The 'New Normal' for Server Hardware

by Drew Robb

Analysts are predicting grim IT spending picture with longer life spans for server hardware, postponed refreshes and a surge in leasing highly likely.

We're seeing many comments about a "New Normal." Earlier this year, IDC posted a paper about how this new normal is shaping IT practices. Other analysts have taken up the call –- it's almost like the phrase has become a handy catch-phrase.

"Changes resulting from the recent economic turbulence are resulting in substantial changes to business and technology management models that will echo for several years, creating a new normal for IT budges, capital availability and technology adoption models," said Joseph Pucciarelli, an analyst with IDC.

In a nutshell, the theory goes that there was an "old normal," and then the economy tanked. Out of the turmoil is emerging a "new normal." It will consist of such things as lengthier deployed life, big projects being curtailed, required payback periods of one year for IT investments, and minimal upgrade and maintenance spending.

Specific to the server landscape, lower IT budgets mean that traditional three-year server refresh cycles may have to be extended to five or more years in many cases. Instead of buying new gear, the focus in the data center will be to eke more productivity and efficiency out of what is already there -– virtualization will obviously play a big role in this. Expect, too, a rebound in the use of second-hand servers as well as leasing being favorable once again, as companies seek to offset heavy upfront costs. While leasing hasn't been seen that much since the turn of the decade, it may come out well when subjected to an in-depth analysis of total lifecycle costs compared to owning and maintaining everything in-house.

Be prepared, therefore, for much number crunching in the months ahead. IT staff members will be forced to go into far more detail than usual about actual costs to deliver services. This might include boiling down applications into cost per user, or total costs per server and so on. As a wave of cost and funding management takes root, expect some shocking discoveries in a few areas. In all likelihood, the worst examples will be immediately turned over to leasing or some alternative. IDC expects cloud computing and software as a service (SaaS) to grow significantly as total costs come under increased scrutiny.

By the same token, outsourcing IT functions (such as server maintenance and management) might also come back into fashion. If someone else can do it less expensively and at a reasonable level of quality –- look out.

"While many IT leaders were quite clear that IT outsourcing has many challenges, many were experimenting with different types of outsourcing," said Pucciarelli.

Much of this comes from IDC surveys of CIOs and IT managers, but this turns out to be exclusively in the large enterprise category –- companies with at least $1.5 billion in annual revenue. In other words, this analysis really applies to the big boys. Anyone doing business with that category of beast better be prepared for a rocky road in terms of purchase order approval and invoicing delays.

For the rest of us, it might not be so bad. Smaller outfits may not be impacted at all by the insane behavior of the current lending environment. If a friend of mine with the best credit you can have can't get anyone to give him a mortgage, then it's a sure bet that things are a hundred times tighter when you add a few digits into the figures involved.

Small and midsize companies, however, probably have enough internal flexibility that they don't need to worry too much about banks when they want to fund their data center expansion or upgrade to the latest Nehalem blades. And those that need the best in memory, processor performance and efficiency are going to buy it anyway, regardless of how tight things might be. You can't be a state-of-the-art animation studio or supercomputing center running on hand-me-down servers, after all.

And just like the previous recession –- the one after the dot-com bubble burst -– you can expect a mandatory penance period where everyone wrings their hands and gnashes their teeth about the need to tighten the IT spending belt and the frailties of irrational exuberance. But those who hew that careful path for too long will become casualties -– probably bought by people like EMC, Oracle or IBM for billions at the very time when the new normal was supposed to have precluded such spending.

Drew Robb is a freelance writer specializing in technology and engineering. Currently living in California, he is originally from Scotland, where he received a degree in geology and geography from the University of Strathclyde. He is the author of Server Disk Management in a Windows Environment (CRC Press).

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This article was originally published on Thursday Apr 15th 2010
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