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.