IBM: Beyond a Box

That lack of differentiation, combined with end-user customers' shrinking IT budgets, gave way to a savage price war that has claimed loyalty as a casualty in many cases. It also exacerbated existing flaws in corporate channel policies and has the major players in the space looking for ways to become more flexible and channel-friendly.

"Resellers like to be loyal, but if a big enough price delta develops, price becomes too difficult to overlook," says Tom LaRocca, Compaq's director of marketing for industry-standard servers in North America. After the booming market of 1999, "we did stand around a bit," he admits. "We didn't have a good SMB team giving us feedback about what the channel wanted."

When feedback from the reseller community jarred Compaq to action, the first step was to build an SMB team for North America for the server, desktop and portable computer lines. "They're able to laser-focus on those customers and provide faster feedback," LaRocca says. One of the first lessons Compaq learned based on this reseller feedback was that customers wanted more services "instead of just a box."

In September, Compaq released the first result of these lessons, a turnkey ProLiant server integrated with Linux-based software and security services from Mitel Networks. "Customers liked the economy of appliances and the flexibility of general-purpose servers," says Paul Miller, director of marketing for mainstream servers at Compaq. The ProLiant offering combines attributes of both, and Compaq initially offered the server through PC Connection to establish it as a channel product.

Sun's efforts have also focused on bringing the emphasis back toward features and away from price, though those features may not always be traditionally technological.

"Speeds and feeds are important, but that has dropped to fourth or fifth on the list of what channel partners are concerned with," says Souheil Saliba, senior director of marketing for volume systems products at Sun. "The concerns have much more to do with support, about how easy it is to do a deployment."

Recently, Sun has been creative at playing the price game, too. In July, the company reduced prices on its lowest-cost rack-mounted server, the Netra X1, by 25 to 30 percent. In late August, without changing the name or price of the server, Sun boosted processor speed from 300 MHz to 400 MHz, doubled memory and drive capacity, and introduced faster speed drives.

In addition, Sun offers both Intel-based servers (the Cobalt product line) and servers running its own Solaris operating system. "The object there is support--support of the applications a customer wants to run," Saliba says. "People worry about whether they'll have to go through architecture discontinuity as their infrastructure grows across the different parts of their organization. By running Solaris across the entire product line, we let the users keep using those applications."

Part 3: Focus On Form

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