Who's Ahead in the X64 Server Wars?

Published: August 3, 2006

by Dan Olds

According to recently released sales figures, server sales in the first quarter of 2006 were flat or declining. The only bright spot for vendors was the 32-bit X86 and 64-bit X64 server market, which saw industry leading unit and sales growth--albeit not at the same pace as last year. (You can see IT Jungle's analysis of the number from IDC and Gartner in this story from several weeks ago.) Slow growth in server sales means we are still in a buyer's market with most, if not all, of the leverage firmly on the side of the customer.

One of the most competitive market segments is, of course, the X86 and X64 server market, and for the sake of brevity, I will refer to this as the X64 market from this point forward. Four major vendors--(IBM, Hewlett-Packard, Dell, and Sun Microsystems)--with roughly equivalent technology are engaged in a daily dogfight for deals and market share. So who's winning the hearts and minds of customers in the X64 server market?

In an attempt to answer this burning question, Gabriel Consulting Group launched our 1Q06 X64 Server Vendor Preference Survey. The survey was designed to capture the perceptions of real-world enterprise X64 customers and understand how they view both the market and specific vendors. We plan to run this survey approximately every six months in order to track changes in the market and spot trends. The rest of this article will discuss results from our inaugural survey.

Sample Demographics

We surveyed a grand total of 212 enterprise X64 server customers, focusing primarily on data center personnel - data center managers, IT architects, system managers, and the like. We don't have anything against CIOs, but they are generally in the dark about what is actually happening on the data center floor. The average survey respondent managed from 20 to 50 X64 systems. Some 75 percent of respondents worked in data centers with at least two incumbent Unix vendors with almost 40 percent of total respondents reporting that they owned systems spanning three or more X64 server brands. While customers have gear from several vendors, the majority stated that a particular vendor was either a corporate standard or tended to get most of their X64 business. In this survey, roughly 30 percent of the respondents have standardized on IBM, 21 percent each on Dell and HP and 28 percent on Sun.

Scoring and Methodology

Given the imbalance in survey responses from the various server brands, it is important to make sure that the results aren't skewed by the sheer size of a particular vendor's installed base. With this in mind, all responses were compiled and then normalized to remove any skew due to sample bias. For example, we know that Sun does not own 28 percent of the X64 server market. But if we simply totaled up the numbers and reported the outcome, the results would potentially be skewed because Sun is over-represented in the sample (just as HP and Dell may be under-represented). To fix this, we normalize the data so that no vendor is advantaged (or disadvantaged) by the sheer size of their installed base or their share of the survey sample. To do this, all respondents were asked to specify which X64 vendor is their particular corporate standard or the dominant vendor in their organization. The total number of responses favoring a particular brand is then compared to the number of "votes" for that vendor on a particular factor and scored.

For example, assume the survey had 1,200 respondents, 500 of whom have standardized on Dell, 200 who are strong HP customers, 300 who have chosen IBM as their dominant vendor, and 200 who have standardized on Sun. When asked which vendor had the best dressed salespeople, 400 participants responded Sun, 300 picked IBM, and 300 said that HP salespeople were particularly natty dressers.

While the raw scores favor Dell, the normalized score (which is simply the number of "votes" divided by the number of respondents who have standardized on that brand) shows that HP is the winner of this beauty contest. HP wins because it captured a larger number of first place votes than the number of HP respondents.

In this simple example, IBM and Sun scored at par--they were voted number one in this category by the same number as those who selected those brands as their corporate standard. Dell underperformed with their "voters" defecting to HP. We are referring to this normalized number as the Vender Preference Index (VPI). The VPI computation yields an easy-to-understand score for each vendor and a gauge of installed base loyalty. For quick reference, a VPI score greater than 100 means that the vendor in question was selected by a number of respondents greater than the number of respondents who have standardized on that particular brand of server. VPI scores greater than 100 are very good. A VPI score of exactly 100 means that the vendor was chosen as a leader by exactly the same number of respondents as those who have standardized on that vendor. VPIs of less than 100 are, of course, bad, and mean that the vendor in question has suffered defections (at least in terms of survey voting) from their own self-selected installed base. While there are certainly more complicated ways to compute the results of a survey such as this, we believe that this method best captures the data we are looking for, in short, how customers perceive X64 server vendors.

X64 Vendor Face-Off: Technology Criteria

The survey is divided into three major sections. The first "Vendor Face-Off" section asks all respondents to pick the vendor who they believe is the leader on a number of technical and product factors. The second section asks how the vendors rate on a wide variety of business criteria. The third and last section explores customer attitudes toward their own specific X64 server vendor and attempts to gauge their loyalty to that vendor. This report outlines the first two sections of the survey, while subsequent GCG research reports will discuss and analyze the vendor-specific data.

The Vendor Face-Off portion of the survey is divided into two parts: Technology Criteria and Vendor/Customer Support Criteria. We will begin with an examination of results from the Technology Criteria section of the survey.

The chart to the left shows the average of all technology criteria scores. IBM leads competitors with an average VPI score of 103.45, followed by HP and Sun, with Dell bringing up the rear with a score of 60.62. This is a general pattern that runs throughout the survey, IBM and HP with narrow wins against each other, Sun in a solid third, and Dell significantly lagging the others.

In general, IBM scored well on technology, performance and service categories. They also topped other competitors on questions such as "They keep their promises" and "Accuracy and adherence to road maps." HP collected key wins in availability, reliability, and manageability categories, plus customers rated its Windows and Linux expertise as best in class.

While we aren't particularly surprised to see IBM and HP at the top of the rankings, we were mildly shocked by how poorly Dell was rated on technology issues and in the survey in general. While Dell is a very successful X86 and X64 PC and server vendor, the company did not fare will with our enterprise data center participants. Detailed results follow that will give some explanation as to the specific factors contributing to Dell's poor showing.

Sun's performance in the survey also bears comment. We weren't sure how well (or poorly) Sun's X64 servers would be rated in our survey, Sun has only been in this market for a couple of years and we weren't sure we would get enough Sun specific responses to allow for inclusion in the results. We were wrong on both counts--we had plenty of Sun X64 respondents and Sun's performance in the survey garnered it a solid third place--topping putative market leader Dell. Sun seems to have capitalized on its massive Unix installed base to establish a solid beachhead in the X64 market with its Opteron-based "Galaxy" servers.

Vendor Face-Off: Vendor/Support Criteria

This section of the survey asks respondents to rate vendors on criteria associated with how well they support customers in terms of services and sales, along with some additional questions concerning vendor commitment to X64 servers and ability to successfully compete in the market.

The average scores for this section of the survey are captured on the chart at left. IBM has the highest average score, followed by HP. Both Sun and Dell were rated below average on this set of criteria. As noted above, IBM tended to win on issues relating to services, including maintenance, professional/architectural services and value per service dollar. HP dominated with its Windows and Linux expertise categories and was also judged the vendor most able and willing to drive X64 server innovation. Sun was rated a respectable number three in most of this section while Dell tended to trail.

Futures and Value

The final questions in this section of the survey deal with customer perceptions concerning the current and future health of the major X64 server vendors, plus a last question about the comparative value each vendor provides.

The results from these two questions present an interesting paradox. On one hand, our survey respondents believe that Dell has more sales momentum than any of its competitors. But, throughout the survey they have generally blasted Dell for coming up short on technology and customer service. They also believe that Dell is less viable in the enterprise X64 server market than IBM, HP, and Sun. What customers seem to be saying is "we aren't that wild about Dell, but everyone else is," which, to us, means Dell is doing a great job of marketing.

In another somewhat paradoxical result, customers believe they are getting decent value from all of the major vendors. What's strange about this is that throughout the survey, IBM and HP consistently top Sun, and particularly Dell, on almost every technical or support criteria. Given this, we might reasonably expect customers to assert that they are getting more value per dollar from IBM or HP. However, this is not the case. IBM and HP do lead Sun and Dell in value for the dollar, but by a margin that is much lower than what we've seen on almost every other survey question. This result leads us to another question that we'll ask in our next survey: How much variance do you see in pricing from the major vendors? It will be interesting to see what enterprise customers have to say about vendor pricing. Are the final street price numbers pretty close to the same or do they vary widely? If there is considerable variance between what survey leaders IBM and HP charge versus prices from Sun and Dell, then the results outlined here make sense in a "you get what you pay for" context.

So What Have We Learned?

At a high level, the survey tells us that the largest vendors, IBM and HP, are held in the highest esteem by both their own installed base and even by customers who have standardized on other brands. IBM's wins were primarily in performance, technology, service, and delivering on its promises categories. HP won on key availability, serviceability, and manageability categories, and also on its ability/desire to drive X64 server innovation. The differences between IBM and HP were fairly narrow in most categories with the companies virtually tied on several survey questions.

Sun posted a better than expected showing in this survey--third overall and third in almost every category. While some may feel that anything other than an outright win is a loss, we believe Sun's results deserve a bit of applause. Sun has only been in this market for a couple of years and is competing against far larger and more established vendors. Also, coming in third means Sun managed to beat Dell, which is certainly a feather in its cap (if anyone is still putting feathers in caps).

Dell had the worst showing in the survey, finishing last in most categories--usually by a significantly large margin. This is despite being one of the largest X64 vendors overall and devoting a lot of resources to its marketing and sales efforts. While Dell has gained a lot of mindshare in the press and with analysts, it seems that enterprise customers (including much of its own installed base) is less than impressed with Dell's enterprise offerings and customer support.

We hope that our survey has helped shed some light on how the major X64 server vendors are faring against each other in the war for data center hearts and minds. We will be releasing future reports that delve into the third section of the survey, where customers are asked their perceptions about their corporate standard X64 vendor.

Dan Olds is the founder of Gabriel Consulting Group, an IT industry analyst firm that focuses primarily on IT as it relates to business, showing companies how technology can be deployed in a more efficient and effective manner. You can contact him through Gabriel Consulting's contact form.