Channelnomics

Whitebox-Makers Rock Incumbent Server Boat

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The bulk of the numbers included in Gartner’s and IDC’s “other” server-maker categories come from companies such as Quanta Computer Inc., Compal Electronics Inc., Wistron Corp. and Inventec Corp., all of Taiwan, and Marvell Technology Group Ltd., officially headquartered in Bermuda with large facilities worldwide including Santa Clara, Calif., and several locations in and around Beijing, China.

Quiet as it’s kept, this cadre of lesser-known ODMs builds most of the servers sold by the big-name incumbents at a significant markup. The game changed, however, when the ODMs recently began taking their business direct to enterprise clients more interested in price and specifications than name-brand labels.

Quanta, Compal, Inventec and Wistron are well-known makers of consumer electronics and end-user computing devices. Quanta and Compal are the number one and two contract notebook manufacturers in the world, respectively, while Wistron, the former manufacturing unit of Acer Inc. before it was spun off in 2000, and Inventec are best known for their mix of laptop and desktop  PCs and LCD televisions.

Marvell, which bought Intel Corp.’s XScale handheld processor unit for $600 million in 2006, is known mainly as a semiconductor-maker.

These firms all have in common their focused efforts to manage a shrinking global PC market by diversifying with bespoke and contract whitebox server production.  The vendors have seen increasing traction since 2011 from some of the biggest names in technology looking  to outfit next-generation data centers with highly customized and commodity servers built to their internal engineer specifications, something legacy vendors have had difficulty affordably delivering at scale.

For example, Rackspace Hosting Inc., a long-time customer of Dell and HP, earlier this year turned to Quanta and Wistron when it sought to reshape its business with its own server platform design built on the OpenStack cloud platform. The plan proves the worthiness of OpenStack, which Rackspace co-built  NASA, and allows Rackspace greater creative freedom in deploying sever farms tunes specifically for its service portfolio.

The pair has also been tapped to provide custom whitebox servers for massive data-center expansion projects for Google Inc. in Taiwan, Hong Kong and Singapore, as well as Facebook Inc. and Amazon.com Inc. in Europe, according to Asian IT trade publication Digitimes. As a result of these deals, Quanta and Wistron expect to see gains in server sales of nearly 30 percent in 2013, the publication reports.

The success of ODMs in the server space is getting under the skin of the incumbents. Dell’s president of enterprise Maruis Hass late last year reportedly warned the group — and Quanta and Wistron in particular — to back off their whitebox server ambitions or risk losing ODM deals with the Round Rock, Texas, vendor. Wistron complied, sort of, by shunting whitebox work to its subsidiary. Quanta held firm and has lost some Dell business to Inventec as a result, according to published reports. Some 85 percent of Dell servers are currently built by Taiwan’s Hon Hai Precision Industry Co. (commonly known as Foxconn), as well as Wistron and Inventec.

Marvell, meanwhile, scored a major coup when it announced last week that its low-power ARM-based servers would power a new series of cloud services and perhaps be used in a massive new data center with an estimated 100,000 servers built by Chinese search giant Baidu.

All of this explains Gartner and IDC’s most recent findings that show the “old guard” server-makers slipping while the background “other vendors” buck the market and the economy with stellar results. So what’s in it for the channel?

Apart from the waning fortunes of traditional vendor partners in the server space, much of this market disruption has yet to be felt by IT service providers. But as low-priced and customizeable whitebox serversbecome more available to mainline distributors and solution providers, partners will be faced with a choice — and likely some advantageous opportunities — in an increasingly competitive server market.

Bear in mind that, for the most part, these are the same boxes, built in the same offshore facilities, minus the recognizable vendor markings and the stiff, margin-sapping markup.

For those partners still leading their hardware sales with their major vendors’ brands instead of putting their own business front and center in every interaction with their clients, the time to consider servers that bear your own name and logo may be better than ever. It won’t earn you any kudos from your Dell, HP, or IBM rep, but it may just earn you points from your customers — who’ll know who to turn to in every phase of their engagement with your services, starting with the name on the rack.

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