Server Vendors sounding like ISPs vs BBC
Seems like the server vendors should stop griping. If they're so good at it they should be building 'cloud' data-centers and offering services like Google, Amazon and Microsoft as mentioned in the article.
CEOs of the major server and PC makers have proved reluctant to complain in public about Intel's very substantial "distribution" business where it moves processors and white boxes directly to customers. But pull one of these executives away from the microphones, and you may well hear a minor tirade on the topic. The Register …
It's no wonder all the middlemen will be upset that others find their services less and less useful in large scale deployments, the redundant cost per box just exceeds in-house costs to create and maintain equipment.
Intel is a chipmaker (among other things now) and should never restrict sales to anyone unless prevented by national security related laws in place.
What is currently happening is the simple rule of free market: whoever can assemble the most useful machine for the cheapest price gets the business.
What the big builders are asking intel is to give them a monopoly on assembling computers based on intel chips because they can't compete against google and are losing some markets.
Well, when you can't compete in market because someone else manages to do it better or cheaper than you, you end up losing it, that's normal, that's progress and that's the way it should be.
Going to your provider and telling him "don't sell to my competitors because I'm unable to compete with him" goes completely against the idea of the free market, of progress and shouldn't be tolerated. They should instead try to improve their offering to be able to compete. Nobody is preventing them to go into the cloud computing / megacenter business if that' what the market wants.
So the server manufacturers want to restrict who can make servers ? Isn't that called a cartel ? And aren't cartels illegal ? (Hint: Go ask the DRAM manufacturers...)
If HP/Dell/Sun/IBM/etc made servers that Google et al wanted, maybe Google might not make their own.
If the other manufacturers are worried about Intel selling direct to Google, maybe Google need to start selling their own home-brew products. That'll *really* get 'em worried.
In pretty much any business, the bigger the order the customer places, the closer to the manufacturer the customer buys. In this case, Google are buying *VERY* large amounts of CPUs, so why shouldn't they buy direct from Intel ?
We used to sell products into a niche market that Intel wasn't interested in, but Intel's distributors used to sell Intel products into that market anyway, so they were our #1 competitor. The solution was to add value - real inherent value that the customers needed, not bolted-on features and spin. That way we strengthened our position in the food chain and co-existed profitably with our big but unintentional competitor.
If the server guys are struggling for margin they should think hard about what value the customers really need and then provide it.
The vendors do add value over what Intel offers. And then resellers add more value. But not everyone buys from resellers, otherwise Dell would never have got into the market in the first place. Why? Because the customer does not see the value added by the reseller as necessary in their case. Similarly, customers going direct to Intel just don't value the additional services offered by the vendors as worth the added cost. Now, if you're Google and you think you really do have the tech knowledge to pull it off (and the economic clout of sheer size) then this is probably the best solution for you. Some that try whitebox solutions make expensive mistakes. But 99.999% of customers don't have the same level of tech confidence, so they go via resellers and vendors.
Now, if you have a limited offering and your core business (and therefore your area of greatest revenue generation) is server hardware (like Sun), then Intel going direct is a problem. But, if you have a mass of additional products such as storage, management tools, printers, etc (like HP) then it's not too much of a problem as you still make money out of the same customer just in different areas. And if they like the value you add around those other areas, the customer may decide to switch from going direct on servers too.
They're whinging because they're missing out on big orders to a company higher up the chain? Well thats how supply/distribution works!
If i wanted...say... a pallet of paper, i don't buy 320 individual reams from Staples do i? (based on pallet packed in 5 ream boxes in 4x4x4 configuration), i go to a wholesaler who will sell it at less than the 320 invidual ream prices.
Likewise google arn't gonna pop down to PC World and buy 2,000 CPUs
A distributors job is to place one large order to a company, then sell on lots of smaller orders to multiple customers, there are often several distributors in the chain.
Here's a news flash. Google is *so* big...(how big is it?) It's so big that it is cheaper for google to design its own systems and have them custom-built to google's specifications. Just like HP does. Why shouldn't it be? Google builds more servers than a lot of vendors.
If some other vendor was actually any better at design, and was any better at cost management, it could undercut google's cost, and then I betcha google would be happy to buy from them.
This is a very obvious sign of the global economy sliding into heavy contraction due to the American credit crisis and subprime mortgage debacle.
Big monsters like Dell, HP and IBM need constant feeding of revenue. Now that the big enterprise business they are accustomed to surviving on is contracting they are looking for other pastures to feed on.
They are whining about Intel's direct business. They are dropping prices to take smaller tier two opportunities from the smaller OEMs like Rackable, Verari, Western Scientific, Aspen, etc.
The big monsters have a huge appetite and they need to eat. MUST HAVE FOOD OR MONGO GET ANGRY! GO ON RAMPAGE! ARRRRRRGH!