The Threat To Microsoft's Server Business - InformationWeek
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11/18/2010
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Dave Methvin
Dave Methvin
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The Threat To Microsoft's Server Business

Microsoft's Server and Tools Division has been a steady and consistent producer for the company over many years. Yet there's a potential danger looming for the company that could put a big dent in that business -- and it's coming from hardware.

Microsoft's Server and Tools Division has been a steady and consistent producer for the company over many years. Yet there's a potential danger looming for the company that could put a big dent in that business -- and it's coming from hardware.The server market has been changing quickly over the past few years. Large data centers need to optimize not just for processing performance, but for power consumption as well. It's not just the power used by the servers, but the power required to cool the hardware. With so much waste heat created, data centers usually spend a large amount of their power budget just keeping things cool. That has driven the demand for low-power servers.

Although Intel has their x86-compatible Atom design, the undisputed desktop champion is facing a strong challenge by ARM in the low-power server market. ARM is the same company that has dominated the mobile market as the powerhouse of most mobile phones and many tablets. The ARM business model of licensing designs for others to manufacture is much more flexible than Intel's model of selling chips.

When Intel sneezes, Microsoft gets a cold. ARM chips can happily run Linux, but Windows is tied too tightly to the x86 architecture to be easily ported. If ARM-based servers offer a significant advantage in energy savings, and thus lower costs, that improves the equation for Linux over Windows. Even if Microsoft moves its customers to cloud-based services such as Azure, higher hardware operating expenses will hamper the competitiveness of a Microsoft solution. Microsoft needs to have a heart-to-heart talk with Intel (and AMD) to ensure they can deliver a server hardware platform with competitive operating costs.

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