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9/30/2004
11:50 PM
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Cool Stuff

Apple's server and storage offerings are helping the company overcome its reputation as the high-priced computing option



Apple Computer makes cool computers. In the business world, that's not necessarily a good thing. But when racking up 1,566 Apple Xserves, cool--in the thermal sense of the word--counts.

Defense contractor Colsa Corp. buys high-performance computer clusters for the U.S. Army. That means competitive bidding, as in the case of an Army supercomputer project that went up for bid in April. With requirements that specified footprint, power-management options, and a peak performance of 25 teraflops--computational speed surpassed by only one supercomputer in the world as of August--the company fielded proposals from six major vendors. "Apple won on technical [merits] and cost," executive VP Anthony DiRienzo says.

Colsa's Xserve cluster draws about a third as much power as systems that were proposed by Apple's competitors, executive VP DiRienzo says.

Colsa's Xserve cluster draws about a third as much power as systems that were proposed by Apple's competitors, executive VP DiRienzo says.

Photo by Erick Anderson
Apple did a great deal of engineering of its Xserve 1U nodes, DiRienzo says. The company has driven the power consumption down considerably, and it has done a lot of sophisticated engineering to get the heat out. "We've been racking up a lot of different types of these clusters, and [with] a lot of them, once you put 30 of them in a rack, you can't turn them up to full power because they can't dissipate the heat," DiRienzo says.

But Colsa's Xserve cluster, dubbed Mach5, which should be operational this fall, draws

about half a megawatt of power. The systems proposed by the competition required up to three times that. As a consequence, some of the competing systems required more processors, which drove up the cost.

Apple--cost competitive? The Army was as skeptical as anybody familiar with the business-technology market, DiRienzo says, asking the usual questions: "Why are you going to put it on Apple? They're more expensive. Are you going to get the same thing out?" But the project worked so well, "they were very supportive of us as we went through this solicitation and this acquisition," DiRienzo says. "They're happy with the performance that the Apples should give."

They're especially happy with the price tag: $5.8 million. The next-closest bid came in at $7.4 million.

The difference isn't simply that the G5 chip draws significantly less power than competing chips, says Alex Grossman, director of hardware storage at Apple. Through its control of hardware and software, Apple has been able to design custom input/output components that allow the use of more affordable, more energy-efficient disk storage without sacrificing data transfer speed. "Our Serial ATA [has] three 7,200-rpm drives in there, which draw less than half the power of SCSI drives that most people use and generate half the heat," Grossman boasts. "We can get similar performance to what people get in 10,000-rpm SCSI drives. And in a lot of cases, we approach what they get with 15,000-rpm drives."

And the costs stay low. "The cost is really a commodity-cost level," Grossman says.

While the challenges of high-performance computing aren't necessarily familiar or germane to the average business-technology manager, cost is one element that bedevils buyers of supercomputers and single CPUs alike. And true or not, Apple has long been perceived as the costlier option. The fact that Apple enjoys a gross margin of around 27%, about 10 percentage points higher than Dell's, doesn't argue otherwise.



But Apple's success in the high-performance-computing market is indicative of a more significant change in the company's overall product engineering and marketing, especially for business users. The company is fielding competitive offerings in the server and storage markets, both in terms of price and performance. That's helping it chip away at its old reputation for costliness.

It's probably fair to say that the views of Bob Neuberger, IS manager at National Semiconductor Corp., are shared by more IT pros than Apple would like. "About four or five years ago, we had a lot of Apples," he says. But the realities of the Windows-dominant enterprise market demanded a purge. "We ended up having to standardize just for operational efficiencies. Maybe if the [Apple] hardware could've been better at doing Windows stuff. ... We're not a Windows advocate, we just know we need to use that stuff to do business, and that's the way it is."

Peter Kastner, co-founder of research firm Aberdeen Group, says that Apple's high-performance computing wins--and there have been others, like the System X cluster at Virginia Tech University, recently upgraded to 1,100 Xserve G5s and currently being rebenchmarked--represent "glamour accounts." But the real bread-and-butter customers involve basic server and storage technology. "The bills are going to be paid with the one, two, three, four Xserves and a few terabytes of RAID storage," he says.

Apple knows that and has been tweaking its enterprise strategy around it, Kastner says. "Apple doesn't have the support and selling resources any longer to take on the entire global enterprise market," he explains. "But since the introduction of the Xserve and Xserve RAID, they now have a very good story that they can take to selected markets or to the small and medium-size businesses."


This cluster of high-performance Apple Xserve G5 servers runs fast and cool, without excessive power consumption.

This cluster of high-performance Apple Xserve G5 servers runs fast and cool, without excessive power consumption.
Frank De La Renta, director of infrastructure at Applica Inc., a manufacturer and marketer of home appliances, tells a similar tale. His company was looking for a backup system and issued a request for proposals that specified 4 terabytes of storage. The bids he received from Hewlett-Packard and Dell/EMC ran $60,000 to $70,000. Because the company's designers used Macs, Apple was thrown into the RFP process as well. Apple offered its Xserve RAID, with 8 terabytes of storage, along with two Xserve G5s, for $56,000.

"We got double the amount for half the price," says De La Renta, who notes that the Xserve RAID operates at a data rate of 400 Mbps, compared with the 200 Mbps he saw with the HP system. Compared with the company's previous tape backup system, the total backup-and-restore time dropped from 10 hours to 45 minutes, he says.

The system changed how the CIO and other IT people in the company thought about Apple, De La Renta says. "They were looking at it as the ugly ducking in the pond, because it wasn't black or beige and didn't say HP or IBM," he says. "Now it's the centerpiece of the data center." The company has since purchased additional Xserves.

Apple remains relevant because it continues to innovate, says Roger Kay, VP of client computing at market-research firm IDC. "Since Apple has long since shaken off any conservative enterprise type of market, they don't have to be as delicate in their technology transitions as the Windows community does," he says. "They don't have to keep all this legacy stuff around to keep certain customers satisfied. That ends up being an advantage for Apple in one sense--it's able to innovate more quickly because its market will tolerate more innovation."



The small and midsize market is a good target for Apple. "Why SMB?" Aberdeen's Kastner says. "Because Apple's operating system and management out of the box are very simple and straightforward."

For small- and midsize-business customers, who tend to have a leaner IT infrastructure, simplicity minimizes head count and keeps costs down. That's been the case at Terayon Communication Systems Inc., a global communications hardware company serving the broadcast industry. Trying to cut down hosting costs, the company opted to run its own servers to handle E-mail, online seminars, and electronic-marketing efforts. Ease of administration and the ability to run Unix were primary requirements.

The company went with Apple's Xserve, saving $30,000 on hardware and $70,000 on support and maintenance costs, says Matthew Ott, director of E-marketing. "I haven't had a single problem," he says. "They handle everything we throw at them." Ott says he did need to make some people in the organization feel comfortable about buying Apple hardware, but what sold them was the price. The company's IT manager initially suggested Compaq ProLiant servers, which would have run $20,000 to $30,000 each. The Xserves ranged from $3,000 to $5,000.

Amit Singh, an operating-system researcher who has worked for Bell Laboratories and is currently with IBM Research, writes regularly on computer-related topics for his Weblog, www.kernelthread.com. Corresponding via E-mail, he offered his opinion about Apple's hardware. "Apple hardware is not just 'pretty' and stylish, but is (mostly) functionally excellent, although these are somewhat subjective areas," he writes. "For example, Apple computers have custom I/O controllers that provide USB, UDMA, EIDE [Enhanced IDE], sound, communication support, etc., all on a single chip, resulting in better integration and a smaller footprint. As another example, consider that there are nine fans and 21 temperature sensors on a G5 PowerMac (certain models)--the machine is amazingly quiet. Apple has historically been very quick in using cutting-edge (for its time) technology for their product line."

Other analysts make similar observations. "Apple's unique because they control the hardware and the software," says Tim Bajarin, president of Creative Strategies. "It's hard for the guys on the outside to be able to control their destiny when they take an [operating system] from one company and chips from another." Vendors hope that Windows is the unifying factor, Bajarin says, but in some cases Windows isn't the only issue. They've got server architectures to deal with, the Linux factor, and IT applications that are more sophisticated than ever before.

It's an open question whether Apple can translate that into market growth. Apple shipped 1,765,000 CPUs in 2003, compared with 1,679,000 in 2002. Nonetheless, investment research firm Piper Jaffray & Co. recently rated Apple stock "outperform," predicting the company will grow market share over the next two years and will have a strong December quarter based on sales of its iPod and G5 computers. The company sold 13,000 Xserve G5s last quarter--nice work if you can get it, but hardly record-breaking. Then again, considering that Apple essentially rebooted as a company with its conversion to Unix in March 2001, it may be unrealistic to expect more sooner. Perhaps it's enough that Apple servers and storage have rejoined the corporate market, even if it's in limited-growth niches.

Apple's next challenge will be knocking on the right doors. "In general, we never say never," says Brian Bonner, CIO at Texas Instruments Inc., about whether his company would consider Apple for enterprise requirements. "We want to continue to look at what's out there as companies continue to move the ball on technology."

Count on Apple to be among the movers. Despite Windows' desktop dominance and a challenging transition to a Unix-based operating system, Apple keeps generating profit with innovative products, and it's still a force in specific vertical industries. Expect Apple to keep building a better mousetrap, whether or not the world beats a path to its door.

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