A couple of days ago, I suggested that three trends - the consolidation of corporate IT assets, the spread of hardware virtualization technologies, and the rise of expert-run utility clusters or grids - might in the long run spell doom for the traditional server-computer industry. Consolidation and virtualization would let companies do a lot more with a lot fewer servers, while utilities would have the scale and expertise to take over the computer-assembly function themselves (as Google, for instance, already does). Two bloggers - SAP's Charles Zedlewski and Sun's John Clingan - have responded with strong counterarguments.
Both argue that if servers become more efficient (through virtualization, for instance), then companies will tend to buy more of them, not fewer. If a product becomes more valuable, after all, you'll want more of it. That's a great point (for unit sales, if not for revenues), though I'm not sure it applies in this case. It's important to remember that what's really being consumed is computing cycles, not servers; through consolidation and virtualization companies may both consume a lot more cycles and buy a lot fewer boxes. In fact, that seems to be the case for a lot of the companies that have been most aggressive in consolidating data centers up to now. (Zedlewski argues that we should have already seen a dropoff in server sales since virtualization is now "wildly popular." I think he's jumping the gun, though; it's still early days for virtualization. Server sales were weak in the last quarter, but it's too soon to know if that's a trend or a blip.)
Zedlewski also argues against the idea of companies shifting away from status-quo, proprietary IT architectures toward more flexible, multi-tenant ones. He may turn out to be right here as well, but I think he underestimates the economies of scale that the utility model, as it matures, will be able to deliver - not only in hardware costs, but in labor costs, electricity costs, real estate costs, and software costs - as well as its power to free up capital and management time for more strategic purposes. But, anyway, Clingan and Zedlewski are right to point out that there are a lot of contending forces influencing the course of the enterprise IT world today - that's why it will be so fascinating to watch how things shake out over the next decade or so.
My own sense is that it's unlikely that the status quo will hold. Frank Sommers, in a comment to Clingan's post, does a great job of explaining why it's hard to see tomorrow when you're looking through today's eyes:
In his introduction to Patterson/Hennesey's book, Computer Architecture, Bill Joy recalls a statement made by Maurice Wilkes to the effect that many innovations occur by imagining that something that is not currently true, is already true.
In the context of Carr's comments, what I'd imagine is that very a reliable high-bandwidth network connection is available anywhere for very cheap. That condition is only partially true today, but suppose that one day that will generally become true.
If that were the case, why would any company not in the IT services business want to run its own data center? I mean, few companies run their own power generators (some do, I admit), mainly because access to the power grid is readily available practically anywhere for a reasonable cost. Wouldn't it be so much more convenient to just be able to use a thin client to log into a remotely hosted desktop? And with standard application interfaces, such as J2EE, shouldn't a company's IT department be able to deploy an enterprise app into a remote data center's hosting environment? Many companies already do this, but I'm curious why wouldn't most follow that path (again, imagining that the above condition is already true).
If that were the case, these remote data center services could operate servers with much higher utilization, hence leading to even further consolidation of servers, and hence lower costs not only for servers, but especially for such hosting services. If hosting service costs fall faster than server costs do, then there might be an even bigger economic incentive for enterprises to outsource their data center operations, hence leading to even faster consolidation of applications to servers.
Interestingly, that's why, I think, Sun's strategy of throughput-oriented computing is going to pay off. Because data centers will want systems that they can consolidate their customers' applications into. So [while] it's true that there will be fewer servers sold, it will be interesting what vendors will gain market share and remain standing.
It will, indeed.
