Sunday, November 07, 2010

A $7,000 Server for SMB

I got my feedback from my presentation at SMB Nation. Thank you. 95%. I appreciate that.

But you know how it goes. One person made a comment that stuck me in the heart. So whoever that is, I hope you'll see and consider this response.

The comment was that SBS servers don't cost $7,000 (a figure I mentioned a couple of times when comparing the expense cycle of having a server on site vs. the monthly costs for cloud services that are pay-as-you-go).

My response to this objection is very simple: HUH?

Servers cost what they cost. I don't know what everyone else puts in at their clients, but for us it looks like this:

Proliant ML 350 G6
- 2.53 GHz Processor
- 6 or 8 GB RAM
- 12MB L3 cache
- RAID Controller
- Hot plug, 500 GB hard drives (2 mirrored for O.S. and 3 Drives configured in RAID 5)
- 3-year warranty
- RDX disk backup drive w/ 4 Cartridges
- SBS 2008 Premium
- 5 additional Client Access Licences
- Diskeeper defragmentation software
- Secure Certificate for three years
- Backup Exec Backup software

Now you might strip out the backup software, secure cert, Diskeeper, SBS, and maybe go cheap on some drives. If you did that you might say the "Server" is only $3,000. But a server without an operating system is useless when making a comparison against the Cloud (or anything else.

If you sell Dell instead of HP, you might have the option to get a nice dual Celeron machine for $600. But we only put our clients on quality equipment.

We believe the equipment list above is a great little server for small business client. And it comes in right at $7,000. I think the system we installed last week was exactly as specified here and sold for about $7,150 plus tax. There are only two changes to this configuration that I would give serious consideration to:

1) Go with three drives in RAID and then create C: and D: volumes on the single RAID array. With this client, that means we'll be selling them additional drives in the next three years. The additional cost today is less than $350 so the future hassles are easily avoided.

2) Maybe go with fewer backup drives. But even at $250 each, how many would you cut? You can't leave a clean with a tiny disc rotation or you have a very fragile disaster recovery plan.

Some people will go to an inferior machine, with no warranty or something that's not business class. But you don't really save much there. The core hardware component here is $3,000. So what are you going to save? Sell them a $2,500 server that's going to give disappointing performance after two years? That doesn't make sense.

The client we migrated last week (with zero downtime, of course) has now purchased four servers from us over the last dozen years. This last one lasted more than four years because of the recession. It only lasted that long because we sold them an appropriate business machine in the first place. Performance was not spectacular at the end of that last machine's life because every other machine in the office is so much faster than the server. But it was alive and it lasted so long because it was good quality from the start.

If I had decided to "save" the client $1,000 four years ago, they would have been very unhappy with their technology -- or they would have had to do some major upgrades along the way.

Quality Matters

I know there are many ways to cut costs. And we each have to run our businesses our own way. But I encourage you to only use good equipment. It seems obvious, but it's not.

When Mike came to work for us he was amazed that our clients basically never call. Things don't break. We never EVER worry about going home at 5:00 PM or going out of town on the weekend because stuff doesn't break.

I am always uncomfortable when consultants tell me that they have some server emergency, failed drives, etc. To me this always sounds like someone sold the wrong equipment in the first place and is now charging the client for fixing stuff that should never have broken. If I had to live in fear of going home at night because my clients' equipment might fail at any minute, I'd go into a different business tomorrow.

If you think you have to sell cheap equipment, I recommend you give the client alternatives. Give them a quote for cheap server and a quote for the server listed above. Let the client choose the server! When a client looks at the bottom line, they will often spend the extra money with a very simple calculation: How much extra does it cost each year? If the "expensive" server is $1,200 more, that's only $400 per year. How many hours of your time - plus downtime - do they need to save in order to make that worthwhile?

So yes, Virginia, there is a $7,000 server in the SMB space. In fact, the world's full of them.


  1. Hallelujah, Karl you speak my languge. We live in the SMB space and although I might have a different opinion to the RDX disk backup drive - we use SCSI external tape drives (for a reason) and / or off-site backup - we will not under spec or under sell a server. The reason it's called a server and not a glorified PC (and also because it costs more) is because it's a different beast. By the way we also quote on ML 350's and additionaly add redundant power and fan/baffle kit. (The reason we use an external tape drive is it's easier to power cycle an external drive than have to reboot the server)

    I think many companies are afraid of "charging" too much or spec'ing a server to high. Dont be afriad guys, we have no problem selling this type of hardware to customers who are serious about their business and look at IT as a strategic investment rather than a cost. Yes we come up against Dell but if you quote on a like-for-like basis I don't believe there is a huge difference (well not in the UK where we are). If a customer insists on say a Dell, we advise them which model etc, they purchase the Dell directly and we install and configure. They are then responsible for any DOA kit or hardware returns - sorry Mr Customer, you want a cheaper server and you want us to spend non-chargeable time on sorting it out when it goes wrong - you can't have it all your way. (We are happy to baby-sit that other server on a chargeable basis). If you had bought a HP server from us we would look after all of that for you for a year, and for free too.

    We are in the fortunate position that we can walk away from some opportunities, I appreciate some businesses may not be so fortunate.

  2. "If you sell Dell instead of HP, you might have the option to get a nice dual Celeron machine for $600. But we only put our clients on quality equipment."

    Wow! You do hate Dell and your comment above is clear that you do not think that Dell is not quality equipment.

    Quite frankly, hardware is a comodity. An Intel processor on a HP, Dell or IBM is the same Intel processor elsewhere. RAID cards are either adaptec or LSI, just marketed under different pretty much the parts are the same I've found. If you prefer HP, and it appears you do, I'm happy for you. But to imply Dell is not quality...that's just your opinion (and if not, based upon what data?)

    In future, can we keep the comments to the critical issue or message. I agree with your article that if you buy a cheap server, you get what you pay for. But then to name one brand over anouther as being inferior you run the risk of losing credibility and objectivity with your audience.

  3. Mail: Thank you. We have used Tape exclusively until this year. Even though the RDX is more expensive, it is easier to get clients to comply with the part they need to play in protecting their own servers.

    Daniel: I don't hate Dell. But two huge points.

    First, if you sell Dell servers you are virtually guaranteed to call tech support at some point during the three year life of the machine. Something will go wrong. Their gold support is awesome and they will help you fix it. But you have made a conscious choice to sell something that will not have 100% uptime for three years.

    That's just my experience after 15 years in this business. Every since mission critical failure of hardware we experienced in the lifetime of our company has been with Dell or white-labeled equipment. That's just my experience.

    I'd rather sell an HP with a three year warranty that will never be used.

    Second, the "parts is part" argument is just wrong. Because HP architects the entire system from the ground up with absolute control of the backplane and how all components connect to it and interact, there is a measurable difference in performance between Dell and HP.

    I grant that this is a minor issue with the increased speed of improvements. You can wait six weeks and buy a machine that just outperforms the "old" machine. But strictly speaking, the identical HP will outperform the Dell.

    NOTE: My comment goes back to something I posted awhile back when Dell was shipping out catalogs to business customers offering a "Server" with a Celeron process for under $500. I just don't think that's a business machine. So I joked that you need at least dual Celerons.

    Relax. It's all just business.


  4. Thanks Karl. Would you mind explaining the cartridge rotation schema using the four cartridges that you mentioned. Happy to take this offline. mail at yenzamsp dot com

  5. The rotation is the same (simple 1, 2, 3, 4). It's the frequency that changes.

    Rather than changing every day, we ask the client to change once a week and take off site. This has the danger, of course, that a week's worth of data could be lost if the building burns down. But the client is more likely to change the darn thing.

    Each drive holds 3 full backups minimum. These are 320GB drives and client stores are rarely more than 50-60 GB. But we expect that to explode in the years ahead with the growth of imaging and video.

    Also, rather than sending a tape off site every month, we are taking a disc drive out of rotation for "permanent" storage once a quarter.

    Clients who were using $130 tapes x 12 were spending about $1500/year on permanent off site storage. Now they're spending $500 x 4 = $2,000. It's a minor increase.

    But most of them get greater "insurance" from us than from their property and liability insurance policy. :-)

  6. Hi Karl.

    Thanks for sharing this. Your spec is pretty similar to what we are doing, and for the same reasons.

    One question I wondered about? What type of disks are people using for SBS? SAS or SATA, and RAID. I am told by technical people that SATA are too slow for Exchange and OS, but OK for Data. And I am also told that RAID 5 is too slow, but RAID 10 is OK. I'd be interested on your and other readers thoughts on this.



  7. Thanks Karl. A lot less complicated (for the customer) and less tape cartridges needed than for grandfather, father, son methodology.

  8. @mail - We have never used G-F-S rotation because it is too FEW tapes in the rotation. In my first book (Network Documentation) I describe our system. With tapes we like to have ten or more tapes in rotation. When a client gets to 7 we sell them another ten.

    Rotation is basically lowest to highest. Very easy to explain to clients. Even if a tape is missing (out of circulation or offsite), just go to the next number.

    Because we take a tape out of rotation every month, no tape is used very much at all. Thus perfect backups and perfect recovery.

    With G-F-S, a tape gets used 60-70 times per year. Yikes.

    Reminds me of the cassette tapes in my 1970 Nova . . . back in the day. Stretched out and not performing well.

  9. @Chris -

    We have traditionally used SCSI. Now SAS is our preference.

    I'm not opposed to SATA. And to save money we might do that. But 250 GB SAS drives are in the $160 range. So you won't save much.

    SATA in a RAID 5 arrive with a decent cache will give excellent performance because you'll be reading 3+ drives at a time. At 10,000 RPM and all those simultaneous reads, exchange should be no problem - Especially on a 10-50 user environment.

    L3 cache is also important.

    In a perfect world, we can optimize every component so that the choke point is always the network and never the server.

  10. great post! you are spot on... I guess some people don't realize they are making extra work for themselves

  11. In reply to Daniel I say that HP and Lenovo are technology companies. Dell is a high volume sales organization. Karl is not in any risk of losing his credibility based on what he said. You may be a Dell fan and that is perfectly fine. Just try to keep an open mind when someone with a great deal of experience in the industry - be it Karl, me or someone else - makes a point. We aren't trying to pick on you, so please don't take it personally if happen to like something other than what we are talking about.

    In reply to Chris, if you can afford them SAS drives are, in my opinion, the way to go on servers. I personally like RAID 10, but that's only my preference.

  12. Well, I worked for HP for 30 years and I can tell you that HP Servers break just as often as Dell Servers do. Dell did have more issues a few years ago with power supply failures (cheap Chinese Capacitors) and HP seemed to have had far fewer.

    But over all and some of my HP customers had thousands of HP Servers, there is very little difference in server quality between HP, Dell and IBM.

  13. Hey Karl, One comment: Why aren't you using BDR with some offsite so take the client out of the loop, reduce your risk (and theirs) and give them higher availability with virtualization?

    If you client is big enough for that size server, what's another $200 a month for BDR?

  14. Dan,

    We love the BDR from Zenith.

    Our norm has been tapes for offsite permanent archiving. We have recently added RDX instead of tapes.

    When it's appropriate to throw in a BDR, we'll do that. Depends on the client.

    More and more we plan to be using BDR. We're considering getting a Smart Style system for our data center and backing up clients to that.

    It's a great time to be in this business because there are so many flexible options.


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