Intel launches Nehalem

This product is claimed to be the most revolutionary server product in 15 years but the bigger question is who will buy?

This product is claimed to be the most revolutionary server product in 15 years but the bigger question is who will buy?

Recessions are tough on innovators. If they sit back and do nothing, people will tell them that they are not growing because they are not innovating. And if they innovate, then companies whom they are targeting will tell them that they don't have budgets.

This is a situation that could face Intel, which launched the new Xeon processor 5500 series, which was earlier codenamed Nehelam-EP. Undeterred by the recession, Intel has set its targets on 2015, when it expects 15 billion devices to be connected to the Internetu2014and hopes that Intel processors will be playing a role in these devices.

Good performance

Technologically, the product appears sound. Intel had demos from both internal staff as well as external customers. They compared the performance of this chip against the earlier 5400 chip and showed impressive performance boosts. One particularly interesting demo concerned Real Image Media Technologies, which does digital processing for movies, which face an 11th hour crunch because new movies have to reach cinema houses for release every Friday.

The demo showed that the 5500 was almost twice as fast as the 5400, and since processing a full-length movie on a 5400 system can take 12 hours, doing it in six hours on a 5500 system is a great idea. Typically, this means that you can use half the systems to process the same number of digital movies that are distributed to various theatres in time for the Friday release.

Great expectations

Intel's sales director for South Asia, R Ravichandran, said that companies that invested in the new system may find a 9x performance boost, and reduce their annual energy costs by a staggering 90 per cent. While the Opex reduction is great, the question is this what of the initial Capex? What will CEOs and CFOs say? When I asked Ravichandran this question, he said that companies have an option of either spending their current IT budgets on upgrading or on maintenance and on electricity. Given this choice, he feels that companies that have not upgraded for a few years may be happy to upgrade. This could be because the increase in Capex may be balanced by a lowering of Opex.

M S Rajagopalan, VP, Real Image Media Technologies, who was invited by Intel to speak about his experiences, feels that companies can't stop completely. He points out that companies who would typically have invested in ten computing units in a good year may reduce it to five, but it is unlikely to be zerou2014and his rationale is that companies who are reducing the number of computing units are bound to want more processing power, and so the 5500 series has a good chance of success.

Global scenario

Since the recession is global, it would be interesting to see what is happening internationally with IT budgets. Gartner, which had earlier projected 5.8 per cent global growth, says that IT spending will increase by 2.3 per cent in 2009.

A Symantec survey of 300 network administrators found 62 per cent saying that IT budgets would either remain stagnant or shrink in 2009. And finally, a survey of 400 IT managers in the US and Europe conducted by TNS found that while cost cutting is happening, about four in 10 companies are allocating IT budgets for IT projects that support business growth.

Given this scenario, the Xeon could find the going tough because of the recession, but may still end up selling.

Demystifying Capex and Opex
Since the weather is heating up, let's use an AC for an example. Capex is what the AC costs and Opex is what the electricity costs. The question that CIOs, CFOs and CEOs face in terms of Capex and Opex is this I can save Rs 1,000 per month by replacing the old AC with a more energy efficient one, but it will cost Rs 10,000, so do I do it? If the decision is taken, then the Capex goes up by a one-time-investment of Rs 10,000, Opex falls by Rs 1,000 per month, and the payback for the system is 10 months. After the ten months are over, you get ROI or return on investment.

QUICK TAKE
>>Intel has launched its Xeon 5500 series
>>The new Xeon offers several enhancements over its predecessor Xeon 5400
>>But the question is will it do well in a recession year?