Failure Analysis: How Apple Screwed the Xserve Pooch

“Failures are finger posts on the road to achievement." -- C.S. Lewis

Many Apple customers throughout the years profitably utilized the rack mounted Xserve product in their businesses. It was a quality product that cost less than the competition's by a significant amount. Yet, it was doomed to failure. Here's how it happend.


Buried in an article about Android, Apple and market disruption, on page 2, Daniel Eran Dilger describes, briefly, the failure of Apple's 1U rack server, the Xserve. The article is: "Apple's market disruption savvy is bad news for Android."

The main thrust of the article is about the art of market disruption and how observers should view Apple's iPhone strategy. Good in itself, by the way. What caught my eye, however, was that innocent looking section on page 2 about the Apple Xserve.

A Lesson in Disruption

As part of his treatise on Android market disruption, Mr. Dilger uses the example of a failed market disruptor, Apple's own Xserve.

When the company tried to break into the enterprise server and storage market with the 2005 Xserve and Xserve RAID, it attempted to leverage its Mac OS X Server platform to deliver equipment that could rival the higher end offerings of rack mounted server room equipment.

Apple hoped to undercut established PC server vendors, including Dell and HP, by offering a server package that delivered comparable hardware with vastly cheaper software than Windows Server, resulting in a much lower price overall."

A comparison chart is shown that was used in Apple marketing to demonstrated the real, tangible cost savings when using the Xserve. Many, many customers bought into this, especially those who were able to exploit and manage the Xserve themselves for effective use.

Very impressive.  But it didn't work in many cases.

In one sentence, Mr. Dilger correctly summed up the ultimate failure of the Xserve:

Apple's Xserve never established much of a market for itself, in part because the company lacked the hands on support services that enterprise-savvy vendors like Dell provided to their satisfied customers.... "


When I was at Apple, in the Federal Sales group from 2003-2005, I was selling the Xserve and its storage companion, the Xserve/RAID. I can confirm what Mr. Dilger wrote above. In my own words, I would say that enterprise/federal customers didn't want a relationship with a product. They wanted a relationship with a company, and they were willing to pay for that. On call.

Apple Xserve (2002-2010)

Apple, on the other hand, was of the mind that products should, by their elegance, sell themselves. That was the Steve Jobs vision. No formal, tedious relationship with the customer should be necessary. Yet enterprise customers could be vastly annoying; they were always whining about what they wanted and needed. They demanded insight into future changes.  They'd ask to be involved. Apple senior management never felt comfortable going there, and so many customers with ample cash fell into the arms of HP and Dell for their servers and support. In that sense, Apple failed.

By and by, that disconnect resulted in limited opportunities for the Xserve. The big opportunities for Apple, the low hanging fruit, lay instead in the consumer electronics arena.

This goes a long way towards explaining how the Xserve could be, at once, both loved by many customers and yet be relegated to the museum of failed Apple products. Customers of mine were always amazed: how could Apple build such a great product, then fail to support it in the way that they needed? (To be fair, Apple field engineers, far too few and scattered, did a heroic job of sales support.)

A good example from those days was a major military organization that needed assurances from our team that Apple would manufacture the PowerPC/G5 Xserve for years to come -- right at the time when Apple secretly knew it would be shifting to Intel. Selling to the military (or trying to) could be a bitch that way. Senior Apple management elected to defer on a potentially huge sale for the sake of getting on with technology, never allowing itself to be held back.

As an aside, that inability to put technical and leadership support behind computational clusters led to Apple's departure from supercomputing as well, but that's another story for another day.

We tend to think of Apple as a company that can't do very much wrong. However, in this case, Apple was in the process of struggling to find the right market profile while also understanding that its way of doing business didn't fit in, in critical ways, with enterprise America. One way to view it was that Apple put its toes in the water, blinked and eventually withdrew, leaving some scars behind.

That's not to say Apple didn't have many, many satisfied enterprise customers, large and small. And it's still true today in the enterprise and government. Plus, Apple's focus on small business has been legendary. Apple made millions of dollars in Xserve from 2002 to 2010. But customers just kept wondering: why couldn't the best hardware company on the planet go all in with them? And the Apple sales teams, straining mightily to meet their sales quotas for an admittedly great product, wondered the same.

Eventually, the company found that it was self-limited in what it could do there and discontinued the Xserve in late 2010. The Xserve era was a great ride, but, in the end, Apple had to screw the Xserve pooch, dust itself off, and become the iPhone/iPad company. Fortunately, Apple found its true niche with consumers. And so, it put an experimental past out to pasture and hasn't looked back.

Who knows what Apple might have achieved if it had approached enterprise sales in a more conventional fashion? But other companies, with the right name recognition, did it better and Apple didn't see a big future in competing with them. And so, it's hard to argue that, given Apple's unique penchant for product design and approach to the modern consumer, the current path is a bad idea.

Postscript on Xserve/RAID

While Mr. Dilger is almost always on the mark, one comment he made about the companion storage product, the Xserve/RAID, didn't ring true. His analysis:

XServe RAID was canceled even earlier because the NAS market wasn't at all impressed by lower prices; they preferred the assurance of acquiring drives rated for true enterprise duty, rather than the consumer-class disks Apple was trying to sell them as cheaper and "good enough."

I sold the Xserve/RAID myself at Apple, and I was even accompanied on a sales call at a national laboratory by Mr. Alex Grossman, the Apple executive behind that RAID product. He would explain to customers that the resiliency of a RAID product is a function of the entire system, and that includes the RAID controller.

Xserve/RAID (2003-2008)

As background for this story, we chatted again, and he reiterated what I recall us telling customers: "The drives in Apple's Xserve/RAID were perhaps slower than the ultimate Enterprise-class drives available at the time, but as an aggregate, that product performed very well. Not only did no customer ever lose any data by virtue of the design, but no customer ever complained or deferred purchase because of the drives we used."

Instead, despite stellar sales, Mr. Grossman (now at Quantum) told me that the Xserve/RAID also fell victim to Apple's "Opportunity vs. Engineering Cost" analysis. That is, given limited engineering manpower and resources, a whole lot more could be achieved by applying those resources to iPhone. Xserve/RAID, while a beloved and spectacular product, would never begin to achieve the potential sales, in dollars, of the iPhone. It was discontinued in 2008.


There was a time when Apple was a boutique UNIX company selling Macs to all kinds of technical professionals. It was natural to back that up with RAID/SAN storage products, Xserve, and other enterprise-class products. Customers loved everyone of those products, but remained baffled by Apple's customer support approach in general. In the end, those products weren't the path to the kind of eventual success Apple wanted and was uniquely suited to deliver.

As some have noted, it is, however, a shame that so many technical and enterprise customers who have adored all kinds of Apple products for years got left behind in that product space. Perhaps the frustration was due to wish fulfillment -- that Apple could be both great at both hardware and traditional business support.

We tend to think that a very large, wealthy company can continue to do all things well. Certainly, Apple could have invested vigorous resources into securing an important market for itself in servers, storage and clusters. That temptation to do everything well can often lead to not being spectacular in the areas that really count. Or working in areas where executives feel uncomfortable, out of their depth.

In the end, Apple chose to think different. It matched its finite engineering resources to the market best suited to its own legacy, temperament and vision.

It seems to have worked out fairly well.


Pooch image via Shutterstock.