Blade Servers and PCs Grow More Profitable For Channel

Channel partners discover profit-rich opportunities in blade servers and PCs amid dynamic market growth. The blade servers require complex implementation and customization which help build margins.

Channel partners frustrated by low-margin generic hardware should investigate the margin-rich opportunities in blade PCs and servers. Blade servers are generic devices that lend themselves to considerable customization and value-added services, say VARs successful in the blade space.

Blade servers are self-contained, stripped-down units that maximize high density in data centers. The blade servers lack many components which are removed for space, power and other considerations, while providing the functionality of a traditional server. A blade server enclosure contains up to 128 units per rack compared with 42 in a traditional server rack, making blade servers ideal for server consolidation.

Blade PCs are thin clients that leverage many of the architectural achievements pioneered for blade servers. These thin clients lower IT costs because all computing operations and storage are centralized. When a blade PC fails, all an IT administrator has to do is swap in a new one. The affected user doesn’t lose any computing resources as they reside on a server.

“There are ample opportunities to make money from blades,” said Mark Martinez, CEO, M2 Technology, a Hewlett-Packard VAR in San Antonio, Tex. with government and corporate clients. Martinez said his company profitably sells and customizes blade PCs, which typically cost $500 more than desktop PCs.

 “Each implementation is a custom job that requires knowledge of active directory, a NAS or SAN component, and the expertise to fit many different pieces together,” he explained.

Other channel partners also see margin opportunity from the complex implementation blades often require. “We make more money on blades than on ordinary PCs and servers because blade hardware costs more, involves a lot of customization, and require more complex implementations,” said Jeff Posey, director of federal enterprise sales and services at Emtec, (OTCBB:ETEC), an HP VAR in Marlton, N.J.

Other VARs are more cautious about the blade market, noting the margin is often found in the solutions accompanying the blade sale, not the hardware itself “Typically I sell more hardware, such as a blade chassis and a SAN device -- when I sell blade servers, but I can’t say I made more money off selling blades than I do off traditional servers,” said Marcus Smiley, president, Epoch Concepts, a VAR in Lone Tree, Colo. Epoch sells blades from ClearCube to federal government clients.

Smiley noted that he frequently makes good margins by selling and installing virtualization and storage solutions that often accompany a blade sale.

Martinez said blades are particularly useful in environments such as the federal government where officials seek to centralize computing, improve computing security and reduce the long-term total cost of ownership (TOC) of servers and PCs.

However, successful blade hardware sales often require patience with long and difficult sales cycles, channel partners caution. “Blades are not an inexpensive solution, so you have to prove to prospects that the lower TOC is worth their investment,” noted Martinez. And Smiley added that blades are proprietary in nature, making them difficult to sell in some accounts.

Despite such challenges, blade sales are a lucrative market. Worldwide blade server revenue for 2007 grew 40.9 percent from 2006 to $3.9 billion, according to researcher IDC. The firm estimated that about 95 percent of all blade revenue is driven by x86 systems, with blades representing almost 15 percent of all x86 server revenue.

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