Intel to Increase Internet Presence with Server Farms

It seems those dancing technicians in brightly colored space suits want to branch out from the excitement of chip making. They've decided to try their hand at providing services for businesses that want to outsource a server operation or two.

Intel Corp. officials publicly brought up the notion of adding a services dimension at an April analyst briefing in New York. The company detailed plans to provide three server farms throughout the continental United States that will offer businesses a place to use as an Internet server location.

"What Intel will be providing are typically the kinds of services and activities that would happen outside of the firewall," says Robert Manetta, a spokesman for Intel. "This [program] is for companies who want to build their business and conduct e-commerce."

If companies have services already set up in their data systems that they would like to move to another location, Intel will provide the shelf space at one of its facilities. The operation will be handled by Intel’s Internet Data Services Division, headed by Jerry Parker. Parker used to run the chip manufacturing division for Intel. Manetta says the server farms will be run like factories. In fact, Intel refers to them as "bit factories."

The Intel-run systems could be tempting to some businesses. If they take the services they presently have running and move them to these facilities, their backbone will become an Intel backbone; their data center will be an Intel data center; and of course, their server will be an Intel server.

The idea for the server program came from an internal Intel unit called the New Business Group. The group's function is to identify areas that could become contributors to Intel’s bottom line, and the idea for the server farms was one such option.

Of the prospective server facilities, smaller operations will have about 2,000 servers and cost Intel close to $50 million to construct. The proposed larger option will consist of about 5,500 servers and cost close to $100 million. It was not specified what combination of large and small facilities Intel would start with. "[The server program is] something that we hope will add to our revenue stream," Manetta says. "It may help our processor core, but it's not designed for that."

The program will be a quarter billion dollar investment for Intel, but will the company see the return it wants? Scott Smith, president of the consulting company Tera Group, says the answer is not clear. "I wouldn't say there's a wave of interest [in service outsourcing] right now. In fact, I would say there's a lack of demand right now," Smith expounds. "Outsourcing e-commerce, yeah, because some businesses have to be up yesterday. But there's still the question of whether companies want to turn over the family jewels to an outsource provider. When you throw in the mix of Internet connectivity, it makes it all the more tricky because the paint isn't really dry on middleware right now."

One thing that Intel's Manetta wanted to make clear is that Intel isn't is an application service provider. That isn't an industry Intel is focusing on, although that could be a function of the servers housed at the facilities. Two server farms will be in California: one at Intel's development facility in Falston and the other across the street from its main office in Santa Clara. The third site has not been announced. The company plans to build more server farms overseas by next year.

"The scary part is that these decisions are being made with little assurance of the return," Tera's Smith says. "What I think will happen ... is that there's going to be incremental outsourcing of things you don't already have, such as messaging, knowledge management, and sales force automation -- applications that already lend themselves to lighter distributed networks."