PC-makers lose orders on off-the-shelf over do-it-yourself servers

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Technology is a fast changing scenario. When Facebook scouted for server computers for their new data centers, the hardware engineers could not find the appropriate server computers they wanted. Instead, they decided to build on their own. This move has resulted several companies such as Hewlett-Packard, IBM, and Dell losing sales in the market.

The plunge in sales orders is also attributed to shift in consumer preference for tablets over PC.

Customers prefer custom-built servers as they provide a cheaper and efficient way of meeting the boom in demand for personal data shared via the web. Custom-built servers can be made using less expensive components, upgrades, and backup services that server makers traditionally offer to large corporations.

The customised machines account for 20% of the US market for servers, which generated $31.9 billion globally last year, said Jeffrey Hewitt, an analyst at Gartner Inc.

Yet surging costs for maintaining data centers is causing companies to seek cheaper options.

CLOUD COMPUTING NETWORKS

Cloud-computing networks store and deliver software and services via the Internet.

According to Gartner, Hewlett-Packard, which last month cut its profit forecast for the third time, has witnessed a slow revenue rise from the sales of servers that are typically deployed in cloud-computing data centres.?

Dell?s sales of servers based on PC chips, the type used in cloud-computing data centres, grew by 4.4% in the June period.

Intel Corp.?said its revenue from chips used to craft servers for data centres rose by 50% in the second quarter. Intel?s understanding that cloud data centres had different needs was key to its sales strategy. The company?s share of the cloud server-chip market is above 90% compared to 35% in 2007.

CUSTOM DESIGNS

Google, Facebook, and Microsoft?have designed servers that contain the minimum amount of components required for their specific task. Facebook?s servers, for example, have custom power supplies and circuit boards in sheet-metal enclosures designed to maximise airflow with minimum number of fans. This improved the efficiency by 38% and reduced the cost?by 24 percent, according to the company.

Google?s servers are also built according to the company?s specifications, with hardware limited to what is necessary for applications to run. The machines run on Linux OS?that leaves out unnecessary code.

Microsoft also chose to redesign their servers. For their data centres, Microsoft uses machines similar to the scaled-down, low-power ones similar to Google. The company has a team of engineers who create server designs and then commission it to companies like Dell and Hewlett-Packard to build the machines.

In an indication of growing demand, Microsoft and other companies asked for tailor-made machines that leave server makers in a dilemma? go after build-to-order market and accept lower profits, or lose customers and relevance. These computer makers have little choice but to adapt. In order to survive they must come up with products that fit the changing needs of data-center builders.

The shift to using cheaper servers for cloud computing may spread beyond Internet search and social media and find its way into other areas such as mobile-phone service providers.

Sources: Bloomberg, Times of India

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