New Game Plans

Hewlett-Packard and Sun Microsystems have a lot to prove. The two struggling IT vendors this week will unveil a wave of products designed to patch weak spots in their product lineups and re-establish their former positions of strength. They're innovative additions, but the companies will have to do even more to keep up with Dell, which drives the market for high-volume, low-cost PCs and servers, and IBM, which dominates the high end with its mainframes, systems integration and outsourcing services, and army of consultants.

The stakes are highest for Sun, which many had written off in recent years as a provider of overpriced and underpowered proprietary systems. This week, it introduces the Galaxy server platform, an x86 line designed to help the company regain its position as a leading supplier of high-performance systems. Sun is billing the event as its "triumphant return to Wall Street." Hewlett-Packard, meanwhile, is adjusting to new CEO Mark Hurd and a 10% cut in its workforce imposed earlier this year. This week, HP is launching an initiative to foster virtualization across its product portfolio, making it easier for businesses to consolidate and shift workloads among fewer servers.

The financial-services market is the current battleground. Sun says 40 brokerages, exchanges, and financial-services companies are testing its new Galaxy platform, which is designed to win back customers in an industry that had been its core strength. "Not too long ago, the word on Wall Street was, 'How do we port away from Sun?'" admits Larry Singer, VP and strategic insight officer for Sun. "But now, the buzz is back."

Prestigious Wall Street wins are crucial for Sun because financial-services companies buy the most-powerful computers available and can serve as a proving ground for new technology that can then be sold to other key markets such as education, government, and telecommunications. But HP won't give ground without a fight. In the past six months, HP says it has moved 150 Sun customers to HP systems, generating more than $200 million in revenue.

Among those HP has lured from Sun is financial-services provider Currenex Inc., a foreign-currency trader that averages about $20 billion a day in transactions. Currenex in January moved from Sun servers equipped with Sun's Sparc processors to HP systems that utilize x86 processors from Intel and Advanced Micro Devices Inc. Sun wasn't demonstrating enough dedication to creating systems that used the Linux open-source operating system, says chief technology officer Sean Gilman. In addition, the performance of Sun's Sparc systems had waned, and the company's x86 effort was just beginning, Gilman says."In our environment, if you are 5 milliseconds faster, you win," Gilman says. "Transactions that were taking a second now take about 10 milliseconds." But Currenex upgrades portions of its server farm every six to nine months and will consider any vendor providing the best performance. "If Apple starts making their own chips, and they're the fastest thing going, we'll switch to Apple," he says.

Sun has been working for the past 18 months to address concerns like those voiced by Currenex. The computer maker introduced lower-priced Sparc systems with faster processors to compete better with high-end systems built on Intel's Xeon chip and refreshed its Solaris operating system. But Sun's boldest move was a decision 15 months ago to enter the x86 market with its first systems based on AMD's Opteron.

The Galaxy announcements represent phase two of Sun's x86 strategy, says John Fowler, executive VP of the network systems group for Sun. The first phase was simply to get Sun's first non-Sparc server out the door.

It's intriguing technology, but Sun is nowhere near the x86 big leagues yet. HP led the x86 server market with more than $2 billion in revenue in the second quarter, according to IDC and Gartner, followed by Dell and IBM with $1 billion each, compared with Sun's $100 million. Before it can challenge the big three, Sun needs to move past smaller players like NEC Corp. with $116 million in x86 revenue and Fujitsu Siemens with $212 million.

Sun is betting on the Galaxy systems to accomplish that, promising that the computers will provide as much as a 50% performance improvement while consuming a third of the power used by comparable Xeon-based systems. Initially, Sun is offering three versions of the Galaxy line. The X4100 and X4200 will be available with either single or dual-core Opteron processors, and a stripped-down X2100 will start at $745 for a single-core Opteron system. They're preloaded with Solaris 10 and the Java Enterprise System.Sun points to interest throughout the financial-services community as proof that its strategy is working, citing HSBC, J.P. Morgan Chase, Mitsubishi Securities International, the Philadelphia Stock Exchange, Reuters, SunGard Trading Systems, and Thomson Financial as companies testing the new products.

Sun plans to address the high-performance market with an eight-processor version of Galaxy, which, with dual-core processors, will effectively provide a 16-way computing system, says Andy Bechtolsheim, a Sun founder who left for about a decade before returning last year to lead the Galaxy design effort.

Still, Sun is coming late to the x86 market, reluctant to shift the focus away from its Sparc-based systems. "Sun got a little away from its roots over the years, and Sparc became almost like a religious issue," Bechtolsheim says. "The Intel-compatible market is well over $20 billion, and with these new systems, we can address at least half of that market."But Charlie Troxel, chief technology officer of Chicago Mercantile Exchange, says the days of homogeneous environments based on Sun or any other single supplier are unlikely to return. A 100% Sun company just three years ago, Chicago Mercantile migrated about 70% of its infrastructure to non-Sun x86-based platforms during the past two years as it used more Linux.

Sun fell behind in performance with its Sparc-based hardware and Solaris operating system, Troxel says. Solaris 10 answered the operating-system problems, he says, but Sun's short track record in x86-based servers leaves him unconvinced. He'll give the Galaxy platform a look. A bad sign for Sun is that Chicago Mercantile increasingly is moving to blade servers. Troxel is evaluating HP and IBM platforms, leaving Sun, which has no blade offering, out of that mix. "We're going to match machines to desired characteristics," he says. "There's no one platform that does it all."

The Philadelphia Stock Exchange is close to that--its entire mission-critical trading system is based on either Sparc or x86-based Sun servers, all of which run Solaris. The exchange in July went live with a new options-trading platform running on x86-based Sun servers, and CIO Bill Morgan plans to evaluate the Galaxy systems as well as new Sparc systems next year. "I'm in a business where we handle 120,000 messages a second now, and it's going to be over 200,000 next year," Morgan says. "Whenever I hear a vendor is striving to upgrade capacity, that's music to my ears."Sun has much to prove. "We have shipped more than 10 million x86 servers, and Sun has shipped a little over 100,000. I think Sun is kidding themselves and the industry to say they have caught up overnight," says Mark Hudson, VP of marketing at HP's enterprise storage and server group.

HP's move to create a more-manageable virtualized infrastructure (see story below) will provide it with an edge over competitors like Dell, which isn't likely to develop management platforms similar to those of its competitors, Hudson says.

American Healthways Inc., a provider of health-care services to more than a million patients and physicians, is using virtualization with its two HP Superdome and Integrity rx7620 servers. It has created three partitions to run its data warehouse, major applications, and development and test activities. Currently, the company manually shifts processors between the partitions. Mike Chester, senior manager for database administration, says the new HP technologies should let him create rules to automatically move workloads between processors.

For Sun and HP, the products being introduced this week put a spotlight on the direction each is moving. HP is making it easier for customers to manage and get more bang out of existing systems. Sun is showing that it can offer competitively priced systems that also provide premium performance. These moves will keep both of them in the race, but they'll need to do more to gain the lead.

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