. Last year SGI tried to outgrow its dependence

on film and animation industry and develop new areas. The launch of PC workstations SG320

and SG540 at price points of Rs2.65 lakh and upward could have turned around its fortunes

but SGI started shipping the systems only late in the last quarter. And the looks, price

and capability of these machines combined will likely give the likes of Kayak rougher

waters to ride.

Compaq and Digital together were ranked second for personal

workstations, while Digital was fourth in the traditional segment. The Alpha architecture

supported three lines of workstations, namely, au-series, a-series and i-series, ranging

from Alpha/Unix platforms to NT. These, along with Compaq's Professional Workstation 5000

series and PW 6000, have ensured this market share. Compaq's strength in personal

workstations is expected to grow due to its strong relationship with software vendors,

value-added resellers and systems integrators.

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ASVs of traditional workstations are likely to dip further

in a bid to compete with personal workstations. But once the Merced, code name for IA-64,

is launched there is likely to be a shift of the medium and lower end market to the new

platform, leaving only the very high end to traditional workstation vendors. Most of the

orders for traditional workstations are likely to come from the already installed based.

Some new applications such as animation and digital content creation may create some

demand in India, though.

PC servers



This category includes Intel-based systems with hardware modifications to support
networking and client-server applications. PC servers are positioned so that high-end

systems compete in terms of price/performance with low-end RISC/Unix servers in the

domestic market. Shipment of PC servers went up by 37.9% and in value terms it escalated

by 32% over the previous fiscal. Compaq has scored a dramatic gain in the PC server market

by shipping the highest number at 4,500 units, which is almost a fifth of the market.

Given its high average selling value (ASV), in value terms it accounted for 29.2% of the

market. HCL slipped to the second slot with 3,700 units, though in units terms it grew 13%

over the 3,268 units sold in the previous year.

Probably Compaq took full advantage of the unsaid but

common prejudice in the market that PC servers necessarily need to be an MNC brand. And

last year this sentiment was aided by the decline of price differentials between domestic

and MNC systems. Also, HCL's market in the corporate and government sectors did not live

up to expectations though the banking sector made substantial purchases. Zenith, ranked

sixth, had the best of both worlds, since it also sells HP and IBM servers. It has been

able to notch a fairly substantial figure at 1,455 of its brand with a share of 7% with a

share of 7%. Acer remains in the third slot just as it was last year, with the number of

its servers going up substantially to 2,900. Acer's repositioning exercise at the

beginning of the year seems to have worked well.

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As unit shipment growth of HP and IBM was higher than the

average PC server market growth, there was an increase in market share of these two

vendors, especially so for HP, which had just 2.5% market share in 1997-98 but notched up

13.2% last year.

Compaq's rise to the number one slot is perhaps

attributable to a positive synergy between Compaq's medium and high end models such as

ProLiant 5500, 6000 and 7000 along with Digital's 3000, 5000 and 7000 series. The ASV of

the servers, too, went up sharply, with the result that the overall PC server revenue

growth almost doubled, to Rs139.48 crore.

Probably one of the best recognized servers in the market

today is Netfinity 3000. Launched last year, Netfinity 3000 helped IBM complete its server

range by filling up the gap at the lower end of the server range. Netfinity 3000 and 3500

now provide an alternative to the low-end models of Acer, Compaq and HP and offer another

option to the SME sector. Netfinity 3000 contributed almost half of the total earnings

from server shipments for the company. IBM's PC server shipments might have been more but

for the delay in the delivery of Netfinity 3000 in the first quarter.

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Acer performed well in the PC server market though its

third rank for the second time running might not reflect that. In the first two quarters,

shipments grew 111% over the previous corresponding period. A majority of these shipments

went to large and medium businesses and the government. But since Acer does not have a

high-end PC server its ASV is low and it remains at a disadvantage in negotiating large

accounts.

PC server shipments of HP grew from 375 units to 2,700,

phenomenal by any standards. This was aided by strong vendor focus in the banking segment.

Moreover, success of the NetServer E50, launched in the first quarter, also helped HP

boost its server sales growth, accounting for almost 40% of the company's PC server sales.

HP won major orders from National Fertilizers, Indian Oil Corporation and Reliance

Industries. DQ

Unix Server Market Segmentation

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1998-99

1997-98

Units Value

rs lakh
asv rs lakh Units Value

rs lakh
asv rs lakh Units

growth %
Value

growth %
Change

in ASV %
High end range 7 4525 646 6 2695 449 16.7 67.9 43.9
Medium range 338 16039 47 571 36181 63 -40.8 -55.7 -25.1
Low end range 1792 26842 15 2082 30089 14 -13.9 -10.8 3.6
Total 2137 47406 22 2659 68965 26 -19.6 -31.3 -14.5
Intel PC Server 20685 47846 231308 14991 36073 240631 38.0 32.6 -4.0

Traditional and Personal Workstation Market



1998-99

1997-98

Units Value

rs lakh
asv rs lakh Units Value

rs lakh
asv rs lakh Unit

growth %
Value

growth %
Change

in ASV %
Traditional 1346 11454 8.5 2352 14515 6.2 -42.8 -21.1 37.9
Personal 2403 4710 2.0 3030 5665 1.9 -20.7 -16.9 4.8

PC Server Vendor Share



Units Market

Share%
Value

rs lakh
Market

Share%
Compaq 4500 21.8 Compaq 13948 29.2
HCL 3700 17.9 hcl 8500 17.8
Acer 2900 14.0 hp 6750 14.1
HP 2700 13.1 ibm 5279 11.0
IBM 2400 11.6 Acer 4663 9.7
Zenith 1455 7.0 Zenith 1455 3.0
dcm 850 4.1 sni 1230 2.6
sni 820 4.0 Others 6021 12.6
Others 1360 6.6
Total 20685 Total 47846

Dell, Minicomp, Micron, Vel, Gateway, Nexus & Melstar

are included in Others.

The

Year That Was
* In a major realignment of its business, SGI

unveiled its Intel-based graphics workstations running Windows NT at prices significantly

lower than Unix-based visual computing workstations the company is largely known for.

* IBM gave the AS/400 a new focus and a new name. The AS/400e is

positioned as a highly scalable, secure server for electronic commerce, the 'e' standing

for e-business

* Calling it the "most powerful system in open systems

computing," HP launched the V2500 Enter-prise Server, part of the HP9000 family of

servers.

* Also coming from HP was the N-Class-a PA 8500 RISC

processor-based enterprise server that can be upgraded to the much awaited 64-bit

processor from Intel (IA-64) when it becomes available.

* While everyone else in the business was busy announcing

plans for IA-64, Sun Microsystems introduced a range of competitively priced

SPARC-based

servers and workstations. The company claims to have a clear roadmap for the SPARC

processors and intends to stay loyal to it.

DATAQUEST

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