Computing giant Hewlett-Packard and Foxconn, one of the world's biggest manufacturers of computers and other electronics, will today announce a joint venture to manufacture a new line of servers aimed at filling the data centers of cloud computing companies like Google, Amazon, Facebook and others.
In what the companies are describing as a "strategic commercial agreement," the two say they will build a new line of servers intended for the data centers of large Internet companies, a segment of the market often referred to as the hyperscale business. It's a portion of the server market that the research firm IDC reckons will grow at a compound annual rate of 15 to 20 percent between now and 2018.
It's also a segment of the market where HP, which is the world's top vendor of servers, is not winning. The servers sold to hyperscale companies tend to be stripped-down, super-fast, low-cost machines, purchased by the thousands and packed into football-stadium sized data centers.
The deals are intended to raise HP's game against new entrants in the market such as Taiwan-based Quanta Computer. Like Foxconn, Quanta has historically operated as an "original design manufacturer" or ODM. The phrase is computer industry lingo for a company that builds computers and other gear under contract for companies like Apple, Dell, and even HP itself.
But in more recent years, Quanta has been selling directly to the cloud giants — Amazon, Google, Facebook, Rackspace — building servers to their demanding performance specifications and aggressive prices.
By selling directly Quanta, Super Micro and companies like them have undercut companies like HP — known as a original equipment manufacturer or OEM — in the process. To Patrick Moorhead, the head of Moor Insights and Strategy, a research firm based in Austin, that makes today's alliance "a counterattack of the OEMs."
"The people at the large public cloud companies have been designing their own servers and getting them from companies like Quanta and Super Micro, and forcing companies like HP, Dell and IBM to adapt or change," Moorhead says.