Dell sees glimmer of hope in server gloom

Although it sold fewer servers in the last quarter, Dell says it is seeing more buyers for its more-powerful systems
Written by Colin Barker, Contributor

Dell has admitted it has been hit by the slump in customer spending on servers, which is affecting all server makers in the economic downturn.

However, while Dell's overall volume of shipments is down, this is being compensated in part by sales of higher-value servers, Rick Becker, Dell's vice president of software and solutions, told ZDNet UK on Wednesday.

"Customers are buying fewer servers," Becker said, but they are buying "richer and more powerful servers".

Dell saw a 11.2 percent fall in server revenue in the last quarter of 2008, according to figures published by market-research firm Gartner on Wednesday. That fall was not as steep as that seen by market leader IBM, which had a revenue drop of 17.4 percent. HP, which took second place in the market just above Dell, saw sales decrease by 10 percent.

That compares with Gartner's figures for the overall market, which in the fourth quarter of 2008 saw a 15.1 percent decrease in revenue, alongside a 11.7 percent fall in shipments. In shipments, Dell is in second place with a 7.1 percent decline. That was a bigger fall than for HP, with a 1.7 percent drop, but much smaller than for IBM, with a 22.3 percent decrease in shipments.

Becker said a change in the way Dell offered servers had a positive effect on its server revenue, even while the number of physical machines shipped fell. The company is focusing on persuading customers to consolidate their server tasks on a smaller number of higher-powered machines, rather than selling them several less-capable servers to do the work.

"When we looked at our own systems, we had 334 systems doing real work, each with a single-purpose function," Becker said. "We consolidated those 334 servers into 21 blade servers. We took 16 racks of datacentre space and consolidated them down to half a rack."

Consolidation would work out cheaper for companies in the long run, Becker said. "If a customer takes [a Dell] previous-generation server and then upgrades to the latest-generation server, the acquisition costs are the same [for the new server as they were for the older one]", he said.

Becker said that because of the energy-saving measures and efficiency being introduced into new servers, users should "upgrade every three years, as they will save more money if they do that", rather than wait to upgrade servers every four or five years.

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