IBM is rolling out the first of its Power7 systems as it looks to grab more market share in the $14 billion Unix server space from HP and Sun. The move comes as HP and Intel prepare to release the next-generation Itanium processor and Oracle looks to bring Sun into the fold.
IBM is rolling out the first systems based on its new Power7 processors, setting the stage for a new round of competition in the rapidly changing high-end server space.
IBM will officially unveil the four new Power7 systems at an event Feb. 8 in New York. At about the same time, at a press conference in San Francisco that also will be Webcast, officials with Intel and Hewlett-Packard are expected to officially release “Tukwila,” the much-delayed next-generation version of the Itanium processor.
All that comes as Oracle works to incorporate Sun Microsystems’ SPARC/Solaris hardware line into its business, and Intel and Advanced Micro Devices look to grab more high-end workloads with their x86 processors.
“We’re seeing three very big vendors … sharpening their elbows a bit,” Charles King, an analyst with Pund-IT Research, said in an interview.
IBM officials are looking to press their advantage, having gained 12 points of market share in the $14 billion Unix space since 2005 and more than 2,200 HP and Sun server and storage customers over the same time span.
“We view the Unix market as very, very robust and mission-critical, and with [the Power7] platform, we have a perfect spot in the market,” Scott Handy, vice president of worldwide marketing and strategy for IBM’s Power systems platform, said in an interview.
With the new Power7 systems, IBM is offering greater performance while consuming less energy than their predecessors, according to Handy. The servers also dovetail with IBM’s Smarter Planet initiative, with capabilities to not only process large amounts of data, but also to analyze that data at the same time.
According to IBM, the Power7 servers deliver twice the performance and four times the virtualization capabilities for the same price as the Power6 servers, all the while consuming half the energy.
They also offer better price for performance than comparable systems from Sun and HP.
The new Power7 chips bring greater performance than the Power6 processors. Power7 offers up to eight cores, with each core able to run up to four instruction threads, enabling each chip to run 32 simultaneous tasks. That includes four times the number of cores and eight times the number of threads per chip than in Power6.
However, the new servers come with more than just new chips, Handy said. There are a host of new integrated hardware and software features designed to increase performance and energy efficiency, Handy said.
TurboCore mode is a workload optimization feature that can have four cores running, and putting the resources—include cache memory and memory bandwidth—of the other four dormant cores before those active ones. It also can increase the clock speed of those four active cores.
Not all systems will support TurboCore mode. Among the four new servers, only the Power 780, designed for such high-end transaction workloads as databases, will support TurboCore.
When not in TurboCore, all the Power7 systems are in MaxCore mode, which takes advantage of its increase in thread count.
The chips also feature Intelligent Threads, a technology that can dynamically change the number of threads being run depending on the type of workloads.
Another Power7 feature, dubbed Active Memory Expansion, uses memory compression technology to make the physical memory appear to be twice as large as it actually is, and can dynamically change the amount of compressed memory based on workload demands.
In addition, IBM engineers have optimized the company’s middleware—including WebSphere, DB2 pureScale, Lotus Domino and Rational—to take advantage of the new capabilities in the Power7 systems.
Regarding virtualization, Power7 systems can support 1,000 virtual machines on a single physical server, four times as many as Power6 servers can support.
“They can put lots of virtual images on these machines and really consolidate the number of servers,” Handy said.
In addition, IBM’s Intelligent Energy technology lets customers power on and off parts of the system, or ramp up or down processor speed based on thermal conditions and system utilization, he said. Intelligent Energy can be run on a single server or across multiple systems. The goal is to help users balance the competing needs of energy consumption, performance and utilization.
The gains in performance and energy efficiency enable IT administrators to do the same amount of work on fewer systems, or to do much more work on the same number of servers, Handy said.
Along with the Power 780, IBM is rolling out the Power 770, a midrange server with up to 64 cores; the Power 755, a high-performance cluster with 32 cores; and the Power 750 Express, a midmarket offering.
IBM also is enhancing its Systems Director Express, Standard and Enterprise editions to make management easier and to bolster virtualization capabilities through enhancements to VMControl.
Monday, 8 February 2010
Power7 - Big Blue eye on UNIX Four server preemptive launch
By Timothy Prickett Morgan • Get more from this author
The scuttlebutt is that IBM seemed perfectly content to wait until May to launch the Power7-based Power Systems servers, but something changed and compelled the company to move up the announcement of its first machines using the eight-core processor to today. Big Blue is not in a habit of explaining its motives or its timing for product launches, but it seems clear that IBM wanted to get out in front of a whole lot of processor and systems launches that are expected between now and the summer.
With so many customers expecting Power7-based machines, it wasn't like IBM was going to have stellar sales of existing Power Systems machines, which run the AIX, Linux, or i/OS operating systems and which are based on the Power6 and Power6+ processors.
The machines announced today are clearly aimed at blunting the attack of midrange X64, Itanium, and Sparc servers as well as some bigger boxes that are going to start creeping up into the power class of the current top-end Power6-based Power 595 machine, which packs 64 cores running at 5 GHz into a single system image. IBM is especially focused on the Unix part of the Power Systems business, where it has generated $1.6bn in revenues in takeouts of Hewlett-Packard and Sun Microsystems boxes in the past three years.
Scott Handy, vice president of worldwide strategy and marketing for the Power Systems division at IBM, says that Sun and HP are each bringing in about $4bn a year in Unix systems sales, with Big Blue getting the lion's share of what is left over of the $14bn Unix market.
"We have 40 per cent share, but this is still a tremendous opportunity here," says Handy. "We are taking Unix to a new leve." And by Unix, IBM apparently means both AIX and i/OS, which share the scalability, reliability, and energy-efficiency attributes of a system designed to support mission-critical workloads.
"We want to position Power as the future of Unix. HP and Sun haven't caught up to Power6, and we will trounce them with Power7. The best marketing executive in the world cannot position Tukwila against Nehalem-EX, which does not support HP-UX," Handy says with a laugh, talking about the four-core Itanium chip that Intel will announce today and the eight-core Xeon chip due sometime in the first half of this year. "HP-UX customers are going to be just as distraught in 2010 as Sun customers were in 2009."
Neither HP nor Oracle, the new owner of the Sun Solaris server business, seem to think there is as much blood in the water as Big Blue thinks it smells. But clearly there is going to be some fierce competition in the server racket this year, particularly with so many projects delayed since the summer of 2008, leaving servers in need of capacity upgrades, and budgets under continuing pressure.
The blood may have more to do with red ink associated with steep discounting than technical superiority when all is said and done in 2010. Which would make it look a lot like 2002 and 2003 - truly awful years for Sun, so-so for the then-merged HP/Compaq, and great ones for IBM's Unix biz.
Contrary to the rumors from last week, IBM did not launch the Power7 line with a kicker to the current Power 520 entry server. (More than a few readers told me this in private; perhaps they all heard the same wrong information). What IBM is rolling out today are four machines in the midrange and enterprise class, which leave entry and blade servers as well as big iron boxes to come out later in 2010.
Handy would not be specific about exactly what these machines would look like, but after some arm twisting he said that customers with current Power 520s (presumably using Power6 and Power6+ chips) will have an upgrade path to the future Power7-based entry machines (presumably to be called the Power 720 to be consistent with the names chosen for the four machines launched today).
Handy also confirmed that the kicker to the high-end Power 595 would have the same 32 sockets, presumably to be called the Power 795, and added that it would cram 256 cores into the same thermal envelope that a Power6-based machine with 64 cores had.
The mount
Like the prior generations of Power-based machines from IBM, the CPUs are mounted on processor cards that mount vertically into the system motherboards. Each processor card has sockets for the Power processors and slots for the main memory. I/O subsystems and external peripherals plug into the system board, which links out to the processor card through a backplane. (Generally speaking, this is the same sort of design that is expected with Intel's future "Becton" Nehalem-EX Xeon processors for multiprocessor SMP machines).
Like IBM's high-end System x servers, which can scale outside of the box using NUMA-like clustering (thanks to some technology Big Blue got when it bought Sequent Computer Systems in July 1999 for $180m). Up to four Power server nodes can be linked into a single system image for AIX, i/OS, or Linux using this interconnect. This interconnect is not available on every machine, and customers pay a premium for the scalability that comes from this interconnect.
The first new machine in the Power7 family of systems is the Power 750, which is the follow-on to the midrange Power 550 that was based on the Power5 and Power6 generations of chips. The Power 750 comes in the workhorse 4U chassis that IBM has had since 2004, but it has been modified to allow for up to eight front-mounted, small form factor disk or SSD drives. That 4U chassis can be configured as a rack or tower server and has room for up to four processor cards, each with 16 DDR3 main memory slots and each with a single processor socket.
This box has the widest variety of Power7 processor options among all of the machines announced thus far. One option has six-core Power7s running at 3.3 GHz, another uses eight-core processor cards that run at 3 GHz or 3.3 GHz. There is a top-end machine that only comes with four processor cards with all 32 cores turned on and running at 3.55 GHz. There seems little doubt that this box will carry the heftiest price.
The Power 750 offers from 8 GB to 512 GB of main memory expansion, with a maximum of 128 GB per processor card using 8 GB DDR3 DIMMs. The box has three PCI-Express and two PCI-X slots peripheral slots and a single GX+ adapter slot, which is used to hook remote I/O drawers (based on a modified InfiniBand link that IBM calls 12X) or graphics cards into the machine. The Power 750 can have four 12X I/O drawers using PCI-Express slots or twice as many using PCI-X drawers. With all of the I/O drawers in the box, the Power 750 can have 584 disk or SSD drives directly attached to it.
The Power 755 is a version of the Power 750 server that is tweaked specifically for supercomputing workloads (and maybe for parallel database clusters running IBM's DB2 PureScale software, but the company has not said). The Power 755 only comes with the four processor cards in the box loaded with 3.3 GHz cores and all 32 cores are activated. This machine can only have 64 GB of memory per processor card, however, which means memory tops out at 256 GB. Other than that and the fact that this machine only supports AIX and Linux, it looks just like a Power 750.
The 770 and the 780
The Power 770 is a version of the Power 750 chassis that has two disk bays removed and the NUMA/SMP clustering bus added in. The Power 770 server node also has two GX++ slots per node, which means it can support a lot more 12X I/O drawers and therefore a lot more peripherals. Each Power 770 server node can have six disks or SSDs and has six PCI-Express slots. With the maximum of 16 12X-based I/O drawers, the machine can support 184 PCI-Express slots across four server nodes and 1,320 disk or SSD drives.
The Power 770 nodes have two flavors of processor cards: one using six-core Power7s running at 3.5 GHz (with 12, 24, 36, or 48 cores activated) and another using eight-core Power7s running at 3.1 GHz (with 16, 32, 48, and 64 cores activated). Main memory on the machine spans from 32 GB to 2 TB. To get memory capacity up to 1 TB means dropping the memory speed from 1.33 GHz down to 1 GHz, and going up to 2 TB means dropping down to 800 MHz. For some workloads, the lower speed of the memory will negate the extra capacity benefits.
The Power 780 is essentially the same machine as the Power 770 with three changes. First, it uses processor cards that have two sockets per card instead of one, which means it has double the processor cores. (However, the memory slots stay the same at 16 per processor card and the maximum main stays at the same 32 GB to 2 TB range per machine).
The second change is that it comes in the same enterprise-class, green-striped chassis that the Power 595 and System z mainframes have. (It has the skin of a mainframe, but the guts of a NUMA cluster with an architecture that IBM has been developing for a decade and selling for six years.) The other big change is the machine only has one set of processor cards, but they have two operational modes. In MaxCore mode, as IBM calls it, each node in the Power 780 cluster has four processor cards for between 16 and 64 cores running at 3.8 GHz, depending on if you buy one to four nodes.
If you happen to have a workload, like an OLTP system, that would do better having fewer cores running at a higher speed, you flip a switch in the microcode, reboot the system, and when it starts up you run in TurboCore mode. In this mode, the cores run at 4.1 GHz, but only half of them turn on. Those remaining cores in the system have access to both memory controllers on the Power7 chips and its full 32 MB of embedded DRAM L3 cache memory. For database workloads, TurboCore mode can boost performance by 20 per cent over MaxCore mode on the same physical machine.
IBM is not publishing pricing information on the machines yet, but Handy says that the memory price cuts that IBM made on Power6 and Power6+ systems back in November, where it cut DDR2 memory tags by between 28 and 70 per cent, were in fact setting the prices on older memory to the same level as IBM expected to charge for DDR3 memory on the Power7-based servers.
As for the systems themselves, IBM's plan is to hold prices roughly the same as the prior Power6 and Power6+ systems and give customers the extra performance. "This is very aggressive price/performance for us, and we are striking while the iron is hot," Handy says.
All of the Power7 machines announced today can support the current AIX 6.1 release as well as the earlier AIX 5.3 release. Customers using i/OS are going to have to move up to the i 6.1.1 interim release that was announced last quarter, and to fully exploit the Power7 feature set, they will have to wait to see i 7.1 later this year. (The word on the street is that i 7.1 will be available in the third week of April, but IBM did not confirm this).
Red Hat Enterprise Linux is not supported on these Power7 machines, which is a bit odd, but apparently IBM and Red Hat are working on it. Novell's SUSE Linux Enterprise Server 10 SP3 and 11 will run on the machines today. IBM plans to start shipping the Power 750 and 755 servers on February 19, The larger Power 770 and 780 machines will ship on March 16. ®
The scuttlebutt is that IBM seemed perfectly content to wait until May to launch the Power7-based Power Systems servers, but something changed and compelled the company to move up the announcement of its first machines using the eight-core processor to today. Big Blue is not in a habit of explaining its motives or its timing for product launches, but it seems clear that IBM wanted to get out in front of a whole lot of processor and systems launches that are expected between now and the summer.
With so many customers expecting Power7-based machines, it wasn't like IBM was going to have stellar sales of existing Power Systems machines, which run the AIX, Linux, or i/OS operating systems and which are based on the Power6 and Power6+ processors.
The machines announced today are clearly aimed at blunting the attack of midrange X64, Itanium, and Sparc servers as well as some bigger boxes that are going to start creeping up into the power class of the current top-end Power6-based Power 595 machine, which packs 64 cores running at 5 GHz into a single system image. IBM is especially focused on the Unix part of the Power Systems business, where it has generated $1.6bn in revenues in takeouts of Hewlett-Packard and Sun Microsystems boxes in the past three years.
Scott Handy, vice president of worldwide strategy and marketing for the Power Systems division at IBM, says that Sun and HP are each bringing in about $4bn a year in Unix systems sales, with Big Blue getting the lion's share of what is left over of the $14bn Unix market.
"We have 40 per cent share, but this is still a tremendous opportunity here," says Handy. "We are taking Unix to a new leve." And by Unix, IBM apparently means both AIX and i/OS, which share the scalability, reliability, and energy-efficiency attributes of a system designed to support mission-critical workloads.
"We want to position Power as the future of Unix. HP and Sun haven't caught up to Power6, and we will trounce them with Power7. The best marketing executive in the world cannot position Tukwila against Nehalem-EX, which does not support HP-UX," Handy says with a laugh, talking about the four-core Itanium chip that Intel will announce today and the eight-core Xeon chip due sometime in the first half of this year. "HP-UX customers are going to be just as distraught in 2010 as Sun customers were in 2009."
Neither HP nor Oracle, the new owner of the Sun Solaris server business, seem to think there is as much blood in the water as Big Blue thinks it smells. But clearly there is going to be some fierce competition in the server racket this year, particularly with so many projects delayed since the summer of 2008, leaving servers in need of capacity upgrades, and budgets under continuing pressure.
The blood may have more to do with red ink associated with steep discounting than technical superiority when all is said and done in 2010. Which would make it look a lot like 2002 and 2003 - truly awful years for Sun, so-so for the then-merged HP/Compaq, and great ones for IBM's Unix biz.
Contrary to the rumors from last week, IBM did not launch the Power7 line with a kicker to the current Power 520 entry server. (More than a few readers told me this in private; perhaps they all heard the same wrong information). What IBM is rolling out today are four machines in the midrange and enterprise class, which leave entry and blade servers as well as big iron boxes to come out later in 2010.
Handy would not be specific about exactly what these machines would look like, but after some arm twisting he said that customers with current Power 520s (presumably using Power6 and Power6+ chips) will have an upgrade path to the future Power7-based entry machines (presumably to be called the Power 720 to be consistent with the names chosen for the four machines launched today).
Handy also confirmed that the kicker to the high-end Power 595 would have the same 32 sockets, presumably to be called the Power 795, and added that it would cram 256 cores into the same thermal envelope that a Power6-based machine with 64 cores had.
The mount
Like the prior generations of Power-based machines from IBM, the CPUs are mounted on processor cards that mount vertically into the system motherboards. Each processor card has sockets for the Power processors and slots for the main memory. I/O subsystems and external peripherals plug into the system board, which links out to the processor card through a backplane. (Generally speaking, this is the same sort of design that is expected with Intel's future "Becton" Nehalem-EX Xeon processors for multiprocessor SMP machines).
Like IBM's high-end System x servers, which can scale outside of the box using NUMA-like clustering (thanks to some technology Big Blue got when it bought Sequent Computer Systems in July 1999 for $180m). Up to four Power server nodes can be linked into a single system image for AIX, i/OS, or Linux using this interconnect. This interconnect is not available on every machine, and customers pay a premium for the scalability that comes from this interconnect.
The first new machine in the Power7 family of systems is the Power 750, which is the follow-on to the midrange Power 550 that was based on the Power5 and Power6 generations of chips. The Power 750 comes in the workhorse 4U chassis that IBM has had since 2004, but it has been modified to allow for up to eight front-mounted, small form factor disk or SSD drives. That 4U chassis can be configured as a rack or tower server and has room for up to four processor cards, each with 16 DDR3 main memory slots and each with a single processor socket.
This box has the widest variety of Power7 processor options among all of the machines announced thus far. One option has six-core Power7s running at 3.3 GHz, another uses eight-core processor cards that run at 3 GHz or 3.3 GHz. There is a top-end machine that only comes with four processor cards with all 32 cores turned on and running at 3.55 GHz. There seems little doubt that this box will carry the heftiest price.
The Power 750 offers from 8 GB to 512 GB of main memory expansion, with a maximum of 128 GB per processor card using 8 GB DDR3 DIMMs. The box has three PCI-Express and two PCI-X slots peripheral slots and a single GX+ adapter slot, which is used to hook remote I/O drawers (based on a modified InfiniBand link that IBM calls 12X) or graphics cards into the machine. The Power 750 can have four 12X I/O drawers using PCI-Express slots or twice as many using PCI-X drawers. With all of the I/O drawers in the box, the Power 750 can have 584 disk or SSD drives directly attached to it.
The Power 755 is a version of the Power 750 server that is tweaked specifically for supercomputing workloads (and maybe for parallel database clusters running IBM's DB2 PureScale software, but the company has not said). The Power 755 only comes with the four processor cards in the box loaded with 3.3 GHz cores and all 32 cores are activated. This machine can only have 64 GB of memory per processor card, however, which means memory tops out at 256 GB. Other than that and the fact that this machine only supports AIX and Linux, it looks just like a Power 750.
The 770 and the 780
The Power 770 is a version of the Power 750 chassis that has two disk bays removed and the NUMA/SMP clustering bus added in. The Power 770 server node also has two GX++ slots per node, which means it can support a lot more 12X I/O drawers and therefore a lot more peripherals. Each Power 770 server node can have six disks or SSDs and has six PCI-Express slots. With the maximum of 16 12X-based I/O drawers, the machine can support 184 PCI-Express slots across four server nodes and 1,320 disk or SSD drives.
The Power 770 nodes have two flavors of processor cards: one using six-core Power7s running at 3.5 GHz (with 12, 24, 36, or 48 cores activated) and another using eight-core Power7s running at 3.1 GHz (with 16, 32, 48, and 64 cores activated). Main memory on the machine spans from 32 GB to 2 TB. To get memory capacity up to 1 TB means dropping the memory speed from 1.33 GHz down to 1 GHz, and going up to 2 TB means dropping down to 800 MHz. For some workloads, the lower speed of the memory will negate the extra capacity benefits.
The Power 780 is essentially the same machine as the Power 770 with three changes. First, it uses processor cards that have two sockets per card instead of one, which means it has double the processor cores. (However, the memory slots stay the same at 16 per processor card and the maximum main stays at the same 32 GB to 2 TB range per machine).
The second change is that it comes in the same enterprise-class, green-striped chassis that the Power 595 and System z mainframes have. (It has the skin of a mainframe, but the guts of a NUMA cluster with an architecture that IBM has been developing for a decade and selling for six years.) The other big change is the machine only has one set of processor cards, but they have two operational modes. In MaxCore mode, as IBM calls it, each node in the Power 780 cluster has four processor cards for between 16 and 64 cores running at 3.8 GHz, depending on if you buy one to four nodes.
If you happen to have a workload, like an OLTP system, that would do better having fewer cores running at a higher speed, you flip a switch in the microcode, reboot the system, and when it starts up you run in TurboCore mode. In this mode, the cores run at 4.1 GHz, but only half of them turn on. Those remaining cores in the system have access to both memory controllers on the Power7 chips and its full 32 MB of embedded DRAM L3 cache memory. For database workloads, TurboCore mode can boost performance by 20 per cent over MaxCore mode on the same physical machine.
IBM is not publishing pricing information on the machines yet, but Handy says that the memory price cuts that IBM made on Power6 and Power6+ systems back in November, where it cut DDR2 memory tags by between 28 and 70 per cent, were in fact setting the prices on older memory to the same level as IBM expected to charge for DDR3 memory on the Power7-based servers.
As for the systems themselves, IBM's plan is to hold prices roughly the same as the prior Power6 and Power6+ systems and give customers the extra performance. "This is very aggressive price/performance for us, and we are striking while the iron is hot," Handy says.
All of the Power7 machines announced today can support the current AIX 6.1 release as well as the earlier AIX 5.3 release. Customers using i/OS are going to have to move up to the i 6.1.1 interim release that was announced last quarter, and to fully exploit the Power7 feature set, they will have to wait to see i 7.1 later this year. (The word on the street is that i 7.1 will be available in the third week of April, but IBM did not confirm this).
Red Hat Enterprise Linux is not supported on these Power7 machines, which is a bit odd, but apparently IBM and Red Hat are working on it. Novell's SUSE Linux Enterprise Server 10 SP3 and 11 will run on the machines today. IBM plans to start shipping the Power 750 and 755 servers on February 19, The larger Power 770 and 780 machines will ship on March 16. ®
IBM Powers Up For Server War
Andy Greenberg, 02.08.10, 12:00 AM EST
As the Oracle-Sun combo heats up hardware competition, IBM's Power7 servers aim to dominate.
Oracle and IBM's knife-fight over high-end enterprise hardware is about to begin--and IBM intends to bring a cannon.
IBM ( IBM - news - people ) plans to announce Monday its first Power7 servers, a long-awaited line of Unix machines that will integrate new chips and software. Big Blue is initially only releasing its mid-range Power7 servers, with both higher- and lower-performance machines to follow later in the year. But IBM says that even the mid-range Power7, the result of three years and $3.2 billion of research and development investment, will squeeze 64 processing cores into each server. It will also double the speed of each of those cores while quadrupling their power efficiency.
IBM's Ross Mauri, manager of the company's Power group, says the servers will be aimed at its "smart infrastructure" customers--those doing real-time analysis of vast amounts of data to optimize complex systems like traffic or water and electricity distribution.
"We're making hardware that was designed to meet the massive scale of these 'smarter planet' projects," says Mauri. One test customer over the last year has been San Mateo, Calif.-based eMeter, which will resell Power servers to manage the data flowing from its Internet-enabled electricity meters in consumers' homes.
But as Oracle ( ORCL - news - people ) completes its integration of Sun Microsystems ( JAVA - news - people ) and aims Sun's high-end servers at IBM customers, Forrester Research analyst Brad Day says a more important factor may be Power7's ability to compete with a wide range of other servers, both low-end x86 machines and high-end Unix hardware.
Unlike Power6 servers, Power7 machines can do the sort of fast-paced transaction processing needed by financial firms, complex analytics from simultaneous data sources or perform high "throughput" computing, including crunching the data-intensive models used in simulations like genomics or weather prediction. "This is the first time they've designed a system that's equally competitive in all these different workloads," says Day. "I'd say they're 18 to 24 months ahead of their competition."
IBM's Mauri pits those versatile machines head-to-head against Sun's offerings: "Sun has their Niagara line, which is throughput computing with lots of cores. But if you want to run transactional computing, they'll try to sell you SPARC," he says, referring to another line of Sun servers. "We have one architecture that's heads-and-tails above both those systems."
Big Blue's new systems aren't cheap: The servers IBM is initially releasing start at $30,000 in their simplest configuration and range up to $1 million.
But those machines likely will help IBM solidify its hold on the high-end server market. The company holds about 40% of market revenues for Unix servers, compared to less than 30% for its biggest competitors, Sun and Hewlett-Packard ( HPQ - news - people ), according to tech tracker IDC. That's a massive switch since the beginning of the last decade, when IBM had less than 20% share and Sun held close to 36%.
Part of that success has been IBM's willingness to foot the bill for companies to migrate their software from other platforms to its Power systems, and even offer discounts based on the value of their competitors' legacy hardware. "They're essentially putting a bounty on Sun and HP," says Forrester's Day.
Given its success at the high end of the hardware spectrum, IBM's larger threat may be the inevitable improvement of commodity servers built on low-end Intel ( INTC - news - people ) and AMD x86 chips.
But Day says that IBM's virtualization software, what it calls PowerVM, allows customers to consolidate their physical x86 servers into virtual machines that can be packed into one much larger, more efficient machine.
By virtue of that software and Power7 servers' sheer size, the new systems could give IBM a leg up on both its low-end and high-end competition. "Although it competes mainly with HP and Sun's high-end servers, Power7 allows them to fire missiles into the x86 space," says Day. "You can clear out a hundred x86 servers and replace them with three of these."
As the Oracle-Sun combo heats up hardware competition, IBM's Power7 servers aim to dominate.
Oracle and IBM's knife-fight over high-end enterprise hardware is about to begin--and IBM intends to bring a cannon.
IBM ( IBM - news - people ) plans to announce Monday its first Power7 servers, a long-awaited line of Unix machines that will integrate new chips and software. Big Blue is initially only releasing its mid-range Power7 servers, with both higher- and lower-performance machines to follow later in the year. But IBM says that even the mid-range Power7, the result of three years and $3.2 billion of research and development investment, will squeeze 64 processing cores into each server. It will also double the speed of each of those cores while quadrupling their power efficiency.
IBM's Ross Mauri, manager of the company's Power group, says the servers will be aimed at its "smart infrastructure" customers--those doing real-time analysis of vast amounts of data to optimize complex systems like traffic or water and electricity distribution.
"We're making hardware that was designed to meet the massive scale of these 'smarter planet' projects," says Mauri. One test customer over the last year has been San Mateo, Calif.-based eMeter, which will resell Power servers to manage the data flowing from its Internet-enabled electricity meters in consumers' homes.
But as Oracle ( ORCL - news - people ) completes its integration of Sun Microsystems ( JAVA - news - people ) and aims Sun's high-end servers at IBM customers, Forrester Research analyst Brad Day says a more important factor may be Power7's ability to compete with a wide range of other servers, both low-end x86 machines and high-end Unix hardware.
Unlike Power6 servers, Power7 machines can do the sort of fast-paced transaction processing needed by financial firms, complex analytics from simultaneous data sources or perform high "throughput" computing, including crunching the data-intensive models used in simulations like genomics or weather prediction. "This is the first time they've designed a system that's equally competitive in all these different workloads," says Day. "I'd say they're 18 to 24 months ahead of their competition."
IBM's Mauri pits those versatile machines head-to-head against Sun's offerings: "Sun has their Niagara line, which is throughput computing with lots of cores. But if you want to run transactional computing, they'll try to sell you SPARC," he says, referring to another line of Sun servers. "We have one architecture that's heads-and-tails above both those systems."
Big Blue's new systems aren't cheap: The servers IBM is initially releasing start at $30,000 in their simplest configuration and range up to $1 million.
But those machines likely will help IBM solidify its hold on the high-end server market. The company holds about 40% of market revenues for Unix servers, compared to less than 30% for its biggest competitors, Sun and Hewlett-Packard ( HPQ - news - people ), according to tech tracker IDC. That's a massive switch since the beginning of the last decade, when IBM had less than 20% share and Sun held close to 36%.
Part of that success has been IBM's willingness to foot the bill for companies to migrate their software from other platforms to its Power systems, and even offer discounts based on the value of their competitors' legacy hardware. "They're essentially putting a bounty on Sun and HP," says Forrester's Day.
Given its success at the high end of the hardware spectrum, IBM's larger threat may be the inevitable improvement of commodity servers built on low-end Intel ( INTC - news - people ) and AMD x86 chips.
But Day says that IBM's virtualization software, what it calls PowerVM, allows customers to consolidate their physical x86 servers into virtual machines that can be packed into one much larger, more efficient machine.
By virtue of that software and Power7 servers' sheer size, the new systems could give IBM a leg up on both its low-end and high-end competition. "Although it competes mainly with HP and Sun's high-end servers, Power7 allows them to fire missiles into the x86 space," says Day. "You can clear out a hundred x86 servers and replace them with three of these."
Sunday, 7 February 2010
Caught in middle-income trap
Caught in middle-income trap
By Dr FONG CHAN ONN
A graduate teacher starts at RM2,500 per month in Malaysia, compared to RM6,196 in Singapore and RM15,661 in Hong Kong. Malaysian wages have fallen behind partly due to the gross divergence between the suppressed Malaysian CPI and that of the world.OVER the last few months, there has been much discussion on the issue that Malaysia has been caught in the middle-income trap. In this article, I will discuss the rationale on why Malaysia has been caught in this dilemma, and some of the steps we need to take to emerge as a high-income economy.
"Many countries caught in the middle-income trap have deliberately jump-started their economy through a high wage policy" DR FONG CHAN ONNHowever, subsequent attempts to further deepen our industrialisation process met with mixed results; and Malaysia’s economic well-being generally remained stagnant, while many other countries galloped away under the scenario of a rapidly expanding world trade.
This is because of the following factors:
Price controls
In 1946, the colonial government enforced price controls in Malaya to avoid economic hardships after World War II. This policy holds until this day.
Price-control items include basic necessities such as rice, flour, sugar, fertilisers, milk, chicken and even bus and taxi fares. Because of controls, these commodities are much cheaper in Malaysia compared to outside.
For example, as of December last year, a kilo of raw sugar in Malaysia was RM1.35, while the world price was RM2.20; that of rice is RM2.75 per kilo compared to world price of RM6.75.
Since basic necessities constitute a large component of the Malaysian CPI, the cumulative effect of price controls for over 60 years has been a gross suppression of our CPI compared to world CPI (see Figure 1).
This, in reality, is the major reason why since the 1980s, Malaysian wages have fallen behind wages of the rest of the world (see chart on Page 28). As an example, a graduate teacher starts at RM2,500 per month in Malaysia, compared to RM6,196 in Singapore, and RM15,661 in Hong Kong.
Besides restraining Malaysian wages, price controls also severely distort the domestic economic factor proportions, resulting in many factories using non-efficient economic production processes. With diesel and fuel prices controlled, and workers’ wages suppressed, manufacturers choose to use more fuels and labour as inputs – instead of more machines – resulting in low-quality Malaysian products and, of course, low productivity growths.
Subsidies
Subsidies began in 1961 under the Control of Supplies Act 1961. Subsidised items include petrol, gas, sugar, rice and other basic items.
In the 1970s, when the price of oil was under US$12 per barrel, petrol subsidy was a bearable cost to the Government. However, with the present high oil prices (over US$75 per barrel), this has become a disastrous predicament for the Government to continue bearing.
As Figure 2 shows, the cost of subsidies has ballooned from 3% of government operating expenditure in 1998 to almost 30% in 2008!
The high cost of subsidies in turn restrains the Government’s ability to upgrade infrastructures such as public transport. It also retards the Government’s ability to provide competitive incentives for attracting high-income activities into the country.
Agriculture sector drag
The dominance of oil palm and rubber in the agriculture sector is unfortunately a significant drag on the nation’s ability to leapfrog into a high-income economy.
Given the plantation terrain, oil palm harvesting and rubber tapping remained manual in nature and (unlike grape or wheat harvesting) not easily mechanised. Up to this day, they remained as low-wage activities, fossilising our dependence on foreign labour (about 300,000) for the continued “vibrancy” of the plantation sector.
The unavoidable presence of these foreign workers in plantations also meant that many labour-intensive manufacturing operations could still continue to exist in the countryside (even in face of local worker shortage) because of the easy “mobility” of these foreign workers from estates to factories. This also means that it is very difficult for the Government to disallow or curtail foreign workers in non-plantation sectors, when it sanctions such a large presence of foreign workers in plantations.
The cumulative effect is that there are now about 2.3 million low-skill foreign workers in Malaysia, making up about 20% of the workforce. They are in the manufacturing, petroleum, construction and domestic-help sectors. Lately, they have also penetrated into retailing, food and beverage, tourism and hotel industries.
The foreign-based Electrical and Electronics (E & E) firms have already declared, in their dialogue sessions with the Government, that they would be forced to move out if foreign workers were to be limited or stopped! This argument, if accepted, will mean that our economy could remain in the middle income trap for the foreseeable future.
Where do we go from here?
South Korea’s GDP per capita is US$16,450, Singapore US$34,346, Hong Kong US$29,559, while Malaysia is still at US$7,469. It must be remembered that in the early 1970s, we were at parity with these countries. In five years’ time they would be even further ahead. What are the bold steps we need to undertake to enable us to leap out of this middle income trap?
I will attempt to elaborate on some of these steps:
Phasing out subsidies and price controls
Price controls and subsidies have created artificial market prices that distort the domestic factor proportions and impede economic efficiencies. The Government has to be bold to find ways to phase out price controls and subsidies; maybe not all at once but over a time frame of say five years. Malaysia is a small country and we cannot live in isolation from the rest of the world economy.
Petrol subsidies, in particular, should be removed within one to two years; while extensive information campaigns are carried out to enable motorists to adjust to living within the context of petrol prices being set in accordance with the world crude prices, as is the practice in many other countries.
In conjunction with the phasing out of subsidies and price controls, the Government must introduce a transparent system of social safety net, providing welfare assistance to the needy, the disabled, the aged, the unemployed and the poor. A coupon-system (together with MyKad) can be introduced where those in need are given subsidies for basic necessities and other essentials such as petrol.
Of course, this implies the need for the Government to create a nationwide data-base of those in need, not unlike the registration system for welfare payments, but more comprehensive in nature taking into account employment status and also proving channels for verification and counselling.
High wage policy
Malaysian wages have been suppressed by market factor distortions for too long. The Government should encourage our wages to be pushed up in line with the rest of the world. When the rakyat can take home more pay, they are then better enabled to adjust to the reality of world prices that will be felt when controls and subsidies are phased out.
Many countries caught in the middle-income trap have deliberately jump-started their economy through a high wage policy. Singapore is a good example; in the 1980s, its economic progress stagnated and the Singapore Government deliberately compelled companies to increase their wages by 50% or more. Though painful at first, this ignited “a second industrial revolution” in Singapore when companies became much more capital-intensive and focused on high-end manufacturing and financial activities. Today, it is a vibrant economic hub of Asia.
We could introduce a similar high wage policy by initially requiring vulnerable sectors such as plantation and agriculture, labour-intensive manufacturing, construction and services (such as restaurants and hotels) to have decent minimum wages.
The plantation companies, in particular, should be required to pay higher wages to attract more Malaysians to work in this sector.
As an example, the 2008 Annual Return of the Asiatic Group – a typical mature plantation company – shows that its total wage payment (RM83mil) constituted only 18% of its before tax profits (RM456mil); and it can certainly even double its wage bills and still remain extremely profitable!
Employers would then have to use more equipment in the new scenario; many of our skilled workers who are now in Singapore can then be enticed to return to these higher skill positions, and in the process uplift the productivity of our economy. The multiplier effects of this would be translated into higher wages for the supervisors, managers and other professionals as well.
Innovative incentives for high-tech activities
The traditional incentives offered by Malaysia in the form of pioneer status and capital investment allowances are not attractive anymore. High-tech start-ups are risky ventures; they need large capital, and hence access to venture capital and government assistance. They also need speedy Internet access and rapid logistics.
They cannot work in an environment where restrictions are placed in terms of equity ownership or employment of expatriates. They, most of all, expect rapid decision-making by us in processing their applications. In early 2000, the Indian information giant Infosys wanted to invest in Malaysia and sought approval for their expatriates to work here; our hesitancy and delay in decision-making caused them to relocate to Mauritius!
We should follow the world trend, and be rapid, decisive and agile in our engagement with high-tech entrepreneurs. We have to introduce innovative incentives to attract them to come here. This includes the offer of cash grants (as a form of venture capital), and R & D research grants to companies to set up their bases here.
In keeping with the common practice of many other countries, the Government must also be willing to offer work permits and permanent resident status to highly qualified scientists and other highly educated individuals to entice them to work in Malaysia not only as a second base but also as a second home.
IT infrastructure and public R & D centres
Malaysia was among the first to recognise the importance of IT by the establishment of our Multi-Media Super Corridor in 2001. But other countries have since superseded us in IT infrastructure. Consider this: our Internet download speed is only 2.2 Mbps, compared to South Korea’s 23.6 Mbps and Singapore’s 8.0 Mbps; our broadband penetration rate is only 30% compared to South Korea’s 97%!
Entrepreneurs now expect to be able to work through their notebooks while commuting in rapid trains and cars. They expect to be able to do video-conferencing while on the move. Our current download speed does not allow for these, and more importantly does not allow the functioning of many of the new IT applications.
The Government needs to quickly bring the state of our IT infrastructure up to parity with the global standard as a precondition for pushing Malaysia towards a high-income economy.
Further, one of the most effective methods for rapid societal debuts of new scientific ideas and innovations is the availability of public R & D centres for niche areas, where high school and university students can be encouraged to experiment with their ideas.
This was how Steve Jobs was stimulated to design the first Apple personal computer in the 1980s in Silicon Valley. And a major reason for the success of the present Korean film industry is the Seoul Animation Center; a centre where Koreans who have interest in animation for movies, computer games, or digital advertising could drop in, play around with their scripts and hopefully end up with viable commercial products.
The Government should follow this trend by setting up R & D centres in 3-D Animation, Computer Accessory Inter-face, Micro and
Leverage on Malaysian professionals and experts overseas
According to an estimate by MEF, there are at present more than 500,000 Malaysian professionals working abroad; and they are in major cities such as New York, London, Paris, Tokyo, Beijing, Hong Kong, and Singapore working and doing research in areas like medicine, financial services, engineering, accountancy, logistics, construction, venture capital and other services.
In my interaction with many of them, they said that they very much want to contribute to Malaysia’s progress. Given the right conditions, I feel that they could be persuaded to set up base here. Unfortunately, often times, we have not engaged them sufficiently.
As an example, the renowned UK liver transplant surgeon Datuk Dr Tan Kai Chah wanted to set up base in Malaysia but could not do so because, as a Malaysian, he was required to do a compulsory three-year government service. Singapore, having gotten wind of this, headhunted him. His liver centre in Singapore is now very much sought after by patients near and far.
Learning from this, we should attract our Malaysian professionals to return to Malaysia, by the Government setting up a Special Group to identify them and then engaging those who are interested to return or at least set up base here.
This engagement should be done discreetly so that their individual requirements can be assessed and met, and their problems resolved. If their foreign spouses want to work, if their children need special education, if they need R & D grants, etc, all these we should be able to resolve. Then and only then can we gain leverage on the large pool of brainpower that we already have.
We should act quickly in this respect, for such talents are being aggressively headhunted by other governments. The Government should do all it can to ensure that our professionals, with their wide international exposure, will end up on our shores and not become other societies’ assets.
Strategic location
Kuala Lumpur’s location at the heart of Asean and its multi-cultural environment enhance its attraction for many emergent high-income activities. We have often forgotten that KL is only 300km away from Singapore and it also has access to deep seaports and airports. Fortunately, AirAsia did not forget this and, riding on the wave of budget air travel, has developed KL as the low-cost air hub of Asia-Australia. With our current lost-cost structures, KL could similarly be developed into the low-cost shipping and logistic hub of Asia.
The Government should also aggressively promote KL as the focal centre for business transactions between East (China, Korea and Japan) and West (India and Middle East) Asia.
A few enterprising Taiwanese direct-sale companies have already established processing centres and warehouses in Malaysia for export of their products to the Middle East because Malaysian-labelled products are more easily accepted in these markets. This is only the beginning of a new wave of opportunities, as East and West Asia get better connected.
Green energy
Flooded with sunshine, strong winds and free from natural disasters, Malaysia is an ideal location for green renewable energy R & D and manufacturing. Renewable green energy has to be promoted to be Malaysia’s new strength. The world’s top three solar companies have now located themselves in Malaysia. One of them (Sun Power) is building the world’s largest solar power manufacturing plant in Rumbia, in my constituency in Malacca.
The Malaysian Industrial Development Authority (Mida) must work hand in hand with the solar companies to come up with incentives and a strategic policy to match that of China, which is currently the world leader in solar power. We must seize this opportunity to nurture a cluster group of ancillary suppliers to provide materials and supporting services to the solar companies, just as we did when we started with E & E in 1972. We must not miss this boat to build a “Solar-con” manufacturing base to equal that of the silicon hub of Penang.
Medical care and pharmaceutical trials
With an aging population all over the world, high quality medical care has become an emergent high-value economic sector. Highly-trained Malaysian medical specialists are working by the hundreds in Singapore, London and Dublin. More importantly, they are highly respected in their fields. They could and should be encouraged to set up base here and transform Malaysia into a world-class international medical centre. The big advantage is that our cost is half that of Singapore, and one-third of that of Hong Kong, the United States and London.
If we reorganise ourselves, we can be among the top in this area. The urgent necessity is for the Government to reconsider compulsory government service for recognised Malaysian medical experts. Isn’t it better to allow them, already in their late 30s, back to create employment and build up our medical base, as opposed to rigidly requiring them to work for three years in government service at great personal and family sacrifice to themselves?
Malaysia, with our multi-ethnic population and extensive bio-diversity, is an ideal place for R & D in pharmaceutical products, particularly in the conduct of trials for new drugs, before their formal acceptance by the authorities. This can be in the area of cancer, Alzheimer’s, osteoporosis, bone conditioning, and heart diseases. The Health Ministry and Mida should quickly formulate a new strategy to attract pharmaceutical companies to seriously consider Malaysia as their new destination for R & D and trials.
Oil and gas activities
Petronas is known worldwide for being a successful national petroleum company. Petronas has done really well for the country in terms of generating oil and gas revenue from both Malaysian and non-Malaysian fields. Unfortunately, unlike the E & E sector, up-stream oil and gas production has not resulted in the emergence of a corresponding vibrant downstream oil and gas sub-sector. We are still very dependent on foreign oil and gas ancillary suppliers for many of the specialised downstream services, such as rig and platform maintenance and repairs, safety training, search and rescue, and other related R and D activities.
Kemaman, Miri and Bintulu are now vibrant oil-related towns. Petronas can play a more significant nurturing role and spin off more of these related activities (which are now sub-contracted to foreign suppliers) to independent Malaysian entrepreneurs of all races, so that we can begin to transform these towns into mini Houstons. Besides its economic benefits to the country, this would also greatly endear Petronas to the hearts of the average Malaysians.
In this article, I have argued that Malaysia has been inhibited from fulfilling its true potential by distortions (in the domestic economy) caused by various policies since independence; by phasing out these distortions and focusing on our strengths in new areas, we can and would emerge as a high-income economy in the not too distant future.
Datuk Seri Dr Fong Chan Onn was Prof of Applied Economics and Dean of Faculty of Economics and Administration, Universiti Malaya. He served in the Government as Deputy Minister of Education (1990-1999) and as Minister of Human Resources (1999-2008). Currently, he is the MP for Alor Gajah.
CALIFORNIA IS THE FIRST FAILED STATE, etc
1. CALIFORNIA IS THE FIRST FAILED STATES of AMERICA:
Watch Intelligence Debates in Video: http://vimeo.com/8876485
2. USA banks failed list:
http://www.fdic.gov/bank/individual/failed/banklist.html
Watch Intelligence Debates in Video: http://vimeo.com/8876485
2. USA banks failed list:
http://www.fdic.gov/bank/individual/failed/banklist.html
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