Dell claims an A+ on blade strategy report card

The director of Dell's PowerEdge Server Product Group, Tim Golden, cites marketshare numbers from IDC and claims that it didn't take long for Dell's new blade strategy to devastate the competition.

Download this PodcastBy all accounts, even those of Dell's, when blades became all the rage in terms of a form factor for servers, Dell misfired and ceded the market to the other two tier one vendors HP and IBM, who had a bit of a field day while Dell regrouped.  Regroup it did. 

About this time last year, Dell began to drop hints that a new blade strategy was in the works -- one that by virtue of Dell's highly optimized direct model (what Dell insiders call the Dell Effect),  would turn the blade market upside down (so the company promised).  Because of the Dell effect, the company said it could do what no other blade vendor was doing -- save buyers money over other server form factors (eg: towers, 1Us, etc.)  on the cost of acquisition versus what other vendors were doing: charging a premium to get all that technology squeezed into a tiny package that eventually produced a savings over time based on other cost-crunching techniques such as better management and power consumption  

Then, in November 2004, Dell delivered the first tangible evidence of that strategy -- its PowerEdge 1855 Blade Server.  Now, a little more than six months later, the director of Dell's PowerEdge Server Product Group Tim Golden cites marketshare numbers from IDC and claims in my interview with him that  it didn't take long for Dell's new blade strategy to devastate the competition.   Since launching the new blade strategy, at least one leading blade seller -- blade pioneer RLX -- has exited the blade hardware market, focusing on blade management instead.  The audio version of the interview is available as an MP3 that can be downloaded or, if you’re already subscribed to ZDNet’s IT Matters series of audio podcasts, it will show up on your system or MP3 player automatically. See ZDNet’s podcasts: How to tune in.

In the interview, Golden does not mince words.  "There were a number of promises that we perceived that other vendors had made about blades that they weren't necessarily living up to. ... Blades were supposed to save you money.  That has not historically been the case."   Golden also argues that with other vendors, buyers might have to face as much as a 30 percent premium to get the space savings that blades offer over other rack mountable servers (1Us).   Meanwhile, he promises that buyers of Dell's blade servers will start to experience a savings versus similarly configured 1U servers from Dell once a blade chassis is populated with its sixth server.  By the time a chassis is fully loaded with 10 servers, the savings (on acquisition cost) is supposed to be 25 percent.  Whether or not Dell's blades can save as much as those of HP or IBM on the management and power consumption fronts was not discussed.  But, in response to my previous write-ups on the issue, readers have come forward to say that it's a marketshare bloodbath behind close doors and that IBM and HP are offering steep discounts off their street prices -- discounts that may bring their costs of acquisition more in-line with what Dell has to offer.  Nevertheless, the IDC data, which indicates that Dell grew in 2005Q1 at IBM and HP's expense (both retreated) could be validating Dell's strategy.

In the interview, Golden also had a bit of news and may have shown Dell's hand in some as-of-yet undisclosed announcements.   On the news front, where Dell previously offered a Brocade-based FibreChannel Storage Area Network (SAN) switch for its blade chassis, the company now has a similar offering that supports McData-based SANs.  Golden says the SAN market is in a near 50/50 split between the two manufacturers and that the new offering means that Dell's blades can now plug into just about any legacy SAN (whereas before, they could only plug into half: Brocade-based ones).   In discussing how Dell's chassis has a backplane that's been designed to accommodate faster versions of Infiniband and Ethernet (4 GB), I asked Golden if we could expect to see a Cisco-based offering any time soon.   Said Golden, "I wouldn't be surprised to see a Cisco switch show up there as well."  When I asked when might that be, he said "You won't have to wait too long."