Less-Is-More Computing

Server makers have made a vital discovery: No one wants an energy-sucker that needs a baby-sitter

For years, corporate computing has been a game of addition: Computer makers focused on building servers with more processors and more number-crunching strength so the machines could do more jobs. Now computer manufacturers are finding out what the makers of Miller Lite and Diet Pepsi have long known: In many cases, less can be more.

That's because customers these days want computers that are less filling. With data centers costing $50 million or more to build, companies need smaller devices so they can cram more high-octane computing oomph into less space. They want machines that use less power, both to save on electric bills as energy costs skyrocket and so the machines can be packed close together without frying each other. And companies want gear that can take better care of itself. The sorry truth is that the expense of configuring and fixing computers is higher than the boxes themselves. Companies are fed up with paying armies of techies to maintain these complex systems. "If you look at the total cost of ownership of any hardware, the biggest cost is people," says Jerry A. Scaggs, a technology vice-president at freight hauler United Parcel Service Inc. "Equipment needs to be able to manage itself much more than it does today."

Computer makers big and small are heeding the call. Market leaders such as IBM (IBM ) (No. 6 in BusinessWeek's Info Tech 100), Dell Computer (DELL ) (No. 35), and Sun Microsystems (SUNW ) (No. 65) are selling servers roughly the size of a pizza box that can be stacked in racks and take up far less space than traditional machines that are at least as big as a college-dorm refrigerator. Last year, 1 million of these slimmed-down servers were sold, vs. 3.6 million bigger ones, according to researcher IDC.

MIDGET INVASION. Now, upstarts are taking midget servers to the next level. Companies such as RLX Technologies Inc. and FiberCycle Networks Inc. sell book-size "blade" computers that are little more than a processor on a circuit card. They're so small that 20 of them can fit in the space of one pizza-box-size unit. That's math that the big computer makers can't ignore: By this winter, expect Dell, Compaq (CPQ ), and Hewlett-Packard (HWP ) to introduce blades as well. Says Duane Zitner, Hewlett-Packard's president of computing systems: "This is a huge business, and we intend to provide all of the [products] our customers want."

The blade servers fill the new lightweight bill in other ways, too. Most use chips that require less power. Houston-based RLX, for example, sports the same electricity-sipping Transmeta Corp. (TMTA ) processors found in some laptop computers and wireless gizmos. And they're designed to be a breeze to install: Since most blades come preconfigured to handle just one task, such as serving up Web pages, they can be set up in minutes. Even more important, special software links the blades together so that if one unit fails, it can be replaced quickly. "We want to offer the best foot soldiers, not the best general. If you lose the general, you're screwed. If you lose the foot soldier, you've got 10,000 behind him," says Giovanni Coglitore, CEO of Rackable Systems, a San Jose (Calif.) company that will soon begin selling blade servers.

Easy setup and replacement are just the first steps in reducing staffing needs in corporate tech departments. Upstart Brocade Communications Systems Inc. (BRCD ) (No. 59) makes switches that can automatically shuttle Net traffic and other data between servers and storage banks. That boosts the utilization of customers' existing storage and frees well-paid techies from having to spend their days typing in commands to keep track of all the data. And Silicon Valley startups Ejasent, NetScaler, and Peakstone are writing smart software that makes the growing potpourri of servers operate in concert. Like an orchestra conductor, these programs direct server computers to the greatest need at any moment--say, speeding up a company's e-mail system as workers sit down at their desks in the morning and then shifting to printing end-of-day reports in the afternoon. The applications, says Peakstone Corp. CEO T.M. Ravi, "work like autopilot in a plane" to help reduce the workload for tech staffers.

Next up: so-called self-healing computers. IBM has pulled a number of efforts together into one grand, multibillion-dollar research and development project dubbed eLiza. It includes some existing technologies such as Intelligent Resource Director--software that anticipates glitches within a server and shifts the workload to other parts of the computer. Longer-term, scientists are racing to eliminate most human interactions, even as complexity skyrockets.

Consider Blue Gene, a supercomputer IBM is building to attack biotechnology problems. The machine, due out in 2004, will have a million processors working in tandem, and researchers at Big Blue fear that technicians would never be able to keep up with inevitable breakdowns. "Anytime you have a million of anything, something is going to fail," says Dave Turek, a vice-president of emerging technologies in IBM's server group.

TINY MARGINS? Self-managing machines will likely pad profits at companies such as IBM, but much of the lightweight movement threatens the fat margins in the server business. Although many server makers predict surging sales of blades, the product could end up as the equivalent of the sub-$1,000 home PC. Sure, companies will sell a lot of them, but they won't make much money. As more manufacturers flood the market with blade servers, for example, their prices will quickly tumble to $500, from today's levels of $2,000 or more. "I would guess blade margins are going the way of the PC desktop"--about 10%, rather than today's 20%-plus, says IDC analyst Mark Melanovsky.

The cost of higher-end servers could fall as well as more tasks can be handled by the lightweights. Some users already are enjoying the new server math. Marty Boos, technology chief at e-commerce hoster Digital River Inc., no longer buys the $1.5 million computers that have juiced Sun Microsystems Inc.'s (SUNW ) margins in recent years. Instead, he recently bought eight smaller systems that cost a total of just $500,000. These machines deliver the same computing punch as one of the pricier Sun machines, and they provide sufficient reliability for the tasks the machines carry out. "I'm glad someone is in the server business," he chuckles, "but I'm glad it's not me."

Sure, not every server will shrink to the size--or price--of a paperback. Most large companies still need top-of-the-line, million-dollar-plus models to store and manage the most sensitive corporate data--say, an airline's reservation system or a bank's customer accounts. But, increasingly, other duties will be handled by nine-foot racks filled with smaller, more streamlined devices that consume less power than their full-scale predecessors. And even the larger machines will require fewer staffers to monitor and manage them. That lightweight recipe adds up to big changes for computer makers.

By Peter Burrows in San Mateo, Calif., with Heather Green in New York

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