TMO Reports - Apple Xserve Making Inroads in Gov't Contracting, Analysts Say

by , 4:15 PM EDT, June 22nd, 2004

Federal IT market analysts say Monday's announcement of a new supercomputer comprising 1,566 dual-processor G5 Xserve servers is a clear sign that Apple Computer is making inroads in the niche market of high performance computing (HPC) for government IT, contracting and higher education that is looking for faster and cheaper computing power.

Huntsville, Ala.-based Colsa Corp., a US Army contractor, announced Monday the purchase of US$ 5.8 million worth of Xserve servers to produce what is expected to be the third fastest supercomputer in the world.

The Colsa system is expected to reach about 15 teraflops when it is up and running this fall, the company said. By comparison, the fastest system, NEC's Earth Simulator, runs at a speed of 35.8 teraflops. Only one other system exceeded 15 teraflops, according to a new version of the Top500 list of HPC sites.

The announcement is being seen by industry analysts as a prime example of an HPC niche that Apple and its rival Dell are having success in penetrating.

"There is this mid-market for HPC that frankly is far more sizable in terms of a market segment that Dell and Apple are going after and they are having success," Forrester Research vice president and analyst Brad Day told The Mac Observer. "This is a $3 to $5 billion market, worldwide. If Apple gets five percent of this mid-market, which is very doable, that will be a big deal for a company that has never truly been in the server segment as a share leader, let alone the more demanding high performance technical computing segment."

"Performance and value count for something particularly when you're talking about the federal government," Jupiter Research Senior Analyst Joe Wilcox told The Mac Observer, Tuesday. "Looking at outside contractors, the federal government is undergoing a crisis with respect to IT saturation. They are outsourcing more and more business, but contractors are still under constraints to deliver the best performance at the best price. They're finding Apple's Xserve systems as a way to get high performance at a very low cost. I'm sure that was part of their reason for going to Apple."

Mr. Wilcox thinks we could be looking at the beginning of a trend in HPC for Apple products.

"How far this goes is yet to be determined," he said. "I wouldn't be surprised if we see more of this moving forward. Apple has some good benefits such as very fast 64-bit hardware and attractive licensing terms with respect to software. This is very good power and performance at a very good value."

Mr. Day believes Apple's alliance with IBM is helping them get through doors it has previously had little success walking through.

"What you're seeing is the big guys in this field - Sun, HP and IBM - create the market and then players like Dell and Apple carve off their own niche. There's a 'behind the scenes' special relationship between Apple and IBM that is helping them get deals they otherwise would never see."

Brad Day agrees with Joe Wilcox that price is making a difference to HPC clients who are mostly federal government, government contractors and higher education.

"Cost sensitive segments of supercomputing are the ones Apple is having success with. That's why government-related and academics who are cost conscious are buying their products.

"In many ways, you could say Apple is to the PowerPC architecture what Dell is to the x86 market," Mr. Day commented. "They are not going to be leading innovators of the technology, but based on their alliances, they will come up with very low cost offerings from a bundled services point of view, as well as overall hardware and software point of view, that makes it compelling for IT organizations that have to be extremely cost conscious and frankly are satisfied with 'good enough' technology that is not breakthrough, innovative technology."