Dell Takes a Swipe at IBM, HP With New Blade Servers

Comes in below top rivals on pricing, but management tools a potential issue

Dell Computer Corp. last week announced that it has started shipping a line of blade servers priced to undercut similar products already on the market from vendors such as IBM and Hewlett-Packard Co.

Dell said its PowerEdge 1655MC blade server starts at $1,499 with a single Pentium III processor, putting the cost of the device several hundred dollars below what IBM and HP charge for their entry-level models (see chart). Dell is also selling a system chassis for less money, although it holds far fewer blade servers than the ones sold by IBM and HP.

Blade servers pack the functionality of traditional rack-mounted systems onto high-density boards. Framingham, Mass.-based IDC estimates that sales of the space-saving servers will total about $120 million this year as top vendors start to ship devices.

Russ Ray, senior product manager for Dell's PowerEdge server line, claimed that Dell's pricing will give it a competitive edge when users factor total cost of ownership (TCO) into their buying decisions.

Increasing Competition

Dell's blade servers aren't the lowest-priced ones on the market. RLX Technologies Inc., a start-up in The Woodlands, Texas, sells an entry-level model for $1,249, plus $3,299 for a 24-slot chassis.

But Glenn Ricart, chief technology officer at CenterBeam Inc., an IT outsourcing vendor in Santa Clara, Calif., said Dell's entry into the blade server market should increase competition and "drive quality up and prices down."

CenterBeam uses HP's blade servers to shadow systems it has installed at customer sites with a mirror image of all their applications and files. Ricart said CenterBeam embraced the emerging technology because blades are less expensive and easier to install and manage than conventional rack-mounted systems, in part because of reduced cabling needs.

David Freund, an analyst at Illuminata Inc. in Nashua, N.H., said Dell "has drawn a line in the sand" for IBM and HP with its pricing. But while Dell has commoditized products such as PCs and Windows-based servers to its competitive advantage, Freund questioned whether it can have the same success with blade servers.

Hardware costs are just a small slice of TCO for blade servers, Freund said, adding that the devices also require an extensive suite of management tools to handle functions such as load balancing. That could become a key differentiator for IBM and HP, he said.

Although Dell offers software to help manage server loads, Freund said he thinks users will also need to buy third-party tools from vendors such as Altiris Inc. in Lindon, Utah, to maximize the potential of Dell's blade servers.

Tim Dougherty, director of blade strategy for IBM's server group, said the company's IBM Director software, which includes automated setup and configuration wizards, gives it a competitive advantage over Dell's technology.

Hugh Jenkins, vice president of marketing for HP's industry-standard server group, emphasized the breadth of HP's blade product line, which is due to be expanded next year to include four-processor servers and models based on Intel Corp.'s Xeon chip.

Dell also introduced a dual-CPU version of the 1655MC. Both models support Windows 2000 and Red Hat Linux, the company said.

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Blade Server Pricing

Pricing for entry-level blade servers with one CPU:

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Dell $1,499 with a 1.26-GHz Pentium III, plus $1,799 for a six-slot chassis

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HP $1,759 with an 800-MHz Pentium III, plus $3,421 for a 20-slot chassis

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IBM $1,879 with a 2-GHz Xeon, plus $4,988 for a 14-slot chassis

Copyright © 2002 IDG Communications, Inc.

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