IT Departments Utilizing Virtualization

IDC released its Worldwide Quarterly Server Tracker on September 2, 2009, which reports that "factory revenue in the worldwide server market declined 30.1% year over year to $9.8 billion in the second quarter of 2009 (2Q09)."

According to IDC, this is the lowest quarterly server revenue since they began tracking this market in 1996.

The obvious implication is that the economy has been awful and companies have avoiding / deferring IT spend. But beyond that it seems that virtualization has both benefited from and contributed to this decline.

With a single server now able to run multiple workloads, it seems inevitable that the server footprint is destined to continue getting smaller within the corporate data center. But the benefits of virtualization do not stop with simply running more apps on one machine; the whole datacenter becomes more agile, more flexible to deal with unexpected changes in workload.

The ability to get more from fewer boxes is certainly a contributing factor to less boxes being bought. And tight budgets in the 2009 economy have certainly contributed to IT managers seeking out less costly options.

It will be interesting to see how the server market rebounds.

Andy Patrizio in his InternetNews.com blog quotes Rahul Agarwal, co-founder of Infiniti Research. Within the dismal sales figures, Agarwal notes that both Gartner and IDC report that unit costs are going up for server sales. Agarwal believes that this is due to sellers trying to widen margins by selling more feature-rich machines:

Our view is that to offset this volume pressure, hardware vendors will be
forced to improve unit margins by building in virtualization capability, memory
and I/O interfaces in the hardware.

So the strategy to improve revenues will enable IT departments to further utilize virtualization, continuing the trend toward fewer individual servers.

Agarwal noted that many servers out there are quite inefficient, particular amongst small-to-medium sized businesses, so the more successful players will focus on consolidation to increase efficiency and reduce the footprint. He says:

The server market of tomorrow will be a value game and not a volume game.

Enterprise Video Fulfilling Its Promise

Video is beginning to fulfill its promise as a transformational technology. Beyond merely cutting communications costs, video is starting to change the way companies do business, and is rapidly being accepted as a "need to have" rather than a "nice to have."

Cisco CEO John Chambers predicts video traffic on the internet will increase six fold by 2012. Here is a link to Cisco's August 5 earnings call where he makes that prediction.

A classic example of the power of video is that of electronics manufacturer NEC. They have a network of nearly 500 dealers across the United States that sell their products. They saved more than $250,000 annually in training costs by delivering product training with video webcasting rather than sending trainers to the dealers or bringing the dealers to the trainers.

They also dramatically reduced the time it takes to train the entire network on new products. Click here to watch a video case study.

A newer example shows how video can literally transform the way a company does business. A major sneaker company manufacturers in products in China. Each time they re-tooled to manufacture a new sneaker, executives would have to fly to China to ensure the tooling was correct and the sneakers were meeting specifications before they began mass production.

They began to use high definition cameras at the plant in China to webcast video of the sneakers to allow executives to make their inspection virtually. Sure, they save money on travel to China. But more importantly, there was a practical limit to the amount of people who could go to China to see the actual design come off the assembly line. The video process allows them to solicit input from a much broader segment of the company, and even get input from retailers while there is still time to respond to suggestions.

The end result is that they can bring their products to market faster than their competition, which creates a significant competitive advantage. Click here to see the video discussion.

I am particularly pleased to see clear evidence of unmistakable, game-changing ROI.

Health Chief Sebelius Webcasting Today at 1:00 pm EDT

Health and Human Services Secretary Kathleen Sebelius is hosting a webcast at 1 pm EDT today, Friday August 7.

Use the hashtag #HCRQ to ask a question via Twitter or email hhsstudio@hhs.gov.