Worldwide server revenue declined 24 percent in the first quarter of 2009 and shipments dropped 24.2 percent compared to the first quarter of 2008, and no one went unscaved; all of the top five global server vendors - IBM, HP, Dell, Sun and Fujitsu/Fujitsu Siemens – saw double-digit revenue declines for the first quarter of 2009, according to Gartner, Inc.

Worldwide: Server Vendor Shipment Estimates, 1Q09 (Units)

Source: Gartner (June 2009)

Meanwhile, Cisco is marketing the hell out of its upcoming Unified Computing System (UCS), which is rumored to start shipping in a couple of weeks. The company has been offering tid bits of information about UCS through webcasts for months to build anticipation for the system. For instance, yesterday. Cisco announced it would offer rackmount servers in addition to blades.

But once the drumroll for UCS dies and the system actually ships, who’s buying?

I would love to be a fly on the wall in a Cisco executive meeting to hear their strategy with UCS. Do Cisco executives really think this is a good time to introduce an entirely new server system? And are they arrogant enough to think they can beat IBM, Dell and HP at their own game?

Yup, all the operations for the largest sporting event in America ran on IBM’s smallest systems, the BladeCenter S, which is similar in size to a briefcase.

In addition to the big game, next month, IBM will officially announce that every one of the NFL’s 32 teams will be standardizing on BladeCenter S, according to Alex Yost, VP of IBM BladeCenters.

The BladeCenter S is actually designed for small to medium sized businesses that don’t have their own data center and need a compact, all-in-one piece of equipment, according to IBM. It is esentially a data center in a box that contains up to six IBM BladeCenter servers, 9 terabytes of local shared storage and networking components. Everything in the BladeCenter chassis is redundant – power, switching, cooling, and storage, so there is no worry about failures, either, Yost said.

As it turns out, this little data center box on wheels has made life for the NFL’s IT team a lot easier; in the past, for every Super Bowl, the NFL’s IT staff have had to lugg all the necessary servers, storage and networking to the event site and set up an entire data center within just a couple of weeks, said Jonathan Kelley director of infrastructure computing for the NFL.

As a long time IBM BladeCenter H customer that trusts IBM equipment, the NFL contacted IBM last year for some help setting up for the 2008 SuperBowl in Arizona - which this New England fan dares not discuss – and heard about the BladeCenter S.

“When the NFL came to IBM to help them set up multiple data centers for last years Super Bowl, our IBM BladeCenter S was still about three weeks away from deployment, but the NFL was confident enough in IBM to use a brand new type of server, and it went off without a hitch,” Yost said.

To support the operations of Super Bowl 44 last night, the NFL used four BladeCenter S chassis with eight, quad-core processor powered blade servers in them and about eight virtual machines running on each server to support security and credentialing for 60,000 temporary employees and around 11,000 media personell.

They also deployed about 300 PCs, wireless networks, and other necessary computing functions using IBM’s BladeCenter blades, said Joe Manto VP of Information Technology for the NFL.

“The operations at the NFL are all supported IBM blades. We chose them because their technology has proven itself,” Manto said. “These servers are almost over-engineered for what we do with them, and they are reliable.”

(The NFL wouldn’t disclose which CPU vendor they use, or name a specific virtualization vendor; they said they use a mix of virtualization vendors, but IBM reported the NFL uses VMware Inc.)

The BladeCenter S enclosure also has extra space for UPSs or other components that might need to be added, and plugs into a regular wall outlet and Ethernet connection.

“It is great for events because it is portable and can be configured at a partner site then shipped to the right location,” Yost said. “Also, their own storage can be connected to the Bladecenter S. It is super quiet and could be placed in office environments without worrying about the noise, and both the front and the back doors of the chassis lock.”

A tyical deployment is in the $15,000 range, the chassis itself is a few thousands dollars. Cost depends on the number of servers in it and other configurations, Yost said.

In fact, this is the largest quarterly revenue decline for servers since the fourth quarter of 2002, and the sluggish server unit shipment growth of 2.8% year over year in 3Q08 represented the slowest increase in server shipments since 4Q06, the IDC reported.

“The x86 server segment was definitely impacted by the economic downturn; there was significant deceleration in the quarter with a particular weakness in September,” said Jed Scaramella, IDC Senior Research Analyst, Servers. “Due to the uncertainty in the market, customers cut back on all nonessential spending.”

Volume systems revenue declined 7.2% year over year in the third quarter, the first decline for this market segment in more than 14 quarters, and revenue for mid-range enterprise servers declined 9.5% year over year. Shipment growth also slowed significantly for x86 servers to 4.0% (1.97 million units) because of a low demand, and revenue declined 6.6% year over year in 3Q08, representing the largest year-over-year decline for the segment in more than 24 quarters, IDC reported.

The IDC didn’t mention this in their release today, but it is obvious that virtualization is partly to blame the slowing demand for commodity x86 servers because it increases server utilization.  According to Tom Bittman, VP and distinguished analyst with Gartner, virtualization has penetrated 12% of the market, and the number of VMs deployed doubles every year. “By 2012, we expect more than half x86 workloads will be run on VMs,” Bittman said in an interview about his presentation on the virtualization market for Gartner’s 27th annual Data Center Conference this week.

“Virtualization and cloud computing have screwed up the market; vendors used to compete in compute islands, they were all direct competitors, but now they fight for control of an entire virtual layer. IBM and HP are competing in broad server technologies, instead of HP and IBM competing only in the area of server hardware,” Bittman said. “All vendors worry about becoming commodities and they all want to be considered the brains of the industry”

Perhaps that concern, along with slow server sales, is why vendors including HP, Dell and Sun have branched out into the area of data center services this year that could add a revenue stream beyond selling hardware. HP acquired EYP Mission Critical Facilities about a year ago and began offering data center services in March. Just this week, Dell announced it would offer services to help people extend the life of their data centers. Before that, Sun announced data center services that include data wiping.

But, there were exceptions to the grim server market numbers; revenue for high-end enterprise servers grew 4.0% year over year, the third consecutive quarter of growth for the segment. Other exceptions to the slowdown were blade servers (11% of the market) and IBM System z (9.4% of the market), which both increased this quarter, IDC reported.

Scaramella said IBM System Z sales didn’t suffer because they tend to be cyclical and are built into companies long-term budgets, which is not always the case for the smaller x86 systems. “Customer are more likely to push out [x86] purchases and see what they can do without,” he said.

And blades were the only platform to experience positive growth in the quarter, with all major vendors exhibiting double-digit growth in blade volumes, IDC reported.

I’m no analyst, but I am guessing the demand for blades didn’t slow down along with other x86 servers because today’s blades are pitched as ideal virtualization platforms. The HP ProLiant BL495c virtualization blade, for instance, is one of many new blades designed with more memory, data storage and network connections to meet the needs of memory and I/O-hungry VMs.

In addition to their appeal as a virtualization platform, blade servers are desirable because they take up very little space in cramped data centers and many blade surpass rack servers in power and efficiency.

So, it will be interesting to see whether server sales recover when the world economies improve, or if they remain depressed due to the increasing use of virtualization.

The IDC is predicting this slowdown to continue throughout most of 2009, but server sales will rebound with the economy, Scaramella said. “We are not anticipating a quick rebound [but] I do not think we will see the same extreme fall-off the market experienced after the dot.com bust,” he said. “At that time there was a tremendous amount of excess capacity built out in the infrastructure. Over the past few years, many companies have been in a consolidation mode – reducing the numbers of servers they have in operations as well as reducing the number of data centers they have in operations. Back in 2001-2002, companies were able to put off purchase due to the excess capacity, this is not the case today.”

IBM now has 13 cloud-computing centers and has dedicated more than 200 full-time researchers and $100 million to cloud computing ventures.

The benefit of cloud computing is that it gives users remote access to computing resources such as servers, storage, services and applications on demand without additional investment in new hardware.

For nearly a year, IBM has built cloud-computing infrastructures and established cloud projects in IBM cloud-computing environments.

According to IBM, in Korea, the new center will provide architecture skills and pilot projects for industries such as banking, telecommunications, government, education and IT hosting services. In India, clients such as midmarket providers, universities, telecommunications companies and government bodies will be able to access the center’s resources for pilot cloud infrastructures and applications and deliver new services to their customers.

Among the first customers to use the new centers is the Association for Promotion of Brazilian Software Excellence (Softex), which will conduct Concerto de
an on-line event to collect ideas for the 2009-2010 strategic plan for Brazil’s software industry. Earlier this year, IBM established Europe’s first cloud-computing center in Dublin, Ireland, a center in Beijing, China; one in Johannesburg, South Africa; one in Tokyo, Japan and one in Raleigh, N.C. Over the past year, IBM has provided cloud-computing services to clients such as Wuxi City in China; Sogeti, the Local Professional Services Division of Capgemini; the Vietnamese government institutions and universities; iTricity, a utility-based hosting service provider headquartered in the Netherlands; and the University of Pretoria in South Africa.

Several other companies have invested in the advancement of cloud computing, including Amazon (EC2), Hewlett-Packard, Intel, Yahoo, and VMware.

As a whole, the worldwide server market grew 6.4% year over year to $13.9 billion in 2Q08, marking the ninth consecutive quarter of positive revenue growth and the highest Q2 server revenue since 2000.

Unit server shipments grew 11.1% year over year in 2Q08 driven by a hardware refresh cycle and infrastructure expansions, according to IDC.

Although volume systems revenue grew 2.1% in 2Q08, they underperformed the market for the first time since 4Q06, as server OEM’s experienced strong pricing pressure in the marketplace.

Matt Eastwood, group vice president of Enterprise Platforms at IDC, said in a statement, “IDC saw strong growth in blades, Unix systems, and IBM System z demand across the marketplace. Diversity in market demand demonstrates customers do not believe a single standardized infrastructure is capable of meeting all their computing needs.”

x86 Server Market Dynamics

x86-based systems experienced their slowest growth rate in 23 quarters. x86 server market growth slowed in 2Q08 to a rate of 3% year over year ($7 billion worldwide). The 2Q08 was also the first quarter that spending for non-x86 systems outpaced revenue growth for x86-based systems since 4Q00.

Could it be that server physical sprawl is slowing? Now that virtualization is mainstream, have people slowed down on their server hardware acquisitions?

IDC blames the x86 server market slowdown not on virtualization, but on the pricing climate, saying average selling values declined 8.4% year over year in 2Q08.

“The pricing challenges many OEMs experienced, particularly in the x86 server market, is a concern as it may foreshadow a slowdown in market demand as enterprise budgets face further scrutiny in the second half of 2008,” Eastwood stated.

“While all the major vendors exhibited strong unit growth, there was significant price competition throughout the quarter,” stated Jed Scaramella, senior research analyst for Datacenter Trends at IDC. “Low-end volume servers, such as 1- and 2-socket systems, are somewhat viewed as commodities and experienced the most pricing pressure. Additionally, the quarter was made noteworthy by the fact that several of the tier-one vendors began shipping their new systems targeting large-scale datacenters. Typically, these are stripped down servers that are designed to operate at maximum power efficiency. All components and features that are not essential, including server redundancy, are eliminated to reduce the capital expenditure of these datacenter customers.”

Nashua, N.H.-based Illuminata analyst Gordon Haff said speculation about virtualization causing server sales to decline have always swirled, but never seem to manifest.

“I’ve been hearing the “won’t people buy fewer servers?” question every time there were faster processors, more processor cores, etc. for as long as I’ve been an analyst. And the market just keeps on growing,” Haff said.

“What you are seeing here though–and which relates to virtualization to at least some degree–is the relative popularity of larger servers,” Haff said. “Virtualization really helps people more effectively utilize larger servers even when single apps don’t need all the
horsepower. Even within the x86 server space we’ve seen more interest in 4-socket servers after that category was in decline for years.”

Blade Server Market Shows Strong Shipment and Revenue Growth

Although blade revenue decelerated slightly in 2Q08, year-over-year revenue growth of 40.8% in 2Q08 was the third fastest over the past 2 years, IDC reported.

Overall, bladed servers, including x86, EPIC, and RISC blades, accounted for $1.2 billion in the second quarter, or 8.8% of quarterly server market revenue.

HP held the number 1 spot in the blade market with 53.3% market share and IBM held the number 2 position with 24.8% share. Dell and Sun also experienced blade revenue growth in 2Q08.

Server vendors run the VMmark test under a set of guidelines and submit results to VMware for posting. It is my suspicion that vendors play leapfrog with VMmark by looking at exsiting VMmark results and only submitting their performance results when theirs are as good or better.

For instance, IBM submitted a benchmark for its 16-core System x3850 M2
running VMware ESX v3.5, which trumped the other published as of March 2008. IBM then published a press release to brag about the results, but within a few months, Dell submitted results three PowerEdge systems sporting better virtual machine (VM) performance than IBM, and Hewlett Packard (HP) beat them all out with its ProLiant DL585 G5 server results published August 5.

HP also sent out an email to press this week boasting their top 32-core results, but didn’t mention one minor detail; they are the only vendor with results in the 32-core category so far. Sure, they are number one. They are the only one.

System Administrator Bob Plankers sums this game up nicely in his blog with a post called “Why VMmark Sucks.”  Here is what Plankers had to say:

“Having a standard benchmark to measure virtual machine performance is useful. Customers will swoon over hardware vendors’ published results. Virtualization companies will complain that the benchmark is unfair. Then they’ll all get silent, start rigging the tests, scrape and cheat and skew the numbers so that their machines look the greatest, their hypervisor is the fastest. Along the way it’ll stop being about sheer performance and become performance per dollar. Then CapEx vs. OpEx. Watt per tile. Heat per VM. Who knows, except everybody will be the best at something, according to their own marketing department.”

In addition, the benchmark is a real pain to set up and run, and the ‘free’ VMmark software requires other expensive software to work. According to VMware’s website,
VMmark requires  licenses for the following software packages;

• Microsoft Windows Server 2003 Release 2 Enterprise Edition (32-bit)—thre 32-bit copies per tile (two for virtual machines and one for that tile’s client system), and one 64-bit copy per tile (for the Java server virtual machine)
• Microsoft Exchange Server 2003 Enterprise Edition
• SPECjbb2005 Benchmark
• SPECweb2005 Benchmark

Plankers said he won’t be wasting any time or money running VMmark. “Instead, I’ll be in meetings explaining to folks why we are maxed out at 30 VMs per server when the vendor says they’ll run 50. Or why we chose VMware over Xen, when Xen claims 100 on the same hardware. I’ll have to remember the line from the FAQ that says “that VMmark is neither a capacity planning tool nor a sizing tool.”

Which begs the question: if it isn’t for use in sizing or capacity planning, exactly what is it good for?”

VMware says the benchmark is good for users who are making hardware purchasing decisions.

“The intention [of VMmark] is that customers can look at the results and make decisions based on what they see. It isn’t just about the fastest server; it’s about making system comparisons; between blades and rackmounts or a two-core or four-core system. Someone can see how much more performance they get from upgrading to four core processors, for instance,” said Jennifer Anderson, the senior director of research and development at VMware.

This makes sense, but as Plankers said, users should beware of benchmark manipulation by vendors and know that the results do not reflect the same workloads that users will run in their own data center environments.

Advanced Micro Devices (AMD) held a Web-based press conference Aug. 15 to formally attack Intel Corp. prior to the Intel Developers Forum (IDF) in San Francisco next week.

When AMD invited me to listen to a webcast regarding the IDF forum, I expected to hear some news; maybe their 45nm processor Shanghai would be coming out earlier than expected to make up for Barcelona‘s delay? That would be big and would help AMD make up some ground in the processor product release wars against Intel.

Instead, the conference served as a means for AMD to plant the seeds of skepticism in the minds of IDF attendees before the conference. AMD executives spent the hour call marketing their existing processing and graphics technologies and bashing Intel.

Randy Allen, the SVP and GM for AMD’s computing solutions group, cited benchmarks showing AMD’s Opteron processors in good light, like the SPECweb 2005 benchmark showing Opteron Model 2356 and Model 8356 hold the top x86 Web performance records for two-and four-processor servers.

Allen also touted AMD’s virtualization assist technology, AMD-V with Nested Page Tables, which recieved high praise from a VMware engineer recently, and he noted that quad-core Opteron is being used in a total of seven of the top performing systems in the most recent Top 500 Supercomputers list, including the No. 1 IBM’s RoadRunner.

“We have our swagger back,” Allen said.

He failed to note, however, that AMD’s Opteron chips were used in only 56 systems (11.2%) on the list, which is down from 78 systems six months ago. Intel processors were used in 74.8% of the world’s supercomputers (about 374 systems), up 4% from six months ago.

When a reporter raised this issue during the press conference, Allen said that having Opteron used in the top performing computer and systems high on the list is more notable than the slip in the number of total systems on the top 500.

In addition to hyping AMD products, Allen also spent plenty of time directly attacking Intel, saying the company has an easy time innovating because it simply mimics AMD’s work.

“Intel adopted our power efficiency technology, our multicore technology and you will see them copying the Direct Connect Architecture and HyperTransport technologies we developed five years ago. … Imitation is the sincerest form of flattery, but it is also annoying.”

Surely, IDF conference goers will hear similar hype about Intel products from Intel executives next week and negative remarks about AMD.

The only mention of AMD’s processor on deck, 45-nanometer chip code-named Shanghai, was that it is scheduled for release later this year and will be delivered on time. Shanghai will consume 20% less power at idle than Barcelona and will have 6 MB of L3 cache (compared with Barcelona’s 2MB of L3 cache).

All in all, the press conference simply re-stated old AMD news.

Thanks for the re-cap, AMD. That is an hour of my life I’ll never get back. And if you just finished reading this blog, hopefully it’s only a few minutes of your time that you can never get back.

Today I attended the keynote address by Oracle Corp. CIO Mark Sunday and heard some pretty cool details about Oracle’s new mega data center, which the company is breaking ground on this month.

I also attended packed sessions on virtualization and cloud computing and ended the day at a panel discussion about creating a more efficient (i.e., green data center).

The panel discussion included major-industry players including Jack Pouchet, Director Energy Initiatives, Emerson Network Power; Michael Patterson, the senior thermal architect at Intel; John Pflueger, a technology strategist at Dell Inc.; Christian Belady, PE, the principal power and cooling architect at Microsoft; and Joe Prisco, a senior systems and technology group engineer at IBM Corp.

The panelists spent much of the hour-and-15 minute discussion arguing about the best technologies and methods for greening a data center, and I’m sure the 50 or so attendees extracted some useful information from the panelists’ back-and-forths.

Each panelist also offered up a tip on how to easily increase the efficiency in a data center, including the following:

• Belady suggested IT managers incentivize employees to measure server power efficiency and reward those who come up with ways to add efficiency in the data center; without incentives, greening data centers probably won’t get done.
  As a side note, Belady made an interesting comment (or threat) about the heat threshold of hardware; he said Microsoft has pushed hardware vendors to create equipment that can withstand up to 95 degree temperatures. “If they don’t, Microsoft won’t buy that vendor’s equipment at scale,” he said.
• Patterson suggested IT administrators raise their hot aisle temperatures to about 80 degrees Fahrenheit to reduce cooling costs, so long as the equipment can take that temperature.
• Prisco suggested that IT administrators check hot aisle temperatures using nothing more than their good old central nervous system.”Your hot aisle is supposed to be hot, and you can tell when heat is escaping into the cold aisle without instruments. Just feel it with your hands,” Prisco said.

  Then, of course, do something to contain the heat better.

There is more to be said about creating a power efficiency data center, which will be continued on SearchDataCenter.com.

As part of this agreement, IBM BladeCenter will be the only blade server platform available for custom ICE Cubes. Prior to this agreement, Rackable’s containerized data centers only supported Rackable’s own server hardware.

IBM also started offering its own containerized data centers recently, as did Hewlett Packard with its version, called POD. Unlike most containerized data center offerings, HP is letting customers fill the POD with servers from any vendor – IBM, Dell, Sun Microsystems, or otherwise.

There are some other vendor neutral containerized data centers, like American Power Conversion (APC)’s InfraStruXure Express and Verari Systems Inc.’s Forest, though Verari does push customers to use its proprietary blade servers, a spokesperson said.

Effective today, Rackable’s ICE Cube modular data center will be outfitted with IBM BladeCenter T or HT systems, which are NEBS-3/ETSI-compliant, meaning they’re certified for use in telecommunications environments and carrier facilities.

The ICE Cube is available in 20 or 40 foot container sizes. BladeCenter-specific configurations of ICE Cube can reach densities up to 1,344 dual socket, Quad core Intel Xeon blades, or 672 quad socket, dual core AMD Opteron blades.