SAN ANTONIO, TEXAS -- Mike Yang is wearing a collared cotton shirt with short sleeves, and as he sits down, a tattoo on each arm tells you who he works for.
Quanta, the tattoos say.
Yang is a vice president and general manager at Quanta Computer, one of the Taiwanese companies at the heart of a quiet revolution in the world of cloud computing. For years, Quanta has said very little about its role in supplying a new breed of hardware to the data centers underpinning America's largest web services. But this week, the company is taking a step out of the shadows, launching an official subsidiary dedicated to selling data center hardware directly to companies in the U.S.
The news comes at a conference inside the Texas headquarters of Rackspace, the company that's second only to Amazon in the cloud computing game, and this is where Yang appears with his tattoos. As it turns out, they're only temporary tattoos. But the effect is the same. Quanta has finally announced its arrival as a company that sells its own hardware.
Traditionally, Quanta and other Taiwanese "original design manufacturers" built hardware on behalf of big-name American sellers such as Dell, HP and IBM. But in recent years, according to various sources who've spoken to Wired, Google, Amazon and other web giants have gone straight to these ODMs for custom-built data center gear, cutting the Dells and the HPs and the IBMs out of the equation. It's the beginning of a significant shift in the way many companies purchase hardware for running large online operations, with financial houses and oil and gas companies also exploring this new avenue.
At the behest of their customers, Quanta and other ODMs have traditionally said very little about this market shift. "Our business is more like an ODM," Yang says. "We're not supposed to disclose any customer information." But this is changing now that Facebook is openly sharing its practices -- and even its hardware designs -- with the world at large.
A year ago, Facebook revealed that Quanta was manufacturing the servers designed for its new data center in Prineville, Oregon, and the Taiwanese outfit found itself in the middle of the whirlwind that is the Open Compute Project, Facebook's effort to encourage open collaboration on new hardware designs.
Yang and Quanta still decline to name their customers -- other than Facebook. But Yang does say that the Taiwanese company has been selling servers, storage gear and networking switches to multiple web companies, echoing what others have told Wired, and on Wednesday, at a meeting of the Open Compute Project in San Antonio, the company unveiled its new US sales operation.
At the same time, a second Taiwanese ODM -- Wistron -- announced a similar U.S. subsidiary. Quanta built the first generation of servers in Facebook's Prineville data center, and Wistron built the second generation. According to Yang, Quanta's U.S. subsidiary -- known as QTC -- has been up and running for about five months. For the most part, it will sell off-the-shelf gear, and this will include Open Compute Project hardware, but Yang indicates that QCT will do custom designs as well -- when appropriate.
'Our Objective Is to Make Money'
Quanta was founded in 1988, and at first, it built notebooks on behalf of "original equipment manufacturers," or OEMs, along the lines of Dell and HP. But around the turn of the millennium, it entered the "enterprise" business, building servers and storage devices and other gear for data centers as well. Originally, it continued to serve OEMs with this gear, but at some point, it began building custom gear for the giants of the web as well.
"Our objective is to make money," Yang says, when asked if the company has built specifically for big web players. "If the requirements are reasonable and what we do it applicable and we're capable of doing it, our thinking is: why not?" In some cases, the web company would supply the designs. In others, the designs came from Quanta. Or the two might collaborate in designing gear, as Quanta did with Facebook.
According to J.R. Rivers -- an ex-Google engineer -- Google has built its own gear in tandem with various Asian manufacturers for several years, and he says that Google's original manufacturer was Quanta. Separately, James Liao, an ex-Quanta employee, has told us that Amazon, Facebook, and Microsoft have bought networking switches directly from ODMs in Asia.
Google has long gone straight to Taiwan for its own servers as well, and according to Liao, it's common knowledge that Amazon acquires servers in much the same way -- though Liao says he did not work in Quanta's server business.
The giants of the web have gone directly to Asia because this saves money -- but also because they need a new breed of stripped-down gear in building the infrastructure that runs their massive web services. Google and Amazon typically treat their infrastructure as a competitive advantage best kept secret from competitors. But Facebook has taken a different tack.
Clearly, the social networking giant is facing many of the same technical problems as Google and Amazon, and it too has gone directly to Taiwan for custom-built gear. But it has open sourced its designs, hoping to improve them -- and drive down prices even further -- by sharing them with others under the aegis of the Open Compute Project, or OCP.
On Wednesday, Facebook announced an official program that will certify companies to sell hardware based on the Open Compute designs, and QCT is among those who intend to be included in these OCP Solutions Provider Program. According to Facebook, other interested companies include ZT Systems and Hyve.
Hyve is a Fremont, California company that Facebook uses to test and complete the assembly of its servers after they're shipped from Asia. ZT Systems is a company based in New Jersey that apparently supplies custom-built servers to Amazon.
In short, the companies selling low-cost data center gear to the giants of the web are now reaching out to others too.
According to John Fruehe, director of product marketing for server and embedded products at AMD and a former business development man at the chip maker, it has traditionally been difficult for all but the largest web companies to purchase gear directly from the ODMs, because you had you buy in enormous volume and you had support the gear on your own. And Dell vice president of strategy Tim Maddox says that most companies still need the extra hand-holding you get from a big-name OEM. But Hyve, ZT Systems, and Quanta's OCT all say they're providing support as well.
A company like Hyve, Fruehe says, provides a middle ground between the ODMs and the OEMs. "You get a lot of the benefits you might get if you went straight to Taiwan," he says, "but you still the benefit from their engineers and support people -- at a lower price than what you get from an OEM."
This is what Yang and QTC aim for as well. "We design, we produce, and we sell," Yang says. "Who else in the world is in this position?"
