Today in Cloud

Bloomberg BusinessWeek reports Gartner figures suggesting that homegrown servers such as those built to Facebook’s Open Compute designs “now account for 20 percent of the U.S. market for servers.” Whilst the article points to the detrimental effect this trend is apparently having on traditional server vendors such as Dell and HP, it paints a rosier picture for chip manufacturers with “Intel Corp. [reporting] its revenue from chips used to craft servers for data centers surged 50 percent in the second quarter.” Intel (presumably?) sees higher margins selling chips this way, with bespoke server build-outs commanding far smaller bulk discounts than behemoths like HP. ZDNet’s Larry Dignan is more cautious than Gartner or BusinessWeek, noting “it’s unclear how many orders Dell, HP and IBM were really losing. There aren’t any concrete examples or figures to back up the premise.” Dignan is right, and continues “For Facebook and Google, the data center is the largest capital expense. It’s only natural that they’d go the DIY route.” The same is far less true for Wal-Mart or Ford or Boeing, where IT infrastructure is a necessary cost (and hassle) of doing business; it’s far easier for them to haggle a good deal for boxes from Dell or HP than to concern themselves with sourcing power supplies, and cables, and chassis’, and solder, and fans, and processors, and RAM, and all the rest. So DIY servers are growing nicely, but only really in niche areas such as the server farms of the web’s giants. The nightmare scenario of the Boeing designed-and-built server in a Boeing data center, or the Wal-Mart designed-and-built server in every Wal-Mart is unlikely to keep Dell and Apotheker awake at night. Far more worrying might be the prospect of new low-margin upstarts entering the business and selling Open Compute-inspired servers to the customers upon which Dell, HP, IBM and all the rest depend.