Open Compute Hardware Not Cheap Enough for Enterprises

Open source “vanity-free” hardware bought in bulk from Taiwanese manufacturers may offer a compelling price difference for the scale of Facebook, but people who work in the majority of the world’s enterprise IT shops generally don’t view servers promoted by Facebook’s Open Compute Project as something that makes sense for their data centers.

Yesterday we wrote about the role of OCP in the enterprise data center as seen from OCP hardware vendors’ and the Open Compute Foundation’s perspectives. Today, we’ll cover opinions of data center industry experts who work with enterprise data center end users.

Come see a Data Center Knowledge panel on Open Compute at the Data Center World Orlando conference in October

Users that don’t operate hyperscale data centers and don’t make hardware purchases of corresponding size either don’t see a price difference compelling enough to make the switch or are simply not aware of the alternative ways of looking at hardware purchasing.

It all comes back to scale

“The old adage, ‘no-one ever got fired for buying IBM/HP/Dell’ still holds for most of those folks,” Mark Monroe, CTO and vice president at DLB Associates, wrote in an email. DLB is a consulting engineering firm that designs data centers, among other projects. Before joining DLB, Monroe was executive director of The Green Grid and before that led corporate sustainability strategy at Sun Microsystems.

Monroe said that from what he’s heard, the price difference for OCP gear is not big enough to overcome inertia of business-as-usual and “risk-avoidance bias” most corporate IT managers have.

When he worked for a “major systems vendor,” it was not uncommon for Fortune 200 firms to get up to 35 percent discounts from list price for large $10 million to $20 million annual purchase agreements. With discounts like that, even if OCP hardware is 40 percent cheaper than Dell hardware, taking the risk (real or perceived) is not worth it. Monroe warned that the numbers were not exact, “but they’re in the ball park.”

Such purchase agreements would be for telcos or financial services companies with comparatively large IT portfolios. A lot of the companies “clustered around number 200” on the Fortune 500 list don’t buy anywhere near that amount of hardware. Companies like Starbucks or Kellogg’s cannot absorb $10 million worth of hardware per year.

“There’s probably 100 companies in the world that can absorb more than that,” Monroe said. “Even eBay, at around 10,000-20,000 servers per year considers themselves pretty small compared to the big hyperscale folks.”

OCP visibility in enterprise market minimal

KC Mares, who’s done everything from consulting Equinix on energy to running global data center strategy at Yahoo, pointed out that OCP was also too new for many IT organizations. If an IT manager doesn’t go to industry conferences or read IT press often, they mostly hear about IT from those who sell to them, companies like Dell, HP, Cisco, EMC and NetApp.

“And while OCP is talked about in data center press and conferences, it’s still new to most IT folks and they are afraid to stick their neck out on a purchase with someone other than a well-known brand,” Mares wrote in an email. “Most IT managers don’t really care that Facebook endorses it, as they are not Facebook and have different needs.”

Lack of awareness is not to be underestimated. There’s a popular belief out there, for example, that OCP hardware vendors don’t offer support, which makes it even harder for an IT manager to switch from an all-inclusive agreement with an incumbent vendor. Frank Frankovsky, president and chairman of the board of the Open Compute Foundation, said this was not true and that OCP vendors offered multiple levels of support.

But that’s part of the foundation’s job: to disseminate information and separate fact from fiction. At least one OCP vendor we talked to did agree that the hardware was not really much cheaper than incumbent gear upfront. Hyve Solutions president Steve Ichinaga said cost benefits really kicked in overtime, expressed through operational costs.