RLX Plans to Change Gears

As RLX Technologies Inc. moves forward with its plans to exit the blade server hardware business, a key challenge will be persuading a major OEM to adopt its Control Tower server management software suite.

In a blade market dominated by the likes of Hewlett-Packard Co., IBM and now Dell Inc., RLX late last month announced it was leaving the space it helped create almost four years ago to focus on its management software.

In a recent interview, CEO Doug Erwin said RLX's goal is to sell Control Tower through OEM deals with major server vendors that want to supplement their management software. RLX will offer Control Tower as a product that can plug in to other management software, such as Computer Associates International Inc.'s Unicenter or IBM's Tivoli products.

Erwin expects by March to announce a deal with a major hardware vendor, which will put aside some of its own management software and sell Control Tower, he said. Though he declined to name the vendor, he said his hope is that the move will compel others to follow.

Industry observers said RLX, of The Woodlands, Texas, had little choice but to make the move to software, particularly now that Dell has jumped back into the blade server space. However, some wondered if Control Tower offers enough unique features to persuade the larger systems makers to sign on.

"The problem is that there are not that many big server OEMs out there, and though Control Tower is a good product, it doesn't fill any obvious holes in the big OEMs' product lines," said Gordon Haff, an analyst with Illuminata Inc., in Nashua, N.H.

In 2001, RLX was among the first companies to offer blades, with its System 324. Since then, most of the major OEMs have followed, pushing the blade server market to an estimated $9 billion by 2008, according to IDC, of Framingham, Mass.

Erwin said the consolidating environment was the latest sign that the products are becoming increasingly commoditized.

"It's going to be a price war between the big boys, and we don't have the volume or scale to compete with the big boys," Erwin said. "A small software company can compete with a large software company because customers will bet on who they think has the best product. A small hardware company competing with a large hardware company has large hurdles to overcome in volume and scale."

RLX, which has already begun laying off many of the 115 employees it had before the announcement, will continue supporting the hardware in its installed base. Still, the move took some customers by surprise. ECI Conference Call Services LLC, in Wayne, N.J., has been using RLX's ServerBlades for about a year, said Chief Technology Officer B.J. Weschke.

"It's definitely disappointing," Weschke said. "I was fond of the whole package. With Control Tower coming with the hardware, there was no finger-pointing when something went wrong."

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