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HP customers report server shipping delays

After the economic slowdown comes a server shipping slowdown, HP customers say. Many are experiencing delays in receiving rackmount and blade form ProLiant servers, although the cause and extent of the problem are unclear.

Hewlett-Packard appears to be having trouble delivering some ProLiant servers in a timely manner. Shipping delays...

affect both rackmount and blade form factors purchased direct and through the HP channel, according to anecdotal reports from IT professionals.

David Palais, owner of Peritus Technology Group in San Diego, Calif., reported that a smaller client ordered HP servers from CDW earlier this summer, "but they had nothing." All the CDW reps could offer "was an odd box with limited disk and memory, sitting on a shelf," which the customer ended up buying "out of desperation."

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It's unclear whether such delays are pervasive, or are due to a shortage of components along the supply chain, or poor demand forecasting on the part of HP. And because so much HP equipment is sold through the channel, it's hard to separate any HP inventory problems from that of its resellers.

HP, for its part, denies any significant shortages or internal changes that could impact delivery times. Any delays are "probably coincidental" and "a function of [customers'] individual orders," said Jim Ganthier, HP vice president of marketing for industry standard servers.

But whatever the cause, the net result is the same: disruption of customers' business processes.

Stefan Shneider, a storage manager at Swiss health insurance firm Helsana, said it took HP six weeks, up from the promised four, to deliver 20 six-core Intel Nehalem blades for its c-Class BladeSystem chassis. And when HP finally did get around to delivering them, the blades arrived a day early.

"They said they were going to deliver on a Friday, but they actually delivered on a Thursday – all our processes were in place for the Friday [delivery]," Schneider said.

Still, other data center customers said that the HP server pipeline is flush with everything they need, except the latest and greatest Intel "hexacores" – Intel's 5600 series "Westmere" chips that launched in the first quarter of 2010.

A systems administrator at a large HR consulting firm who did not want to be named said his firm orders and installs about 40 dual-socket quad-core BL460c blades per week -- without a hitch. "We order them and get them in a matter of days," both directly from HP as well as through resellers like CDW and others. But requests for six-core-based systems are deemed custom configurations, and have ship times of at least six weeks, he said. "You just can't get them."

Intel is probably not to blame for the apparent shortage of Westmeres, said Shane Rau, IDC research director for computer, networking and storage semiconductors.

One of the reasons we went to blades in the first place was for shorter implementation times.
Kent Altena, technical engineer at FBL Insurance in Iowa,

From the first quarter launch into the second quarter when shipments ramped, Intel's Westmere EP processor shipments increased 1300%, Rau said via email. "That speaks to some hefty demand for these processors, but also that Intel was ready with supply," he noted.

Likewise, Rau dismissed another usual suspect in shipping delays: memory.

"[Memory] pricing was high for a while, but the market DRAM is in decent supply-demand balance now, so pricing is not spiking, which would be the case if there were backlogs," Rau said.

Others point the finger at Asian suppliers and the recession. "People were hinting that because of the economic slowdown, factories had depleted inventory and vendors were nervous about restocking, and ordered based on conservative estimates," said Peritus' Palais.

To that point, HP's Ganthier pointed out that business for x86 servers is booming, both for the industry as a whole and for HP in particular, which experienced growth of 54% and 31% in the past two quarters. "Perhaps the industry is starting to suffer from inventory," he said. However, because of HP's size and scale, "if that were the case, we would suffer from this less than anybody else."

Slower guaranteed ship dates
Whatever the cause, it would appear that HP is aware that it cannot guarantee deliveries on servers the way it has in the past. For several years now, HP has delivered blade servers in three to five days, said Kent Altena, technical engineer at FBL Insurance in West Des Moines, Iowa. But now the firm has received a letter from HP stating that it can no longer fulfill shipments in that timeframe, and can only guarantee shipments within 10 business days.

Longer wait times defeat the purpose of blades. "One of the reasons we went to blades in the first place was for shorter implementation times," said Altena. "We like to be just-in-time just as much as they do."

Shipping delays and product development stand to have a greater impact on FBL's relationship with HP than recent scandals such as Mark Hurd's sudden resignation earlier this month, Altena said.

The ability to quickly and accurately fulfill customer orders is paramount.

"The likelihood we would boycott HP based on the personal antics of their CEO is not very high," Altena told SearchDataCenter.com earlier this month. "Where I would hop off them is with things like the current shipping slowness, or if they were to lag in releasing a [converged network adapter] for the [ProLiant] G7," he said.

For HP customer MLS Property Information Network, lack of predictable ship times was one factor in switching from "built to order" (BTO) or "config to order" (CTO) processes in which HP ships a fully built and tested system. Instead, MLS is ordering "base models with options" that require on-site assembly.

"I used to love CTO," said Matt Lavallee, but he stopped buying pre-configured systems two years ago after several protracted delays. "About one-third of the time, some component [shortage] would stop it up." By ordering a base model and building systems himself, delivery times are more predictable, he said. "I'll gladly trade the convenience [of CTO] for being able to order the system and get it on time."

Just say no to just-in-time
The way HP organizes its server business leaves it open to delays. Compared to Dell and IBM, which both follow a build-to-order model, HP offers dozens of SKUs for each server model, each with its own characteristics, said Jed Scaramella, research analyst at IDC. The flipside, said Peritus' Palais, is that if HP's business forecasters predict demand wrong, "they're stuck with a model no one's buying." Or the reverse -- "if inventory dips, you're stuck waiting."

IT buyers can insulate themselves from the vicissitudes of vendors' supply chain and inventory woes by trying to plan projects in advance, Palais said. "I tell customers to try and plan out at least 30 or 60 days," and not the three to five days which has become the norm.

Buying servers well in advance has insulated HP customer A-Life Medical in San Diego, Calif., from substantial shipping delays this past year, said Harold Alston, manager of information technology. "We see delays of as much as three weeks on about 20% of our orders, but because we buy quarterly and stockpile our inventory, it really hasn't affected us," he said. The company purchases rackmount DL models through the channel and blades directly from HP, for a total of 10-12 servers per quarter.

But that kind of planning isn't always feasible or desirable. "Engineers don't like to buy too far in advance because by the time to go to purchase, a new model might be out," said Palais. Likewise, IT shops are often "in crisis because someone didn't tell them a new app was coming online. It all really depends on how well-organized the IT organization is."

Whatever the reason for delays, the problem belies HP execs' public claims that the company's huge buying capacity means it is first in line for all the major and cutting-edge components. Earlier this year, then-CEO Mark Hurd pointed out that HP represents a $70 billion supply chain, whose efficiencies should trickle down to the customer. "We want the lowest price, best quality, best availability. Price [alone] is not good enough," Hurd said.

Let us know what you think about the story; email Alex Barrett, News Director, at abarrett@techtarget.com, or follow @aebarrett on Twitter.

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