Clouds float Dell bottom line
Hyperscale saves x64 biz
It's easy to be snarky about the "cloud computing" catch phrase server makers are tossing around as they peddle their wares. It's as annoying as it is inexact. Nonetheless, there's some money to be made from companies facing complex server scalability issues.
In the spring of 2006, Dell quietly set up a free-standing business unit called Data Center Solutions, just as the Web 2.0 buzzword was taking off and had not yet merged into the utility computing buzzword to give us yet another: Cloud computing. And that DSC unit - believe it or not - is one of the keys to Dell's resurgence in the x64 server market.
Three years ago, says Forrest Norrod, vice president and general manager of the unit, Dell took a look at some statistics for the server space at large and gathered the best intelligence it could find about server installs and spending at the companies deploying the very largest grids and clusters. Among the name-brand companies deploying "hyperscale" distributed computing - which is a better moniker perhaps than cloud computing to describe what these companies do - the compound annual growth rates for server sales and shipments were much larger than for the market at large.
Significantly, the tier one server makers - Dell, IBM, Hewlett-Packard, Sun Microsystems, and Fujitsu-Siemens - had a lower market share among these hyperscale companies than they had for general purpose servers in the broader market. While Norrod is not one to argue semantics - he says "cloud computing is just the latest instantiation of a type of computing that has been evolving for a very long time" - Dell will do whatever it has to do to get its foot in the data center door. "We wanted to get in there and see what these customers needed and go get our unfair share," Norrod says.
To that end, Dell created the DCS unit with its own product development, marketing, sales, and support team, which now has close to 200 employees and which can also draw on the substantial expertise of the rest of the Dell company. Back when it was founded, DCS initially targeted 20 companies, including the name-brand Web companies we can all chant: Google, Yahoo, Microsoft, Salesforce.com, Facebook, eBay, and so on. The goal was to target 5 companies per quarter and nail them.
DCS began selling its Cloud Computing Solution - a mix of custom server development, data center design, and custom support services - in March 2007. And after 19 months of sales, the unit has 30 active customers and is shipping machinery and delivering services to 27 of them this quarter.
Dell won't talk about revenues or shipments for the DCS unit, but Norrod will brag about this: If DCS were broken out as a separate company during the second quarter of 2008 - the last quarter for which server market share data is available from IDC and Gartner - then DCS would rank among the top five server makers. Norrod would not even hint at what percentage of Dell's server revenues and shipments in Q2 came from the DCS unit, but for this to be true, the number would have to be pretty large.
Gartner reckons that 2.34 million servers shipped in the second quarter of this year, up 12.2 per cent from the year ago quarter, with Dell coming in number two among all shippers with 577,163 servers sold worldwide. The number four position was held by Sun Microsystems, with 96,510 units, and the number five position was taken up by Fujitsu-Siemens, with 61,077.
IBM sold 308,835 machines according to Gartner, giving it the third ranking, and Hewlett-Packard was the dominant shipper, with 706,724 machines. For Norrod's statement to be true, DCS would have to account for between 10.6 per cent and 53.5 percent of Dell's total server shipments in Q2. The lower number is probably closer to the truth.
DCS doesn't mention a lot of its customers by name, but Facebook and Salesforce.com buy custom servers and data center services from the Dell unit. Incidentally, Google does not, and not for want of trying on the part of Dell. And Norrod is a bit frustrated by that. "Google is a very innovative company in many ways, but we are all slaves to our history and inertia," he says. "Google has evolved its bread rack servers in a garage, but it is as far as they can go with it, I think." Google is, of course, super-secretive about its server infrastructure, but has built its own iron.
Here's how DCS makes money. A large (and unnamed) search engine company engaged the DCS team because it needed to add servers to its infrastructure faster than its data centers could allow, even after it was plunking down new data centers. Using its own designs, the search engine company could cram about 12,000 servers into one of its data centers. Dell engineers came into the data center and reconfigured the air conditioning units, raised the water temperature on the CRAC units, and moved around the server gear to improve air flow.
Then Dell took a variety of half-width motherboards from Super Micro as well as some created on a custom basis to create a 2U rack server that held four physical two-socket servers. (You can double up in 1U servers, but 40mm fans are louder and less efficient than 80mm fans, so a 2U chassis makes more sense). Dell was able with this design to get the per-server cooling down to 5 watts of electricity, compared to around 30 watts per server with its best PowerEdge general-purpose designs. And when all was said and done, Dell was able to cram 30,000 server nodes into the same room.
The hand-tailored solution is not just hand holding, either. According to Norrod, the differences in the ways that search engine companies implement their code to distribute data and queries across their machines will drive the architectural choices Dell helps these companies make. Different search engines get slightly different, but still custom, boxes. And some customers want different support options, too. Some DCS buyers prefer to have Dell employees on site to deal with break/fix issues (and with tens of thousands of servers, something is always dying), while others just want to have spare parts and still others only want dead boxes replaced.
Norrod says that having figured out how to do custom servers and data center designs for these hyperscale companies, Dell is now looking to expand out into custom storage and other IT gear. This includes an ecosystem of partners, some of whom are interested in building public, private, or semi-private compute or storage utilities. Dell is projecting, in fact, that 35 per cent of x64 server sales could be driven by high performance computing, service providers, and these hyperscale distributed computing deployments within the next three years. (All of these types of deployments have some resemblance in terms of scale and technology.)
But Dell also knows that the DCS unit has some inherent limits. Norrod expects to have 50 customers by the end of this year, and maybe 100 by next year, but says this hand-crafted approach does not scale to IT in general. However, everything Dell learns certainly can be applied in some fashion to midrange and enterprise computing, and custom servers built today lay the foundation for future products. ®