This morning, we all learned that Apple has cancelled the Xserve effective January 31, 2011. Apple will continue to support the product, but the first reaction by many will be justifiable, grave concern. However, understanding the details, Apple’s motivations, and customer tendencies is harder than just flying off the handle. Here’s my analysis.
In Ian Fleming’s novel, Goldfinger, Auric Goldfinger said, “Once is happenstance. Twice is coincidence. Three times, it’s enemy action.” It certainly seems like we’re seeing enemy action when it comes to Apple announcements regarding key technologies for the enterprise. And, in this context, for convenience, I’m using the term enterprise as a shorthand to include higher education, research, science, business, and government.
The first reactions to the cancellation of the Xserve, effective January 31, 2011 are likely to reflect serious concerns by those invested in the product and cause them to question Apple’s intentions in this space.
For context, one has to remember that Apple was seriously involved in cluster computing, supercomputing and scientific research in the 2000 through 2005 time period. Large supercomputers at Colsa (in Alabama) and Virgina Tech were built with Xserves. Many, many more smaller clusters were built as Apple sought to provide small, rack mounted solutions to the “enterprise” as I’ve abbreviated it above. Even a single Xserve in an equipment closet could provide serious capability to a small business. The combination of the Xserve and Mac OS X Server makes for an easy to use, powerful combination, manageable by a mere mortal, not a giant team.
And so one has to ask, why is Apple doing this, what’s the real impact, and what message, if any, is Apple sending?
Two Sides of the Issue
There are always two sides to an announcement like this. If there’s anything I learned at Apple, it’s that nothing is as it appears and that one has to both understand Apple’s deepest motivations as well as those of customers. Outside of that context, a lot of angst just isn’t very justified.
On the research side, there will be people who’ve invested in this hardware and Apple’s vision. Apple brought a lot of ease of use, design elegance and just plain common sense to Xserve and the former Xserve RAID. There are plenty of senior staff in any organization who subscribed to Apple’s way of doing things, have a Mac on their desks, and successfully deployed Xserves.
That said, we always worry about the message Apple is sending and that gets balanced against Apple’s business interests. Whether Apple likes it or not, this decision does send a message, but we have to have good information to interpret it correctly. Regrettably, shallow interpretations of the message often percolate through the community and is something that affects Apple, for a time, whether it likes it or not. The company has learned to live with that.
The reality is that serious researchers have long wondered about Apple’s commitment to certain markets and fitness as a long term, reliable business partner. Decisions like today’s create new cracks in one’s confidence because certain market sectors depend on long term stability and steadiness of purpose.
Drew McCormack who works with Macresearch.org wrote me about his concern.
“Unfortunately, those of us who have worked with Apple products in the scientific and enterprise arenas have seen this coming for some time. The success of the iPod, and later iOS devices, has made the Mac a more and more marginal part of Apple’s product line.
“Apple has never been comfortable with high-end markets — it is fundamentally a consumer company — so I think they have just decided to consolidate their efforts on consumer markets, and leave the rest to the HPs and IBMs of this world. A sad day for those of us who loved the Xserve, but ultimately inevitable.”
When I was at Apple, I worked a little with the Virginia Tech supercomputer (built with Xserves). I got to know Jason Lockhart, one of the managers. He wrote me:
“It [Xserve] was a solid server platform that matured nicely. I will be sad to see it go. I knew Doug before he became product manager for the Xserve and Xserve RAID and was there when he released the product to the world. He was very proud of those products and worked very hard to refine their designs over their lifespan.”
I can attest that, at Apple, customers constantly confronted me with concerns like this, and they are legitimate. It’s a question of how Apple does business, and it’s different than how, say, IBM does business.
However, as you may have suspected, there’s more to the story.
One can’t analyze a decision like this without understanding Apple’s thinking. First of all, we have to understand that Apple was a very different kind of company when the Xserve was introduced. Apple was a smallish, one product company, the Macintosh, and it needed to branch out in every way it could in order to generate sales. That meant developing products like Xsan, the Xserve RAID, the Xserve and Mac OS X Server. These gave Apple credibility, traction and sales where it needed it in the enterprise.
Contrast that to today and look at the contribution from various Apple products to its revenue. The iPhone, iPad, iPod, and non-Xserve Macs make up more than 90 percent of Apple’s business. Meanwhile, Apple sells not so many Xserves. Michael Gartenberg, an expert industry analyst and partner with the Altimeter Group told me on the phone today:
“Sure, a small number of people are going to be very annoyed. But you have to remember, Apple isn’t getting rid of the software [Mac OS X server], they’re just changing the hardware. Right now, the Xserve isn’t selling in quantities that make sense, and, actually, the Mac mini server is doing much better. “I don’t think Apple is sending a message here. If the demand were there, Apple would keep selling them. Killing any product is hard, and someone, somewhere is going to be upset. But right now, the product just fit into Apple’s lineup.”
Mr. Gartenberg also pointed out that you can buy as many as you need right now and Apple will continue to support them, honor warranties and support contracts.
Tim Bajarin, principle Strategist with Creative Strategies, Inc, concurs.
“Remember, Apple isn’t killing the software side of this, Mac OS X Server. When I spoke with Apple, I was told that sales of the Xserve were decreasing over time. Meanwhile, more and more customers were ordering Mac minis (which are also stackable) and Mac Pros with Mac OS X Server. So this is really a case of killing one SKU that isn’t selling well, but I think Apple is committed to Mac OS X Server. I don’t think Apple is sending any kind of message”.
Finally, don’t forget: Apple sales people will be explaining the deeper facts to their customers.
The other thing we have to consider is that Apple is an agressive technical company. It seeks markets that hunger for a new product, like the iPad, and uses its design, technical and manufacturing capabilities to build great products that fulfill that need. Apple continues to surprise us.
Keeping that in mind, we have to suspect that Apple will continue to develop newer products that meet our needs and sell like gangbusters. In order to do that, it can’t dwell on and unnecessarily commit to products whose sales are declining, despite the incorrect conclusions we might come to. The recent revelations related to Light Peak suggest to us that Apple always has something up its sleeve, moves ahead briskly, and won’t be hamstrung by products of the past. We should keep that in mind if Light Peak comes to fruition and Apple just plain bypasses USB 3, just as it fundamentally bypassed HDMI with DisplayPort.
My first reaction to this announcement was alarm. We’ve seen Steve Jobs announce the Mac App store which could affect how businesses can manage their Mac installations. Apple cancelled the Xserve RAID (February 2008), deprecated Java recently, and now has axed the Xserve. It would be easy to draw all the wrong conclusions and throw a fit, especially if one has to explain this to non-technical upper management.
On the other hand, remember that Apple has partnered with Unisys recently to support Apple products in the enterprise. Apple has shown no signs of disbanding the enterprise and federal sales units who contribute significant sales. Macs, but especially, iPhones and iPads are enormously popular in businesses that remain dominated by PCs and Windows.
Apple is a pragmatic company that cuts it losses, doesn’t cling to low volume technologies, and constantly, relentlessly moves into the future. If you need a 1U rack server in 2011, there are plenty of companies that will sell you one. Some of them are very good at what they do, like Hewlett-Packard, some may be out of business shortly, and some may be unexpected. Apple, however, will move smartly towards US$100B in annual sales in a year or two, doing what it does best.
Postscript: For further insights, see this letter from the father of the Xserve, Alex Grossman, now the CEO of ActiveStorage. Careful reading is in order.