Entry-Level Servers Category Profile

The margins on entry-level servers are about as tight as those of PCs these days, yet with the advent of dual-core x86-based systems over the past year, the opportunity to offer customers leaps in performance has never been better. Nor has there ever been more opportunity to offer product differentiation.

Some key decisions customers have to make these days include whether to stick with Windows or give Linux a try, and whether to go with Intel's processor platform or AMD's. Also, blade servers are available at the entry level, but they're not suitable for small businesses per se.

In the Entry-Level Servers category, the key vendors are all regarded as having high-quality systems.

Last year's VARBusiness Annual Report Card (ARC) showed a virtual dead heat among Hewlett-Packard, IBM and Sun Microsystems, with the latter falling just short of a three-way tie. Dell scored so poorly that it chose not to participate again this year. While many of HP's scores increased since last year, IBM's and Sun's dropped significantly in several criteria. But HP was the clear winner. With only a 2-point edge over IBM and 7 points over Sun, HP's strongest differentiators were compatibility and ease of integration in Product Innovation, and Loyalty (85).

Steve Pranis, an account executive at Rochester, N.Y.-based SMP, says HP and IBM offer high-quality servers. But for customers that don't have a brand preference, he tends to recommend HP's ProLiant servers.

"In general, I've found the HP products to be more upgradable than IBM's over a longer period of time," Pranis says. While HP won in the Entry-Level Servers category, it trailed IBM in some specific areas, such as presales support, ease of doing business and partner portal.

"HP's portal isn't up to speed," he says, adding that, for one thing, information is too hard to find.

In terms of channel conflict, HP fared much better than IBM (66 to 61), although many HP partners are still reeling from the vendor's decision to cut margins for those who participate in the agent referral system from 8 percent to 4 percent. "It's been hurting us," Pranis admits.

For its part, HP says it hasn't heard any complaints after last year's brouhaha (the company quietly announced the change, much to the chagrin of many partners).

"When we relaxed the discount level, all of the noise went away," says Tom LaRocca, vice president of partner development and programs for HP's Solutions Partner Organization. "We haven't had anyone coming back to us saying this needs to be readdressed."

Still, strong leads in overall Product Innovation and Loyalty are what pushed the winner over the top. HP bested both IBM and Sun in compatibility and ease of integration by 8 points, the widest margin in any criteria by far.

Rest assured, IBM didn't take its loss lightly. Bob Samson, vice president of worldwide sales for IBM's systems and technology group, says his company is more innovative than HP and that it needs to do a better job of educating partners.

"We've got to get the word out," Samson says. "Maybe we've been a little too quiet--not bragging enough about what we have and what we can offer our clients and partners around the world."

In the end, solution providers that bundle other services are the ones that profit the most in the entry-level-server world. That includes offering ancillary products and services such as software applications, networking gear and configuration, and availability services, including power, backup and business-continuity services.