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Apple's Xserve: MIA or DOA in the Enterprise?

Posted by iMark - 2005-12-21

Apple Computer's Xserve G5 offers significant processing power, notable storage capacity, and robust remote-management capabilities, making the server perfect for corporate environments. So why aren't more businesses buying them?
Unix maintains only about 8 percent of server-environment shipments worldwide, according to IDC analyst Dan Kusnetzky. Of those shipments, Apple is responsible for approximately 5 percent.

These numbers indicate that, when compared to other server manufacturers, Apple is a minor player in the business market, despite its development of a machine that has been praised for exceptional performance.

Although the Xserve has as much power and capability as many competing hardware offerings, the machine has yet to make serious inroads in the enterprise environment.

The question to ask about this technology that had the industry abuzz several years ago at its debut is whether potential buyers are simply dismissing it even before it is being given a chance. Will Apple ever have a shot at this multibillion-dollar business?

Traditional Niches

Despite the lack of corporate adoption, Apple does seem to be finding success with getting the Xserve into universities and research facilities. This is not surprising because Apple has had a firm grasp on the education market through its desktop and notebook products for a long time.

Bringing the Xserve into universities and colleges was a natural extension of the company's traditional dominance of this market. Apple has been especially keen to build on those relationships. "Apple knows its strengths, and usually knows its customer base," said Forrester Research analyst Ted Schadler. "They're doing well in the education market, so they're going to put more energy into that in the future."

It is quite possible that Apple has not mounted a major corporate push -- and all the related ad campaigns -- because the company does not want to take resources away from these education-and-research initiatives, Schadler indicated. But that does not mean the company is neglecting big business completely.

In many ways, Apple's approach to the enterprise is unlike how it handled its "switch" campaigns, which attempted to get Windows users to make the leap to Apple products. Although the company has put energy into wooing enterprise customers away from Redmond, Apple places much greater emphasis on serving its traditional niche markets and building on those.

It is likely, then, that Apple will continue to try to win accounts in areas where the company already has a firm foothold with desktop Macs, but analysts do not expect a major push to win over enterprise I.T. departments.

Future Think

Just because Apple probably will not do a major marketing effort to gain more enterprise customers does not mean the Xserve lacks the ability to win more fans, however. "Apple's shipment numbers do not represent a clear picture of the company's opportunity," Kusnetzky said.

Apple's strong presence in organizations that are focused on content-creation, education, and research could give the Xserve greater exposure in the upcoming years, he said. As these niche markets begin to rely on the Xserve more, and spread the word about its virtues, other industries could take notice.

"Xserve's operating environment is very easy to use and to configure for organizations in those areas," Kusnetzky noted. "Apple has an opportunity to gain a foothold in organizations and then expand upon its presence."

If researchers using Xserves end up branching off and starting their own companies, for example, it is likely that they will bring Apple with them into the corporate arena. But, Kusnetzky added, it is still too early in Xserve's adoption period to see how much of an impact it could have in the market.

Perception Problem

In attempting to capitalize on its niche-market strength, Apple will face several challenges, but perhaps the greatest obstacle to overcome is perception. Enterprise customers are used to bringing in certain big-name vendors like Microsoft, IBM, HP, and Sun -- companies that tend to be seen as very enterprise-focused.

To many companies, Apple is viewed as a developer of consumer products that makes hardware and software for students and graphic artists. That view of the company might very well be a tough one to overcome as Apple attempts to broaden its adoption in enterprise-class data centers.

"Companies already think that switching to a Mac OS from Microsoft wouldn't be worth the hassle," said Gartner analyst Michael Silver. "A large company with thousands of PCs has a huge number of applications that require Windows, so they wouldn't even think of migrating. That puts them in a very non-Apple frame of mind."

Although the Xserve might be able to fit in to such an environment easily, without much disruption to what's running on the company's desktops, many I.T. departments still are not eager to discard their perceptions of Apple and take a chance on bringing in the company's technology.

Many big businesses have server vendors in place that upgrade equipment regularly, or find that having certain kinds of applications or data-storage needs hosted is a better option for them. To bring Apple in to this kind of environment, an I.T. manager or CIO would have to demonstrate a need to switch to the Xserve from another vendor. Often, companies feel there is little reason for such a transition.

"For business users, bringing on new equipment, much like changing operating systems, has to be because there's a demonstrated need," said Silver. So, although Apple might not be DOA in the enterprise, factors like perception and growth only in certain markets are keeping the company MIA in server rooms.

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