Why Steve Jobs pulled the plug on Xserve, and how Apple can reenter the server market

“Today, Apple’s decade-ago investments in notebook design, consumer electronics, direct retail, and software development all seem prescient, and clearly paid off very well. In contrast, the company’s efforts in servers haven’t done very much at all, largely because Apple’s core competencies in managing user experience don’t translate well into the business of selling server hardware. Other companies do a much better job of selling server hardware, with service and support options Apple can’t (or doesn’t care to) match,” Daniel Eran Dilger writes for AppleInsider.

“Additionally, Apple is no longer trying to sneak into the enterprise market via the server room; today, it’s being welcomed in the front door as a mobile device vendor. Continuing to focus on Xserve development because of a 2002 decision to sell Apple branded servers would be foolish given how much has changed since,” Dilger writes. “Apple can drop the Xserve and continue to sell its Mac OS X Server product on its Mac Pro and Mac mini, meaning very little lost revenue but much lower development costs.”

Dilger writes, “However, while there is enough annoyance with Apple’s discontinuation of the Xserve to sponsor a website petition, there does not appear to be enough of a market for Apple to continue to address with its own hardware. Apple does however have the capability to relax its Mac OS X Server licensing to allow partners to install it on third party hardware, which would be a bigger win at lower costs for the company than continuing to develop unique hardware at a loss.”

Much more in the full article – recommended – here.

41 Comments

  1. Apple exiting the server market was clearly written on the wall when the Intel processor switch (from G5 processors) was announced.

    Most server purchases are not based upon software or the server operating system, but upon hardware. Apple sold a TON of G5 X-Servers because nobody else had a processor nearly as powerful as that at that time. In fact a Mac made the #3 spot in the world of supercomputers because of that awesome G5 processor.

    Far as a server operating system, Linux is much more customizable and free to jump to another hardware vendor, unlike OS X Server which is limited to only Apple hardware. Steve Jobs even used Linux based render farms when he owned Pixar.

    So goodbye X-Raid and now X-Server, next to go it is the MacPro as there is no consumer level use for such a powerful computer as 3D games have all gone to consoles. (and you can’t get video card upgrades for the Mac Pro’s anyway!)

    The Pro market purchases are not enough to sustain the existence of the Mac Pro by itself. Apple is openly feuding with Adobe, the two have become nearly hostile. Apple seems to want to exit the graphics market it founded to focus on the larger consumer iFad, iMac and MacBook Air market.

    Apple even introduced BootCamp, to assist Mac pro users into becoming familiar with Windows and begin their transition.

    Us Mac Pro users will have to come to accept the inevitable, Apple isn’t for us anymore. Windows 7 really isn’t bad, it’s not as good as OS X, but a ton better than XP.

    As a lifelong Mac user, I have come to accept Apple’s leaving of the “Pro market”. I’ve ran Windows of various flavors in virtual machines.

    I am ready.

  2. Continuing to sell servers might have given Apple bragging rights but not much else. Servers are a low-margin business, and that does not fit the Apple business strategy.

    IT managers look for cheap, unglamorous servers that deliver performance with the highest degree of density as possible. This means that blade servers running Linux rule the day. Visual aesthetics mean nothing in a server room. Even Google’s data centers are crammed with cheap, inelegant but high performing servers. That’s not where Apple wants to be.

    So rant. Apple will likely stay in this, but in a different way. If anything, Apple could provide service via their large data center(s) rather than grunting out trying to compete against commodity server hardware.

  3. Apple will be welcomed into the 21st century Small and mid-tier business market through hosted SaaS Applications (e.g. iWorks.com to compete with Google Apps) and through thin client apps (anyone have any apps on their thin-client mobile devices?)

    Act from the Future

  4. I disagree. If Apple wants a foot in the Enterprise market, it is going to have to produce a machine that can serve enterprise needs while fitting in to a 1U space. Mobile systems are a peripheral for now. So it’s up to Apple to decide if they want to be in that space.

    As for me, I don’t want to have to own one computer for gaming and one for everything else. I’ll still with a Mac Pro and bootcamp for as long as I can. Sure, I can’t get the latest graphics cards, but the offerings are a lot better now, and I think they will improve.

  5. For every Xserve Apple sold there was an associated number of Mac Pros, iMacs and Mac laptops that accompanied that Xserve of 10 to 20 to 50 or more Mac clients. Having a credible server helped win the minds of management approving purchases proposed by Mac evangelists. Now those same evangelists feel betrayed and will just stop fighting the good fight and say OK to the figures proposing Dell or HP clients.

  6. Yes, it would be nice if Apple did something like licensing OSX server, but on a majorly tight leash. Perhaps a “joint venture” with someone … Oracle/Sun perhaps? … with good hardware and a need for an OS?

  7. Apple claims it discontinued Xserve because of a lack of demand. Well, the demand would be there if the prices weren’t absolutely absurd.

    You can get a low-end off-brand Blade server for a couple hundred bucks. A bottom-of-the-line refurbished Xserve costs $2,500. Of course there was no demand.

  8. Apple has a whole line of pro apps which they make a healthy margin on as well as healthy margins on the pro hardware. Apple ain’t leaving it’s core markets any day soon. It’s investments there are paying off handsomely.

    Xserves demise is a shame. They are sexy machines and I drooled for one until could finally afford one and now I own two. Sure I might not need another one for a year or two but then the design and machine tooling is done so why not keep churning them out even if it’s just at break even?

    I know IT nerds don’t go in for good looking rack hardware but some of their bosses do!!

  9. @ Brian

    I agree and I’ve been saying this over and over again in various Mac-related sites. There’s just no reason for Apple to be in the enterprise backend and try to compete with the likes of IBM, Oracle/Sun, HP and Dell. They’re not making money with the server hardware either. They make their money in the enterprise with software, storage, networking and services like consulting and systems integration.

    Apple is making good headway into the enterprise with the mobile devices. It really is about the iPhone, iPad and the MBA now that accesses the Apple ecosystem on the cloud and also accessing the corporate backend. Apple hired Unisys to help Fortune 500 companies tie in these devices to these companies’ IT infrastructures and it seems all is going well on that front.

    Apple is a client device company as far as hardware and the OS is concerned and a provider of media, apps and other services on their ecosystem. That’s what their focus needs to be. That’s plenty on their plate and they don’t need to bother with servers and backend services that can be much better handled by the likes of IBM, Oracle, and SAP, etc.

    Apple apparently has very good working relationships with these enterprise giants – including using a lot of their gear, software and services for Apple’s own internal operations and the NC data center. Why would Apple want to compete with them? They are not even remotely in the consumer side of the business or even in the front-end in the enterprise.

    There’s a good reason why Apple is aligned with them and not with HP and Dell. IBM, Oracle, and SAP also compete vigorously against Microsoft, so that’s yet another good reason for Apple to work with them and not against them. I also reckon that IBM, Oracle and SAP cast wary eyes on Google as well. What Google is doing can’t be viewed in a favorable light by these companies either.

  10. Think about what businesses must, *must*, own their own servers and why, 20 years from now. I wish lots of orgs would give up running their own servers today so their employees become more productive. Most enterprise upgrade projects today are a waste of resources. By the time the infrastructure is set up for the “future” it is already obsolete. Unix is geared to be servers and for “pros” by default. Yesterday’s pro line is light weight client tomorrow. Don’t let semantics hold back your imagination. Nothing is set in stone by this change of hobby.

  11. @Yoyo,
    I go for good looking racks any day ” width=”19″ height=”19″ alt=”wink” style=”border:0;” />

    @akh2k,
    Yes, that is one thing Jobs is different from others. He likes good partnership and does not try to conquer every tech sector.

  12. Someone should start a pool for when the following occur:

    – Apple abandons Mac OS X Server
    – Apple abandons the Mac Pro
    – Apple “locks down” Mac OS X to such a degree that you can no longer hack out a quick C program.
    – Apple takes away root access/permissions from the end user.

    I love apple products… as a consumer. But I will NEVER trust Apple in the enterprise market as the abrupt announcement shows they are too arbitrary and capricious to be depended on.

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