RLX Exits Blade Server Business

By Jeffrey Burt  |  Posted 2004-12-23

RLX Exits Blade Server Business

Nearly four years after helping create what has become one of the fastest growing segments in the server space, RLX Technologies Inc. will exit the blade server business and instead concentrate on expanding the market for its Control Tower management software.

RLXs goal is to sell Control Tower through OEM deals with major server vendors who want to supplement their management software with RLXs offering, said CEO Doug Erwin. RLX will offer Control Tower as a product that can plug into other management software, such as Computer Associates International Inc.s Unicenter or IBMs Tivoli products, Erwin said.

In the meantime, RLX will continue to service and support the hardware in its installed base, Erwin said.

The Woodlands, Texas-based company was among the first of the startups to offer blades, which started off essentially as stripped-down servers holding basic components such as processors that slip into a chassis, through which they share such features as I/O and power supply.

However, since then, most of the major OEMs have jumped into the market, which analyst firm IDC expects to jump to a $9 billion business in 2008, with blades comprising up to 50 percent of server revenue. IBM and Hewlett-Packard Co. have been leaders in the blade market for a few years, and Dell Inc. last month jumped back into the space with the PowerEdge 1855.

Erwin said the company had been considering becoming a software-only company for more than a year, but it was Dells entrance into the blade server space that convinced officials to make the move sooner rather than later. It was growing more evident that the blade server market was becoming increasingly commoditized.

"Its going to be a price war between the big boys, and we dont have the volume or scale to compete with the big boys," Erwin said. "A small software company can compete with a large software company because customers will bet on who they think has the best product. A small hardware company competing with a large hardware company has large hurdles to overcome in volume and scale."

RLXs announcement Thursday came about a month after the company rolled out the sixth generation of its blade servers, the SB6400, which is powered by Intel Corp.s Xeon processor with EM64T technology, which enables the chip to run both 32- and 64-bit applications.

However, what has earned RLX the most praise in recent years has been Control Tower, which enables users to quickly, automatically and remotely perform such tasks as provisioning and policy management, all from a single console. RLX also has begun creating modules that can plug into management systems from such vendors as IBM and HP, Erwin said.

Click here to read eWEEK Labs review of RLXs Control Tower 6G.

The modules will enable users to simply buy what they need, rather than having to overhaul the management systems they already have in place, he said. RLX officials said this summer that Control Tower in the first half of 2005 will extend the reach of the suite with APIs to enable greater integration with software from other vendors, and also will increase the number of automated rules for managing an IT infrastructure.

Control Tower, which can manage both blade and rack-optimized environments, has garnered praise among industry observers and journals.

"It seems that when we get written about, its because of our management product, so were going to put our money where our mouth is," Erwin said.

Next page: Bringing investors back into the fold.

Page Two

Erwin said by March he expects to announce a deal with a major hardware vendor, which will put aside some of the management software it is offering now and instead sell Control Tower. The hope is that once that deal is announced, other vendors will follow suit.

RLX announced the strategy change to employees Wednesday and began contacting customers Thursday. The decision will mean internal changes for RLX; before the announcement, the company had about 115 employees. Erwin said some layoff notices were sent out Wednesday, but he declined to say how many jobs would be lost.

For some customers, RLX getting out the hardware business was disappointing but not surprising. ECI Conference Call Services LLC, in Wayne, N.J., has been using ServerBlades for about a year and runs about 100 of them currently, said Chief Technology Officer B.J. Weschke.

"Its definitely disappointing," Weschke said. "I was fond of the whole package. With Control Tower coming with the hardware, there was no finger-pointing when something went wrong, no one saying its a hardware problem and software problem."

Erwin said that while the announcement represents a big change for RLX going forward, it was less risky than trying to slug it out with larger vendors in the hardware business. It also has brought investors back into the fold, he said. Some had been skeptical of RLXs ability to compete on hardware, particularly given Dells entrance into the market. When RLX spoke to them about becoming a software-only company, not only did they support the move, but other investors who had left the company began coming back, he said.

Erwin said he expects to announce another round of funding next month.

In 2001, the company rolled out the RLX System 324 chassis, which could hold up to 324 ServerBlades, which at the time were powered by Transmeta Corp.s Crusoe chip. Like most initial blades, RLXs offering was targeted at ISPs and other companies with large server farms that wanted to conserve space.

However, over the past couple of years, vendors such as IBM and HP have expanded their offerings, seeing blade servers as a key component of their utility computing strategies. IBM not only offers Intel-based blades, but this year rolled out the first blade running on its Power chips. HP not only offers Intel-based blades, but also is planning for systems running on Advanced Micro Devices Inc.s Opteron processor.

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