Server Appliances - "Caching" In on Internet's Growth

  • Written By: R. Krause
  • Published On: March 2000



Market Overview

The growing market of "Server Appliances" - servers which handle specific tasks or functions (as opposed to general-purpose [GP] computing) - is aimed at companies who need to do a few tasks extremely well, but do not have to "be all things to all people". These tasks include areas such as web serving and caching or Network-Attached Storage.

In addition, server appliances tend to focus on rapid deployment of both the hardware and software (the latter sometimes accomplished through a good GUI). Customers in this market have tended to be companies such as Internet Service Providers (ISPs) and Application Server Providers (ASPs), as well as smaller companies and "Mom and Pop" shops that can't afford large computing expenditures. Further, larger companies and e-Commerce sites are now discovering the benefits of appliances and caching.

In short, these servers are finding homes in companies, large and small, wishing to speed application and solution deployment.

The tremendous growth in this market segment is closely tied to the growth of the Internet, and the associated need for increased performance and throughput. In addition to Internet-related growth, the proliferation of the Network Attached Storage (NAS) market is a big sales driver.

The current appliance hardware market is estimated at $100M-$500M, with sales expected to top $5 Billion by 2003, for a CAGR of ~75%. The level of IPO (Cobalt Networks and CacheFlow, two leading small vendors, IPO'd in November) and acquisition activity is another indicator that this market will continue to grow rapidly, before the inevitable consolidation.

As with the GP server market, prices for basic server appliances vary widely from segment to segment and from application to application. For the low end, prices are generally in the $1000 to $10,000 range. For the high end, prices can be as high as $50,000 to $100,000. In either area, prices depend on the vendor and what "bells and whistles" are added.

Sales cycles are generally shorter than those for GP servers, because of the focused nature of both the product and solution desired by the user. Revenue comes from equipment sales - service revenue is not meaningful, the only "services" usually provided are Internet hookups, etc .

Market Leaders/Winners

Because the market is so new, there is no clear leader. However, significant competitors include small vendors like Cobalt Networks and CacheFlow, mid-size vendors like Network Appliance (the present NAS leader), and traditional server market leaders Compaq, Dell, IBM, and HP.

Strengths

  • CacheFlow For the 5000 series:

    Throughput: In the "Web Polygraph" testing, CacheFlow's throughput was 2300 rps (requests/second), tied with Dell. Novell's ICS software caching product yielded 6000, but that was for a clustered system, so it is not an "apples-to-apples" comparison. [Source: Data Communications magazine] In addition, their response time of 1.49 seconds is quite good.

  • Cobalt Networks For the CacheRaQ2 series:

    Price: At $2000-$3000, the CacheRaQ2 is among the lowest priced offerings.

    Size:
    At one rack unit high (1U) the RaQ2 is (along with the Netfinity 4000R) the smallest unit available for rackmount. This is very attractive to ISPs who need to put a bunch of small servers in a single rack.

  • Compaq For the TaskSmart C-Series:

    Reliability/Availability: The system has redundant power and hot-swappable storage, valuable for maintaining uptime. In addition they can be clustered.

    Price/performance:
    The TaskSmart C-2000, with a $/rps figure of $16.69 was second only to NetHawk, and the best among the new-hardware-solution providers.

    Novell relationship:
    Compaq is one of two vendors (Dell is the other) currently shipping ICS, Novell's high-performance, scalable web-caching software.

  • Dell For the ICS series:

    Corporate strength: Dell keeps getting stronger in the server arena, with US market share of ~23%.

    Novell relationship:
    As with Compaq, Dell's relationship with Novell gives it an advantage.

    Price/performance:
    For a well-configured system, Dell's 32.9 rps/$ was second only to NetHawk's 65.0 rps/$. Performance: Tied with CacheFlow's 5000 with 2300 rps.

  • IBM For the Netfinity 4000R:

    CPU density: The 4000R is the new density leader, with 2 CPUs in a 1U-high enclosure.

  • Network Appliance:

    NAS leadership: Network Appliance is the current leader in the Network Attached Storage market, holding a greater than 40% share. (NetApp is also a key player in the caching market, holding a market share of approximately 28%.)

    File serving: The NetFiler product can run attached to mixed (Unix and Windows NT) server networks.

Challenges

  • CacheFlow For the 5000 series:

    Performance and price/performance: In "Web Polygraph" testing in July, '99, the CacheFlow 5000 could only reach ~10 requests/second/K$, one third of Dell's , and approximately one half of NetApp's NetCache. CacheFlow improved these numbers to approximately 12.7 rps/K$, but this figure moves it past only Cobalt.

  • Cobalt Networks For the RaQ2 series:

    Performance: Presently focused only on low-end environments.

  • Compaq For the TaskSmart C-series:

    Physical size: At three rack units (3U) high, the TaskSmart system is significantly larger than HP's and IBM's offerings. With only one CPU per chassis, CPU density will be significantly lower in a large installation. Note: This caveat applies to those situations where having a large quantity of servers is as important as the server's performance.

    Price: A base system costs ~$9000, which means smaller customers have a tougher time gaining an entry.

  • Dell For the ICS series:

    Physical size: The ICS is loaded on PowerEdge servers, rather than a specially-designed chassis. With the server appliance market moving toward smaller enclosures - 3U, 2U, and even 1U - this is a disadvantage for ISPs wanting a "JBOS" setup.

    Disk quantity: Although price/performance is good, disk quantity limitations may require customers to add a storage array.

  • IBM For the Netfinity 4000R:

    Availability: These servers, although announced, are not yet available.

    Fuzzy focus: Although it is based on the Network Engines WebEngine (an appliance), it is unclear whether this server will be an appliance, or just a very short GP server.

  • Network Appliance:

    Maintaining their NAS lead: As the field gets more crowded, it will be difficult for NetApp to maintain a clear lead in both the appliance and caching markets

    Price: Current products start at around $20K, which may be too high for smaller customers. However, a lower- priced version (base price approximately $7K) is expected in early 2000.

Market Challenges

All of the above-mentioned vendors could be considered challengers, since the field has no clearly defined leaders (with the exception of Network Appliance for NAS products). As the field consolidates, we expect to see stratification, at which point the leaders and challengers will become obvious.

Market Losers

Although it is still too early for there to be defined losers in this market, they will tend to be the small vendors with limited product offerings. Check back in nine months for an update.

Market Predictions

The server appliance market is predicted to grow to $8 Billion and 2 million shipments by 2003 [Source: IDC]. This is stunning growth for a market barely two years old. As with most markets, there will be a proliferation of vendors for the next 2-3 years, followed by a period of consolidation. We expect 60% of the current players to be gone - whether out of business or absorbed by larger companies - within three years. [70% probability]

Presently, the market is segmented, and there is no dominant vendor for the overall market. We expect that some of the existing segments will combine, so that in three years there will only be three or four clear appliance segments. As with the GP server market, we believe there will be no more than five vendors with significant market share in 2003 (75% probability).

The appliance market will take business away from the GP server market. This is because customers needing only one or two functions had (until recently) to buy unneeded functionality as part of a GP server purchase. Being able to buy units tailored to their specialized needs will pull their dollars away from the GP market. General purpose servers will still continue to be the majority of server sales, however. (85+% probability for the next three years).

Vendor Recommendations

Small vendors should either (1) try to build up as much market share as possible, thereby strengthening their position, or (2) align themselves with a major vendor.

Meridian Data and Whistle Communications, two of the earlier and more noticed small vendors, have already been purchased (by Quantum and IBM, respectively). As with the GP server market, "big fish eating small fish" is a market trend.

For those trying to maintain their independence, packing ever more features (e.g., increasing CPU density, increasing throughput) into their products is one path; strategic alignments with large vendors is another.

The large players (i.e., the Big Four) have built-in advantages: their installed base, their market clout, and their ability to commit resources to development. To separate themselves from the rest of the pack, they will either need to use those internal resources to develop their own design(s), as Compaq has done, or they will need to buy/use someone else's butt-kicking technology, as IBM has done with Network Engines:

User Recommendations

Users now have the opportunity to purchase, for relatively low cost, server systems targeted at specific needs they might have. This benefit alone means users should review this field more closely.

For users wanting non-rackable, lower-priced systems, Meridian/Quantum, and Whistle/IBM should be considered seriously. Note that Meridian is geared toward Network-Attached Storage for small businesses, and Whistle is geared toward small businesses. The common thread is "small" - having a truckload of Snap! servers or Whistle InterJets is not a realistic large-company scenario, except as adjuncts to a larger infrastructure. Dell also offers an ICS-based server in mini-tower form, but the price tag is in the $4500-plus range.

For rackable, lower-price web-caching or web-serving, vendors under consideration should include Cobalt (CacheRaQ series), IBM (Netfinity 4000R), and Network Engines (WebEngine) with Compaq and Dell at the higher end of the price range. Note that initial price is not the only gauge of value, as evidence by Compaq's and Dell's excellent price/performance figures. For raw performance (i.e., requests per second), CacheFlow and Dell are leaders.

For clients interested in Network Attached Storage, the selection process should include Network Appliance, HP (reselling ProCom's systems) and Auspex during the quote cycle (although Auspex's corporate viability has decreased in recent years). For users focused on Internet/web caching and serving, the choices are plentiful, including all the vendors mentioned above.

In general, users need to assess the tradeoffs (e.g., price vs. computing power) and proceed accordingly. Users also need to realize that there will be consolidation in this market, and should factor corporate viability into the selection process.

 

 
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