Systems Builders Fashion New Tech Niche

First there was the portable phone, then the portable media player. Now, say hello to the portable supercomputer. Nor-Tech, a custom-systems builder based in Burnsville, Minn., has designed and configured a portable high-performance cluster for researchers in the field of fluid dynamics at a large university in Utah. The researchers, who study the 3D structure and physical behavior of liquids, needed a way to process and store the large amounts of complex data they were analyzing. But they also needed a system that could be toted among multiple departments and campuses.

In response, Nor-Tech developed a portable cluster on wheels. The 15u cluster is housed in a ruggedized, shock-mounted chassis and can operate up to 96 processor cores on just two 110VAC 20-amp circuits, or 52 cores on a single circuit--which also satisfied the researchers' limited power constraints.

Seeking out such niche markets and providing highly customized solutions is the path many systems builders are taking to drum up new sales, as many have struggled to compete in the custom white-box market against top-tier OEM vendors.

"It's how we're differentiating ourselves from the Dells and Hewlett-Packards of the world," says Todd Swank, vice president of marketing at Nor-Tech.

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"You have to look for different niches," agrees Joe Stopski, vice president of business relations and development at Fusion Microsystems, a systems builder based in Centennial, Colo. "What we're really looking at is providing custom computing solutions for specific applications."

Fusion has developed custom systems for medical devices in hospitals, high-performance storage solutions and even digital signage in airports.

"Systems builders are moving up the stack in terms of what they're producing and providing," says Steve Dallman, general manager of Intel's worldwide reseller channel organization, Santa Clara, Calif. "They decided there's not a lot of value in just selling a generic desktop PC, which doesn't require a lot of customization. That particular customer just needs basic computing, and there's not a lot of margin or application support required."

Next: Serving Up Opportunity

Serving Up Opportunity

Servers are one area where many systems builders have migrated, with blade servers, in particular, becoming a more compelling market, as blade server sales are expected to reach $10 billion by 2009, according to market-research firm IDC.

"They've all moved into the server business in a very big way," Dallman says. "It's a growing phenomenon, and we're just at the beginning of what's a very dynamic ramp-up in servers to meet the unending computational demand. Whether it's Google or Microsoft adding server farms or SMBs increasing their productivity or Web presence, there's an insatiable demand for servers."

And along with server sales come increased opportunities for higher-margin services and support, from break-fix to ongoing management.

"With servers, you get to sell a lot of different software, and it's more complicated in terms of technology. It's a big area for us to provide service and value to customers," says Jean Shih, president of AMAX Information Technologies, a large systems builder based in Fremont, Calif.

"Servers are more complicated, and the barrier of getting into the field is higher, but, in return, there's still a lot of competition compared to PCs. In the PC market, the first-tier companies like HP, Dell, IBM and Acer are doing well, so it doesn't leave much for white-box people to compete; the products are so standardized, there's not much value to add," Shih says.

The systems builder decided early to make the move upward from selling mainly white-box systems, and for the past five years has been moving more deeply into servers, storage and high-performance computing.

So far, the move has paid off handsomely for AMAX, which saw 30 percent to 40 percent growth from its server sales this year, and the company sees no sign of a slowdown in the coming year. In fact, it's expecting to get an even bigger boost as AMD rolls out its quad-core Barcelona chips for servers. Already, the systems builder is seeing demand in that space.

Along with the demand for servers comes an increased opportunity for systems builders to provide custom storage solutions.

"We expect to see more and more demand for storage and blade servers this year," adds James Huang, marketing manager at AMAX.

In addition, AMAX just joined Microsoft's certified program for Microsoft Windows Storage Server solution manufacturers, which includes larger vendors such as Dell, HP and CDW, and about a half-dozen other companies.

"This will really help us gain more market momentum in storage servers," Huang says.

NEXT: Tapping into storage.

Meanwhile, AMAX has rolled out a new line of its StorPlex Storage Systems network-attached storage platforms, which use Microsoft Windows Storage Server 2003 R2, and the systems builder is now testing the new Microsoft Windows Unified Data Storage Server software and plans to roll out new solutions based on that software soon, Huang says.

Hoping to help drive growth in the custom storage market, Intel recently introduced a quad-core version of its storage server for systems builders. The Storage Server SSR212MC2, formerly code-named "McKay Creek," is a 2u, 12-drive rack-mount storage server designed for the SMB market.

It can be configured as network-attached storage, a storage area network or an application server, and it supports serial-attached SCSI (SAS) or high-capacity serial ATA (SATA) hard drives, according to Intel.

"We're working with six different software companies to make sure there's software available to load on product," Dallman says.

Among the software companies participating are Microsoft, Open-E and Red Hat. Intel is also working with hardware vendors such as Emulex to provide multiple network connectivity options, including Fibre Channel and InfiniBand.

The Intel Storage Server SSR212MC2 costs $2,800 without a RAID controller and $3,600 with one.

Also geared for the SMB market, which makes up the bulk of systems builders sales, Intel in the second half of 2008 will roll out its new Multiflex blade server for systems builders. The system will include built-in storage and networking.

"The idea is to be able to bring all of these together into one box for the management, networking and configuration they need for storage solutions," Dallman says.

In addition to moving up the stack into servers and storage, systems builders are also looking for opportunities in less conventional areas.

"We see opportunities like storage as well as security, where partners are now expanding into businesses that aren't traditionally PC-related," says Gary Bixler, director of North America marketing at AMD. "For example, we have customers moving heavily into video surveillance and security systems."

Next: Whitebook Lag

Whitebook Lag

Another area where systems builders have tried to gain more traction but have not yet made the headway they hoped for is in the whitebook market.

While sales of notebooks are predicted to outpace desktops by the end of the decade or thereabouts, systems builders have yet to capitalize on that market growth.

Intel acknowledges it hasn't seen sales of whitebook systems grow as quickly as it had predicted, despite the launch of its Verified By Intel (VBI) program last year. Intel rolled out VBI to help provide custom systems builders with financial support and standardized PC components, such as power supplies, batteries and LCD panels.

One big factor that hampered VBI was inconsistency in the quality of supplies from Intel ODMs, but Intel has tapped a new third-party logistics company that it expects will improve component availability from ODMs and drive up volume to bring pricing down.

One of the key VBI program areas Intel will invest in for the coming year is improving battery design features.

That's welcome news for John Gouker, CEO of Workhorse PC, a McKinney, Texas-based systems builder. The company sells many notebooks to the education market, and it has found that it's often unable to supply the battery options schools are seeking.

"They've been kind of lacking for us in some of the features we need most for schools buying notebooks," Gouker says.

Another VBI design feature Intel will add in response to channel demand is a port replicator, for simultaneously connecting multiple peripherals to notebooks, Dallman says.