Small business server market heats up

The top three server vendors in the world are now engaged in a fierce battle for the small to midsize business server market.

IBM Corp. and Compaq Computer Corp. have each introduced new small to midsize business servers designed and priced to deter market share from Dell Computer Corp. Both IBM and Compaq share the same strategy of attacking Dell at what each company believes is Dell’s Achilles’ heel: the ability to deliver software and services on top of inexpensive hardware, officials for IBM and Compaq said. Dell is a popular brand in the small to midsize business space and capable of cutthroat pricing through a direct, build-to-order sales model.

Compaq on Tuesday made the small to midsize business server market a three-way fight with the introduction of a new line of ProLiant ML300 Series servers, the ML330, ML350, and ML370, said Paul Miller, the director of marketing for mainstream servers at Compaq.

Compaq is enlisting channel partners like the PC Connection Sales Corporation to deliver a wide range of IT service offerings and customer support with the new ProLiant servers, extras Dell cannot deliver for the same price, said Miller. ML300 series servers running 800MHz Intel Pentium III processors start at US$1,199.

“Small businesses and midize businesses do not have the dedicated IT staff. They need a partner to help them understand [IT],” said Miller.

Compaq and its sales channel partners will offer consulting to small to midsize business customers concerning which of the new ProLiant models and configurations work best in the customer’s environment, said Miller. The services will allow Compaq and its channel partners to deliver to customers fully configured hardware and software package that includes applications such as e-mail, file/print sharing, Internet access, firewall, Web hosting and network-delivered services.

“Because of the strength we have in the channel, we can deliver both the products and the services,” Miller said. “Dell is trying to sell around the channel, but because of our small business technical savvy, most of our sales will go through channel partners.”

IBM fired the first volley at Dell in the small to midsize business server market last week with the introduction of it IBM eServer x200VL, a small to midsize business server with an 850MHz Intel Celeron chip that starts at $699.

IBM sources said the new eServer x200VL is targeted specifically at Dell’s PowerEdge 500SC, a small to midsize business server that dropped in price last week from $699 to $649 on Dell’s retail Web site.

With the eServer x200VL, IBM, like Compaq, is offering service and support above what it believes Dell can offer, said Jim Gargan, the vice-president of IBM’s eServer xSeries servers.

Self-managing features from its IBM’s Project eLiza initiative, including software rejuvenation, predictive failure analysis, and IBM ServerGuide, are each bundled within the new IBM eServer x200VL.

“What we are doing with [the x200VL] is clearly establishing a beachhead in the small business front. World class solutions for small business budgets,” said Gargan.

“We are clearly communicating that we can meet Dell prices, but they cannot meet out value,” he said.

Dell’s popularity among small to midsize business customers is evident in a recent study on PC brand loyalty by International Data Corp. (IDC), based in Framingham, Mass.

The study reveled that among the small to midsize business customers surveyed, “current Compaq owners indicated that they would, in fact, be more likely to purchase Dell than purchase Compaq PCs.” IBM owners were “similarly positioned,” the report said.

Compaq is the number one server vendor in the world by units shipped, followed by IBM, then Dell, according to IDC.