Small biz takes economy servers for spin

Entry-level server appliances are growing in popularity for Web and e-mail services.

They're cute, they're cost-effective and they are worming their way into small offices and remote branches every day. Meet the entry-level server appliance, a machine growing in popularity for Web and e-mail services.

There are a good number of these Web server appliances being offered, including the Qube 2 from Cobalt Networks, the NetWinder OfficeServer from Rebel.com and the Whistle InterJet II from Whistle Communications, which is now a wholly-owned subsidiary of IBM.

These machines share three characteristics: They often have an unusual design to differentiate them from typical PCs; they include Web, e-mail, File Transport Protocol (FTP) and local area network (LAN) server functions; and they do so in a single box that runs Linux or FreeBSD Unix, a low-cost Unix product.

"They quickly migrated to advertising their ability to share Internet access for all systems in the office," says Ray Boggs, a senior analyst at International Data Corp. "The price point is not too painful for small businesses, and their easy, Web-based configuration hides the operating system [OS] details pretty well."

GartnerGroup Dataquest reports that almost 31,000 of these Web servers shipped in 1999, and the research company expects that number to hit 721,000 in 2004.

Prices depend on the amount of system memory and the size of the hard disk.

The Cobalt Qube 2, a low-end system, offers the smallest price tag of $999, while the more robust InstaGate from eSoft sells for $3,995. The majority of systems hover in the area of $1,500 to $1,800, making them cheaper than a PC server with either Microsoft's Windows NT/2000 or Novell's NetWare.

Though they're not cheaper than a PC running Linux or another low-cost Unix variant, the vendors bundle customized configuration and management utilities, hiding the mysteries of the OSes from inexperienced users.

The Rebel NetWinder OfficeServer illustrates the basic entry-level server appliance quite well.

Powered by Linux, which is hidden by well-designed configuration screens that run on any browser client, the OfficeServer includes 64 megabytes of random access memory (RAM) and a 10-gigabyte hard disk for a retail price of $1,595. It can handle 50 users on the LAN, plus thousands of Web site hits and e-mails per day comfortably.

The Apache Web server software used by OfficeServer is a popular choice among these entry-level Web servers, for an obvious reason: The vendors pay no royalties. The same goes for the included e-mail server and FTP server software. Few of the vendors in this market, however, are sitting in one place. They are trying to forge upgrade paths for their systems, and trying to make it easier to tie the machines to the Net.

Rebel offers rack-mount versions of its OfficeServer, doubling the amount of RAM and hard disk space found in the base version. And Cobalt's Qube 2 ships in three different configurations, each with increasing amounts of RAM and hard disk space. The upgrade path exists for companies that go beyond the small-office designation and want more horsepower.

Cobalt pioneered the "cute Web server" market with its stunning purple cube, and the company has done much to supply its users with an upgrade path. Cobalt's RaQ 2 handles up to 10 million Web and/or e-mail hits per day, while its RaQ 3 can serve about 35 million hits. In addition to larger client companies, Cobalt has expanded its market to Internet service providers and large hosting services. Its RaQ system gives providers flexibility, with up to 40 fitting into a single standard rack.

If a company to outgrows its Cobalt Qube 2 server, it can move its Web server to a RaQ system hosted by its own ISP.

New business model

Bringing the ISP into the picture illustrates a very important change in the business model for small Web servers. Many vendors are working out deals with other vendors that give the appliances away when Internet connection contracts are made.

"The latest wrinkle is to gain access to service customers by giving the product away," according to IDC's Boggs.

For example, Encanto Networks recently signed a marketing agreement with Lucent Technologies calling for Lucent to relabel and resell Encanto's systems bundled with Lucent Internet connections.

Also, ESoft announced on June 19 that it was moving to a subscription model. Customers will receive the hardware with a two-year minimum service contract, which is priced at $100 to $300 per month, based on connection speed.

An optional service leaves eSoft with management authority over the system, even when it is located at the customer's site. That way, the customer can be assured that trained technicians are maintaining its system at all times.

ESoft's InstaGate gained a group of siblings when eSoft merged with Technologic in September 1999 and added its Team Internet multifunction Web servers to the eSoft product line.

It looks as though cute Web servers will be around for a while.

"There's years of significant growth in this market," Boggs says. "These [low-cost Web servers] get small customers into the e-commerce mainstream in a hurry. Companies can use these small Web servers to get into e-commerce cheaply and painlessly."