In the Hyve: Server racks bound for Facebook's data centers (Photo: Synnex)

If you drive down highway 880 from Oakland, California, take an exit about 30 miles south, and snake past a long line of car dealerships, you’ll find an ordinary office building that belongs to a company you’ve never heard of. And if you’re allowed to walk inside — past the receptionist and the cubicles, through another door, around the security guard, and into the warehouse — you’ll find some technicians assembling and testing server hardware for some of the biggest names on the internet.

This includes Facebook and Rackspace and at least one or two other names that even your grandmother knows about it.

The warehouse belongs to a company called Synnex — an outfit that spent the last 30 years buying and selling computers, hard drives, chips, memory, and all sorts of other hardware. But Synnex isn’t the one assembling and testing all that internet server hardware — at least not officially. Those technicians work for a brand new Synnex division called Hyve.

Hyve Solutions was created to serve the world’s “large-scale internet companies” — companies increasingly interested in buying servers designed specifically for their sweeping online operations. Because their internet services are backed by such an enormous number of servers, these companies are looking to keep the cost and the power consumption of each system to a minimum. They want something a little different from the off-the-shelf machines purchased by the average business. “What we saw was a migration from traditional servers to more custom-built servers,” says Hyve senior vice president and general manager Steve Ichinaga. “The trend began several years ago with Google, and most recently, Facebook was added to the ranks of companies who want this kind of solution.”

The net’s biggest names have caused a tectonic shift in the worldwide server market. These are the companies that need more servers than anyone else on the planet, and they’re moving away from traditional server makers such as Dell and HP, embracing Hyve, various manufacturers in Taiwan, and other little known companies that can help them build servers for their particular needs. In response, Dell and HP are now doing custom work as well. But the Hyves of the world are here to stay.

Be Like Google

Hyve doesn’t count Google as a customer — or at least it doesn’t seem to. But it’s serving many of the internet companies that are imitating Google. Unhappy with the cost and design of traditional servers from the likes of Dell and HP, Google designs its own servers, and it contracts with companies in Taiwan to build them. Facebook has now followed suit. Its no-frills servers are built by Taiwanese “original device manufacturers” (ODMs) Quanta and Wistron, and then they’re shipped to Hyve in Fremont, California, where technicians load them into racks, hook up the required networking equipment, test them, and ship them off to Facebook’s data centers.

Google treats its latest server designs as trade secrets, but earlier this year, Facebook open sourced its designs under the aegis of the Open Compute Project, sharing them to anyone who wants them. And this led Synnex to create Hyve. Hyve is a place where internet giants can go if they want Open Compute servers. But even before Hyve was created, Synnex was working for the big internet names. It has long provided custom machines for Rackspace — the San Antonio, Texas company that offers infrastructure services across the net as a scale rivaled only by Amazon — and though Synnex won’t identify its other customers, it will say that these are companies everyone knows. “They’re household names,” Ichinaga says.

Hyve is just one of the under-the-radar server companies feeding these big internet names. SGI — the company once known as Rackable (not to be confused with Rackspace) — has spent years building custom servers for the likes of Amazon and Microsoft. And a New Jersey-based outfit known as ZT Systems is building servers for similar internet outfits — though it won’t say who. Hyve and ZT say very little about how their operations work, but both seem to have very close ties to manufacturing outfits in China and Taiwan, where so much of the world’s IT hardware is built. This means they can provide custom servers while still keeping prices down.

“We have very long term relationships with the key vendors,” says Ichinaga. “We already sell billions of dollars’ worth of components and other IT equipment, and that basically allows us to leverage our relationships with our partners when we serve our [internet] customers.” Tim Symchych, the director of supply chain operations at Rackspace, confirms that his company can get lower prices from Hyve than he can from Dell and HP (though the company continues to buy from Dell and HP as well). Jason Hoffman — the chief technology officier of Amazon- and Rackspace-rival Joyent — says there will be cases when his company can actually get a better price from a traditional server maker such as Dell. But the point is the Hyves and ZT Systems of the world are competing with the big boys, and in many cases, they’re winning.

With Facebook sharing its designs through the Open Compute Project this trend will only continue. According to Ichinaga, Hyve has already received orders for Open Compute servers from multiple companies. And that doesn’t include Facebook.

The Hyve Mind

Joyent CTO Jason Hoffman visited Hyve one afternoon in early December. Joyent typically buys its servers from Dell or Sun Microsystems (now part of Oracle), but he’s exploring other options. He spent an hour discussing Hyve’s services with a company sales rep, and then he took a brief tour of the warehouse. We tagged along, and though Hyve was careful not to expose its other customers, it did show off some of the Open Compute server racks it’s putting together for Facebook.

Hoffman and Joyent don’t want Open Compute servers. Facebook’s designs are meant for web serving and memcaching — a way of storing caching data in server memory, so it can be quickly accessed — and he’s looking for something more robust. “Facebook is really just running one applications,” he says. “We’re supporting different applications for all our customers.”

But Hyve says it can give him what he wants. Though Facebook’s servers are built in Taiwan and shipped to Hyve’s warehouse in Fremont, Hyve tells us that in most cases, it builds servers on its own, pulling parts from partners across the globe. Hyve says it can work with a company like Joyent to design a server that suits its particular needs. “It starts with collaboration,” Ichinaga says. “We figure out what the customer wants in terms of server workload and the physical environment and everything else. If you need something different, we can do it.”

Ichinaga won’t go into detail about Hyve’s business model. But he says the company is only able to do this because Synnex has spent thirty years distributing computer hardware to thousands of resellers across the globe. It has close relationships, Ichinaga says, with the likes of chip giant Intel and hard drive maker Seagate, as well as ODMs such as Quanta and Wistron. “Compared to a traditional OEM companies,” he says, referring to original equipment manufacturers such as Dell and HP. “We have a very low S,G, and A [selling, general and administrative expenses]. It’s just a very efficient model.”

Synnex is a US company. Its Fremont, California, offices are the official headquarters. But the company’s founder, Robert Huang, was born in Taiwan and studied electrical engineering in Japan. And its ties to Asia run deep. The company has offices in both China and Japan.

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