Intel’s Nehalem Drives Cloud Computing

Implications: Intel’s next-gen Nehalem processor ups the performance bar, making it increasingly difficult for AMD.  Server manufacturers and software vendors will also be impacted, positively or negatively, by this generation of processors, which will also provide further impetus to cloud computing.

Analysis: AMD has held an architectural advantage over Intel for the last several years, although Intel has been able to regain the processor performance crown despite these inherent limitations.  Intel’s method of accessing memory, the Front-Side Bus (FSB), is an archaic approach that has limited processor performance.  In addition, Intel’s quad-core offerings have been more single-core processors tied together than designed-from-the-ground-up quad-core processors.  AMD has offered an integrated memory controller and multiple cores on the same die for some time.

Intel’s Nehalem processor removes these barriers.  It is due out very soon on the desktop, followed by servers and mobile during the next few months.  For the first time, Intel is offering a processor with an integrated memory controller.  Nehalem will also offer four cores on the same die, with the Hyper-Threading (remember the Pentium 4 and Hyper-Threading?) architecture revived.  This means Nehalem will offer top performance for four application “threads” simultaneously, and possibly as many as eight threads under some circumstances.  Since Intel’s processor performance was already superior to AMD’s, this does not bode well for AMD’s future prospects.

The greatest impact of this architectural change, however, will be in the server market.  Desktop computers are rarely able to fully utilize four cores today, and with the new and improved Nehalem it becomes even less likely.  The actual performance lead Intel has thus becomes somewhat academic for most desktop computers, gaming being a notable exception.  Servers, by contrast, are able to fully utilize multiple cores.  They also tend to run very large applications that require more memory and thus the integrated memory controller is more of a factor.  This is a big reason why AMD has been able to maintain reasonable market share in the server market.  Both the integrated memory controller and Hyper-Threading will likely have much more benefit for servers, thus hitting AMD in one of their remaining strengths.

The full implications go well beyond AMD.  These processors will provide increasingly powerful small servers.  This is likely to impact the large server market even more, since many of the applications that previously required larger servers can now be handled by low-end, commodity servers.  Companies that derive much of their revenue from the low-end server market (Dell, HP) stand to benefit at the expense of those who focus more on high-end servers (Sun Microsystems). 

Applications vendors will also be affected.  Virtualization becomes ever more important as small servers become more powerful.  VMWare will benefit, but so will Microsoft, Citrix and even Virtual Iron.  With Nehalem, an amazing amount of computing power becomes available in a rack of blade servers.  This cries out for virtualization and is going to be a huge driver in the development of the “private cloud” computing model, where enterprises use virtualization tools to create their own internal compute cloud.