Virtualization Hasn't Hurt Dell's Revenues Yet!

I often hear reactions like, virtualization is really going to commoditize companies like Dell, and what's Intel going to do about virtualization? It looks like virtualization certainly hasn't hurt Dell's latest revenues, at least yet. I actually believe data center space, power, cooling, capital costs along with US economic pressures have been just as big an issue for many, limiting their computing server expansion needs. Virtualization isn't all bad for hardware manufactures, and in many cases it's good.

Virtualization Sells Premium Servers - The good margins in hardware aren't in the $1,200 servers Dell, HP, IBM and others can sell you. The margins for the server manufactures and chip makers are in the big iron. Dell could sell you a half dozen small servers and make a few buck each or make a ton more money selling you a 2x4 or 4x4 core system with a juicy storage system and memory footprint.

Large Servers Means Premium Service Contracts - Just like those service contracts the teenagers at Circuit City and Best Buy try to sell you, there's big money in them there service contracts. You aren't going to buy a $10k, $20k or $30k server and stick with the standard next-day service plan. You're gonna want 2 or 4 hour service turn around with onsite repairs by some repair guy with a big bag of replacement parts. Sell the car at a good price, and make money on those nifty $1,200 quarterly service calls. Same deal here.

Where 5 Servers Consolidate, 5 Laptops Spring Up Somewhere Else - While the server count might start to consolidate in the data center, the average number of laptops are increasing from one laptop per household to one laptop per person. I'd hate to tell you the quantity of laptops, gaming rigs, game consoles, servers and network gear that's gone through my household in the last five years. Putting two kids through college and being a "gadget dad" will do that to you.

We could probably have made a serious dent in the One Laptop Per Child initiative if we'd thoughtfully given away all those used computers, at least the gear we didn't burn up during in-house LAN parties playing WoW, EQ2 or Counter Stirke. :)

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