Analysis Here's a prediction you don't see everyday. Microsoft will be responsible for ending the monogamous relationship between Dell and Intel. Microsoft will deliver Dell to AMD.
Over the past three years, Dell has hinted time and again that it will pick up AMD's 64-bit Opteron processor. Dell, however, has never actually made the move to AMD, saying it won't do so until customers beg for a second supplier. Well, come mid-2005, Dell's customers may start begging.
In the middle of next year, AMD will beat Intel to market with a dual-core 64-bit x86 processor. Intel isn't expected to match AMD with a similar product until the first quarter of 2006. That gives AMD at least six months to pound away on the singular message that it's the obvious choice for Microsoft customers - or at least those Microsoft customers that care about the price of their software.
Microsoft recently beat out most of its software rivals by declaring that it will recognize dual-core processors as a single chip in per processor pricing schemes. This licensing policy applies to SQL Server, Biz Talk Server, Commerce Server, Content Management Server, Host Integration Server, Identity Integration Server, Speech Server and Internet Security and Acceleration Server. Opteron server customers will be able to pay for a two-processor license on these products and essentially run the software on four processor cores. Intel server customers won't enjoy the same advantage for several months. So, if you're in the market for a box to run Microsoft software, there's a pretty compelling reason for you to give an Opteron-based box a go.
If you're in the market specifically for 64-bit kit, the move to Opteron becomes even more compelling. Microsoft said in July that customers can move from 32-bit Windows Server 2003 to a 64-bit version of the OS at no charge. A production version of the 64-bit operating system should arrive in the first-half of 2005 - just in time for the release of the dual-core Opteron.
Here's what all this means for Dell and its large collection of Microsoft customers.
"I just think Dell tracks what Microsoft's customers are doing," said James Governor, an analyst at RedMonk. "If Microsoft is really aggressive about pushing 64-bits, and Intel is not ready with a chip, I would assume Dell would not wait any longer."
Another top executive at a large Intel and AMD server shop said the Dell shift might not even have anything to do with 64-bits. He put the potential cost savings for Dell customers this way:
"Two-way servers are the bulk of the marketplace," he said. "AMD will release a chip that turns a two-way into a four-way, and there will be no extra cost for Microsoft software. Even a VP can figure this one out. They'll understand that AMD is a better chip for Windows."
Despite the complexity that a second-supplier will add to Dell's vaunted supply-chain, the company will be forced to placate customers by delivering Opteron-based boxes. Dell can ignore the single-core Opteron for the time being, but it simply can't afford to let HP, IBM and even Sun Microsystems offer dual-core systems to Microsoft customers for months without a response of its own, particularly in the two-way server market that it wants to dominate.
The downside to the upside
Numerous pundits would argue that such a prediction doesn't make sense.
For one, customers don't often change their entire server architectures simply because of an interesting pricing scheme. Microsoft and Dell customers would see a nice price/performance advantage when comparing a dual-core Opteron-based box versus a single core Xeon-based box, but such a price break might not be tempting enough for those customers who are enamored with the Intel brand and happy to wait for Chipzilla to catch up to its rival.
It's no secret that IT budgets remain tight. This environment makes customers less willing to try out unproven technology until they see that new systems really can deliver what they promise. By the time customers assess AMD's product and get their heads around new software pricing models, Intel will have product out on the market.
"A six month lead won't really matter," said Laura DiDio, an analyst at the Yankee Group. "Very few organizations will be brave or foolhardy enough to just deploy these new servers and software once they're out the door."
DiDio highlighted one of the second major obstacles to a mad dual-core Opteron server rush, which is that customers aren't exactly sure how software will perform on these boxes. Unlike the Unix market, the x86 market isn't chock full of software that has been tuned for years to take advantage of multiprocessor boxes. Microsoft and Dell customers need to think not only about multicore chips but also about sophisticated partitioning software, multithreading technology and other virtualization packages.
"There is no guaranteed predictability on application performance (with multicore chips)," DiDio said. "That doesn't mean software will freeze or crash, but it might behave differently. It may impact organizations in ways that surprise them."
Dell, expect in the case of Itanium, always waits for customers to demand a new product before it adds the gear to its hardware lineup. If only the bravest customers are testing out Microsoft Server products on dual-core Opteron servers, then Dell would seem to be able to wait until Intel rolls out a dual-core Xeon.