InformationWeek: The Business Value of Technology

ike Meinz, director of IT at General Mills Inc., is mothballing a piece of the Golden Valley, Minn., company's history. During the next 15 months, Meinz will retire General Mills' Amdahl Corp. mainframe as he moves all the system's data onto Unix servers from Hewlett-Packard.

Meinz, like most buyers of high-end computing power, is getting more demanding; he would have made the switch even if Amdahl weren't getting out of the mainframe business. He wants to simplify his company's IT infrastructure by reducing the number of vendors he has to deal with. He won't compromise one bit on power. Yet he also expects the flexibility to be able to respond to business changes that create huge spikes in demand on the company's IT infrastructure--such as a proposed $10.5 billion merger between the breakfast-cereal maker and the Pillsbury food operations of Diageo plc.

General Mills just purchased three of HP's newest, highest-end Superdome servers, which are priced from $400,000 to $2 million each. By replacing a mainframe version of SAP's R/2 enterprise resource planning software with the latest version, R/3, running on two Superdomes, Meinz expects to be able to handle databases of 500 to 600 Gbytes, at least five times larger than what the old mainframe could support. The third Superdome server will support a new business-inventory process plus the increased call-center volume resulting from the pending merger with Pillsbury. "The success of our R/3 project is vital to plans to integrate Pillsbury into General Mills," Meinz says. "We're here, and we're ready to take on the Pillsbury business."

Meinz wants to simplify the company's computing infrastructure in the process and says that's best achieved by building a homogeneous architecture delivered by a small number of vendors. Besides HP on the high end, General Mills uses Compaq servers running Windows for file and print servers and Web activity. "Some companies bid out every project," Meinz says. "We found out many years ago that it didn't get us better prices, and we had to have duplicate support staff." He also says it's easier to find qualified support personnel to manage Unix servers.

Meinz bought his first HP server in 1976, but he doesn't stick with the vendor out of habit. His IT department benchmarks the company's infrastructure annually and compares it with others in the food industry to ensure that his systems measure up to those from other vendors. "I've seen HP, IBM, and Sun leapfrogging one another," he says. "It's better to have the IT expertise in one platform and monitor that vendor for its research and development; the level of reliability, availability, and serviceability; and its status as a long-term player."

General Mills' reliance on high-end servers to support its most critical systems isn't unique. But in this economic climate, businesses are looking to wring every drop of price/performance out of their high-end systems while ensuring that the systems have enough power and flexibility to handle the increased workloads that result from new applications such as E-business, customer-relationship management, and supply-chain and logistics management.

Price/performance consciousness has led to industry one-upmanship that bodes well for IT managers shopping for high-end systems. Jonathan Eunice, an analyst at Illuminata, says the major Unix vendors are in an arms race, each adding features in response to the others. Newer high-end systems are designed to make it easier to reallocate processing power and memory where it's needed. They offer improved management capabilities to monitor and control system workloads, and feature the ability to run multiple operating systems and apps simultaneously. Vendors also are putting more emphasis on service and support, which increasingly are key factors in buying decisions.

At the same time, mainframe users are finding ways to build much-needed flexibility into their legacy systems, while Windows systems running on new Intel chips dangle the promise of high power at low cost. All that threatens to blow up the walls separating various high-end server categories, giving users more choices. "There's no shortage of vendors that want that high-end business now," Eunice says. "And they have slick machines."

The names of the vendors battling for market share are familiar. Last year, in the market for Unix servers priced at more than $250,000, IBM had 31% of the market ($3.9 billion), Sun Microsystems had 26% ($3.3 billion), and HP had 22% ($2.9 billion), according to International Data Corp. IBM also leads the pack when the server market is divided into categories such as midpriced ($100,000 to $1 million) and highest-priced (more than $1 million, including mainframes) (see chart, p. 52).

Recent sales data suggests some buyers are delaying big server purchases until the economy picks up. Gartner Dataquest says overall Unix server sales slipped 4.4% in the first quarter compared with a year earlier. "We're seeing the effects of reduced budget allocations," says Dataquest analyst Shahin Naftchi. Sales of Unix servers priced at more than $100,000 declined 3%, while sales of systems priced between $10,000 and $100,000 faced double-digit percentage declines.

However, Naftchi notes that sales of low-end Unix servers are faring better. Sales of Unix servers priced between $5,000 and $10,000 actually increased 84.5%. "Many companies are buying smaller servers with the idea they can add more at a later date as necessary to spread out the cost," Naftchi says.

The server vendor perhaps most closely identified with the dot-com world is Sun, which benefited greatly during recent years as budding Web companies and E-business ventures standardized on its servers. Sun's unit shipments in the Unix server market in 1999 and 2000 were at least twice that of HP's and IBM's, IDC says.