For the past several years - and some of them not particularly good ones - Dell's Data Center Services (DCS) bespoke iron-making forge down in Round Rock, Texas, has been a particularly bright spot in the company's enterprise business.
Although it serves only a handful of very demanding hyperscale data center customers, the DCS unit accounts for a growing part of Dell's server shipments and revenues. And just perhaps some profits, too.
DCS was set up in the spring of 2006 to chase the big server orders at Google, Yahoo!, eBay, Amazon, Facebook, Salesforce.com and similar hyperscale Web 2.0 companies, and by the fall of 2008, the company was doing a gangbusters business - but still had not landed Google as a customer, and probably never will because Google thinks it can do everything better than anyone else. (DCS names Facebook and Salesforce.com as customers.)
The unit has several hundred employees, who craft and build custom server kit for these picky Webby shops, where power and cooling issues actually matter more than raw performance. The high availability features necessary to keep applications running are in the software, so you can rip enterprise-class server features out of the boxes - they are like legs on a snake. By October 2008, when Dell was bragging a bit about how well DCS was doing (mainly because the great Recession had hit Dell and its server-making peers particularly hard), the company hinted that if DCS was a standalone company, its mere 30 customers would have made it one of the top five server-makers in the world. That was pretty good for a unit that was only 19 months old.
And DCS just keeps growing, even without Google on its roster of low-profile customers. Speaking to members of the press in New York recently, Steve Schuckenbrock, president of Dell's large enterprise group, said that when the numbers were tallied up in the second quarter, the DCS unit shipped more machines than IBM did across all of its product lines. That would make DCS the number three server maker behind, er, Dell proper.
As El Reg previously reported, the box counters at Gartner reckon that companies consumed 2.15 million server units in the second quarter, up 27.1 per cent compared to the second quarter of 2008, which had one of the worst downdrafts on record thanks to the poor global economy. HP shipped 644,172 servers in Q2 of this year, and Dell (including DCS and its other custom OEM server building biz where it makes and sells kiosks and server appliances, including Google's eponymous search appliances) shipped 542,799 units. IBM was the number three server-maker in the quarter, at 267,614 units, with Fujitsu coming in fourth with 60,974 boxes and Oracle fifth with a piddling 47,968. All other server-makers combined accounted for 581,512 machines.
In order for Schuckenbrock to be telling the truth about DCS shipping more boxes than IBM, then DCS had to ship more than 267,614 units. So to be a smart-alec, we'll say they shipped 267,615. And at that number, DCS accounted for just under half - 49.3 per cent - of Dell's overall server shipments. Back in October 2008, I calculated that DCS had to be somewhere between 10.3 and 53.5 per cent of Dell's total shipments for the second quarter of 2008 (based on vague statements Dell was making) and I thought the lower number had to be closer to the truth. Well, maybe not.
Which makes you wonder why IBM and HP didn't pick up Rackable Systems (which now goes by the name of Silicon Graphics) or Verari Systems (which went bust and then came back to life as Verari Technologies earlier this year) to get into the custom server racket. Well, IBM is not really a server manufacturer except for high-end machines (everything is farmed out) and HP sells plenty of boxes without needing to go down the custom box route. As long as DCS keeps its hyperscale customers happy, it will be very hard to dislodge them from an account.
Find a startup, help it grow
The trick, of course, is not to try to steal accounts away with custom servers, but to find startups that will grow fast and make them happy and keep them that way. This was the genius of the Oracle database-Sun server hardware combo during the dot-com boom. Sun's "Starfire" Enterprise 10000 servers were the default back-end box and Sun's pizza-box Solaris servers were the default front ends - and it is also how, for instance, Dell's DCS unit got in on the ground floor at Facebook.
"Dell was in early, and we helped them innovate," says Schuckenbrock of Facebook.
The company is also in on the ground floor with OnLive, the Web-based gaming site that launched in June. OnLive was founded by Steve Perlman, who worked at Apple where he created QuickTime and also gave your ma and pa WebTV back in the early days of the dot-com era. OnLive allows gamers to play popular video games on their PCs remotely through a Web browser and soon on their TVs with a special (and cheap) HDMI and network adapter. The games are actually running back in OnLive's data centers, and the secret sauce that Perlman has been working on to make console games work over the Internet and inside of a Web browser is what he called "error concealment". DCS had to create a custom server to integrate their video compression board into the machine, as well as pack in some high-end graphics cards to drive the games. Power and cooling are big issues. And no, you can't see the servers. It's a secret.
If Perlman told El Reg how this new video compression technique worked, he would have to kill us all (but no doubt in a role-playing game where the blood is not real but the lawsuits are). But however the video compression works, Perlman says that it can "tolerate extremely high packet loss", which is a given with a lot of our Internet connections here in America. My guess is that the technique is somehow smearing the data to fill in missing blanks, and doing so in such a way that your eye can't see it.
OnLive has some important differentiators over selling and playing games on your own PC. First, you can't patch the online version of the game, since it is running on OnLive's servers. That has the effect of making OnLive the preferred platform for multiplayer games where showing off your prowess without cheating is important. Moreover, when a game goes live, it can go live immediately on OnLive. Even if you get the download of a new game off the Internet from a vendor, it can take hours to download and install it on day one since everyone else is trying to do the same. So if you want to be first to actually play a game like Mafia-II, then OnLive could be your best bet. And so OnLive is planning for rapid growth of its gamer base and therefore its server farms.
"These guys took a bet on Facebook early, and they benefited from that," says Perlman. "And now they are making a bet on us."
Schuckenbrock would not say how much of a premium that Dell's DCS unit can charge for its bespoke boxen, but said that Dell was "charging a fair price" given the time to market advantages OnLive was getting and the engineering work involved.
Oddly enough, now that Dell has partially commercialised its custom servers with the PowerEdge-C line of machines, launched in March and enhanced several times this year, it may be harder to get some of that DCS hand-holding. To get a custom server contract, Dell is looking for customers who need "true breakthroughs in power and performance" and the "ability to see a market for the server beyond the original customer".
In a sense, DCS customers are the beta testers for PowerEdge-C customers. It is funny to think about who should be paying for the privilege: Dell or the DCS buyer. ®