Released in 2002, Apple's (Nasdaq: AAPL) 
Xserve marked the end of the company's hiatus from the enterprise 
server market. Five years later, it is clear Apple has not given up on its ambitions to offer an alternative to Linux and Windows-based x86 servers. However, the fight for Apple is far from won.
Despite the Xserve's struggles, Apple has continued to expand the Xserve line and has rolled out new models in addition to the Xserve G4. January 2004 saw the arrival the G5 and in August 2006, the company launched an Intel (Nasdaq: INTC) Xeon-based Xserve.
With the line now in its fifth generation, with a Quad Xeon 64-bit Xserve on the market, the question is, who is buying the Xserve and who is not? Apple ardently argues its case for incorporating one or more of its servers into a corporate network . Naysayers, on the other hand, make a compelling case cautioning IT departments against such a move.
From 'Humble' Beginnings
In June 2002, when Apple launched the OS X-based, rack mounted Xserve, Apple CEO Steve Jobs said the company was "humble" as it entered the market.
"For everything we know, there are 10 things we don't know," he said at the time. As much as Jobs claimed the company did not know, and the company's lack of experience in the business community notwithstanding, reviewers called the Xserve was a serious contender.
Five years later, however, the market has all but shut the door on the server, Gary Chen, a senior analyst at Yankee Group, told MacNewsWorld. "I haven't followed the Xserve in depth, mostly because hardly anyone is using it, at least in the SMB (small and medium-sized business) and mid-markets. [It] could be different in the enterprise, but I doubt it.
"The world is moving towards two platforms -- Windows and Linux," he continued. "Unix will stick around for quite some time, but it's not growing. So I'm not sure where another platform like Apple would fit in an enterprise."
To Intel Inside
The fifth-generation Xserve is powered by the dual-core Intel "Woodcrest" Xeon processor, running at up to 3.0 GHz. The quad-core, 64-bit system provides performance up to five times faster than its predecessor, the Xserve G5.
"It is a major upgrade over the G5, with dramatically more memory bandwidth, dramatically more I/O capability and bringing PCI Express technology to the box," Doug Brooks, program manager for Xserve, told MacNewsWorld. The Xeon Xserve also incorporates new storage capabilities with support not only for Serial ATA (SATA) but also Serial Attached SCSI (SAS) hard drive technologies.
The latest version also sports new and expanded management capabilities above and beyond those offered in the G5 Xserve, which are important to education and business customers. With the switch to Intel, Apple joins other x86 servers; however, Brooks noted, the company has integrated the popular microprocessor into its unique design.
"Today, Xserve can support over 2 TB (terabytes) of internal storage," Brooks stated. "So for customers looking for departmental servers with a lot of storage there is an incredible value."
The fact that Apple owns the entire stack of its server platform -- from the hardware and software to the drivers and firmware -- is a real opportunity for Apple's customers, according to Brooks, because the company can tune the system to be easier to use with greater performance.
"That's a real highlight of Apple owning both the hardware and software," Brooks added. "So, in a way, we consider Mac OS X Server to be our killer application with incredible Unix-based, powerful core operating system with Apple's ease of use. We bring the ease of use a lot of people associate with our desktops to our servers."
Ease of use takes on special meaning, according to Brooks, since for many of Apple customers the Xserve is their first server.
A Windows and Linux World
The problem for Apple and the Xserve is still very much a niche market player, said Laura DiDio, a Yankee Group research fellow. While there has been a modest uptick in Macintosh adoption on the enterprise level, in terms of servers, DiDio concurred with Chen's assessment, adding that it is "a Windows and Linux world." Businesses are already committed, DiDio stated, and if they are not on Windows they have Linux or even Unix.
"It's not a pipe dream, because they have a 5 percent market share for desktops. But for servers, it's hard because there aren't as many Macintosh server applications. It has nothing to do with the technology. Apple has always had very elegant technology. The Mac OS desktop and server are built on Unix. They have very leading edge features."
Another hangup for CIOs and IT managers, according to DiDio, is the inability to justify the perceived costs associated with any Apple hardware. "They were high-priced, and you couldn't cost-justify it."
Just like the average car buyer, CIOs have to have a reason to abandon what they are currently using in favor of a different system, DiDio noted. Most people do not run out to buy a car until their repair bills are too much, the vehicle has been in an accident, or it is simply unreliable. CIOs are in a situation, where good enough is OK. In addition, it is very difficult to rip out and replace an entire infrastructure .
It will really take a lot for them to overcome their niche status, she continued. However, it is not inconceivable that with some good marketing , sales and incentives along the lines of what Apple has done for its desktops, Apple could move up one or two percent in the market.
"But if any company can do it -- it's Apple," DiDio stated. "I've never seen a company that's able to reinvent itself the way Apple has. If they were to really come out with some good prices, good promotional things, they could pick up a percentage point or two."
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