Dell Unleashes Own R&D To Tackle Network Market
Dorine:
Saw this over at IBD,quite interesting stuff,looks like Dell is on track as planned to tackle the high-end segment of the market.I see smell cash,you?
========================
Source:IBD
Date: 2/24/99
Author: Michael Tarsala
Dell Computer Corp.'s research and development team flexed its small, but growing, muscles to help bring a new storage technology to market.
On Tuesday, Dell became one of the few companies to ship products needed to build so-called storage-area networks for systems running on Microsoft Corp.'s Windows NT.
SANs - basically a storage computer and the hardware and software to access it on a network - let companies house data outside of server computers. SANs have advantages over storage housed on network servers, say product makers. They claim SANs make data easier to manage and products cost less than storage on the network server.
Also, SANs can help programs run faster over a network and can quickly back up data on a business, or enterprise, network.
''It's an indication that Dell wants to be a major player in the enterprise,'' said David Hill, an analyst with Boston's Aberdeen Group Inc.
The company is coming out with SANs ''for the same reason Willie Sutton wanted to rob banks,'' Hill said. ''That's where the money is.''
Another aspect of this product announcement caught analysts' eyes. Dell's R&D staff co-developed the SAN software. It's a sign that Dell plans to create more high-end computing technologies, analysts say.
Dell - the second- largest seller of PCs in the U.S., behind Compaq Computer Corp. -generally adopts the innovations of other companies.
''Some people are surprised that we're getting out ahead in this market,'' conceded Tejas Vakil, vice president of Dell's storage marketing.
Dell says it expects to devote more R&D into storage and other high-end business computing lines in the next few years. Dell employs 70 engineers in its storage R&D group, says Kevin Reinis, a Dell marketing director. The company began selling storage products in June.
In the fiscal year ended last month, Dell spent $272 million on R&D, or 1.5% of its $18.2 billion in revenue.
But that figure lags those of rivals. Dell nemesis Compaq spent $1.4 billion, or 2% of 1998 revenue, on R&D. Compaq is the leading seller of NT storage - including SAN -products. And EMC Corp., a leading storage player that also makes SAN for NT, in 1998 spent $315 million, or 8.3% of sales, on R&D.
Analysts say SAN products will become more important in corporate networks in the next three years. The fledgling SAN market could grow to $15 billion by 2002, Dell predicts.
So far, most SANs have worked with mainframe and Unix computers - not NT. Microsoft has been working to boost the performance of NT to better compete against higher-end computers.
EMC holds a technology edge over Dell and others, analysts say. EMC targets the high end of the NT storage market. Its systems typically cost more than $1 million.
Dell's SANs will target midrange NT networks. Dell will offer a system that connects four midrange servers to 720 gigabytes of storage for less than $250,000.
''Our goal is not to compete head to head with EMC in the high end,'' Dell's Reinis said. ''They've been in that market space a lot longer.''
EMC and Dell likely will meet in the middle someday, says John McArthur, an analyst with Framingham, Mass.-based International Data Corp.
On Tuesday, Dell unveiled several new hardware products to build a SAN. They include network switches that use Fibre Channel technology to direct data between servers and a storage computer. The company also shipped new hardware to connect data kept on tape libraries to the storage network.
The software for controlling the SAN, developed with Microsoft, lets companies adjust to changes in corporate storage needs. More storage space can be given to one server and taken away from another with the software.
Dell handed off the software to Microsoft and is licensing it from the software maker. Analysts expect Microsoft will license the software to other hardware makers. Parts of the software could be included in Microsoft's Office 2000, the next version of NT.
Handing over control of the software might seem unconventional, but Dell's strategy makes sense, analysts say. Dell believes Microsoft can make this SAN software widely accepted. If the software proves popular, Dell is the first company with products out that use it. And Dell has more experience with the software.
Hewlett-Packard Co. used a similar strategy in helping Intel Corp. develop underlying technology for the chipmaker's Merced server processors, expected next year. HP has the advantage of knowing the technology intimately. This could help HP release products faster and develop better products that use Merced.
The SAN strategy also clearly benefits Microsoft, analysts say.
''What Microsoft wants is anything that will help build its credibility for running enterprise applications,'' IDC's McArthur said. ''This is a step along the way.'' |
