High end system vendors get the blues

Analysis: As servers get more generic, it's back to workstations.

Ten years ago, the PC hierarchy was very clear: the bottom level client - desktop and laptop alike - PCs were mainstream systems with similar performance and features as well as resulting lower margins for both the manufacturers making them and the system integrators installing them. Then there were professional 3D graphics, desktop publishing and electronic design automation workstations, which were powerful usually dual-socket deskside machines with high priced OpenGL graphics cards. At the very top were servers, usually monsters with two or four CPUs, larger memory and I/O, as well as custom, expensive system level design.

As you climbed up every level, the volumes diminished, but both the unit prices and percentage sales margins achievable jumped massively. So, a quad CPU server would cost as much as four dual CPU workstations or 40 PC clients respectively, even though the plain bill of materials might only have been three and 15 times more costly, respectively. The added value, service and support margins made up the difference.

And that was a time when most of these big machines were still designed, and often made, in the US or other Western countries. A decade ago, the Taiwanese were still novices at workstation and server board design, and the cost savings or quick turnarounds that the little Chinese island can bring to the table didn't mean that much yet in this exclusive marketplace, which was dominated then by DEC, Compaq, HP, Sun, IBM and Silicon Graphics and what was then a healthy mix of various 64-bit RISC architectures as well as the ascendant but still 32-bit X86 at the low end.

Now, things look quite a bit different.

The RISC platforms with their extra performance and price niches are mostly gone. None remain in workstations and only very high-end servers are around with IBM POWER7 and Fujitsu SPARC64 VIII coming this year. No RISC in workstations means a far smaller software developer base, as having a machine on the desk can never be fully replaced by access to a remote big machine somewhere far away. Even Intel's Itanium, the supposed RISC-killer, seems destined to follow the same fate in due course. Too bad Nvidia didn't decide to get hold of the Alpha platform and its fast X86 binary translators, since if it had maybe we'd now have some real competition there.

The 64-bit X86 has fully taken over the workstation and all classes of servers up to eight sockets now, with only a limited few RISC boxen still around in this mainstream server category. And, yes, it's mostly the Taiwanese firms like Supermicro, Asus, Gigabyte and Tyan - increasingly through their mainland China bureaus - churning out the actual designs for companies like HP, Dell, Fujitsu and others. Quick turnaround, low price and pretty much generic standard feature sets on, say, 1U dual processor (DP) server platforms now make them just as ubiquitous, and with similar zero value add, as a typical client PC.

As an example, a typical Intel dual processor Nehalem or Westmere Xeon platform, expected to be like 90 per cent of all DP server shipments this year, has complete memory control and QPI interconnect already in the CPU, and only Intel's Tylersburg chipset is available to choose from. Everyone even uses the same LSI SAS optional storage controller. So, how much 'added value' is there to add at the hardware level? It seems, even less than on a high-end gaming desktop board. No value add means no margin to add.

When coupled with the tough competition between both these Taiwanese firms and the big US vendors using the designs, this means rock bottom margins for the generic 1U and 2U DP server platforms, not that different percentage-wise from, say, a desktop.

With Intel's Nehalem-EX quad socket platform arrival late next month, a similar 'standardisation' will happen in the higher end space. Except for very big boxes that scale to eight sockets and more - mind you, that's 64 cores and 128 threads here - the base four socket platform will, sooner or later, become as generic as the DP one. One CPU socket type, one I/O chipset, one memory buffer chip, and you can play around with the rest, but there's not much to play with at the base hardware. Why should there be, when Intel did a great job with all these chosen components anyway? As you'll see at the end of next month, Nehalem-EX is expected to scale very well, the best ever multiprocessor scaling for any X86 platform.