The global server market continues to suffer in the face of threats from cloud computing and virtualization, forcing OEMs to look for an escape avenue in emerging new areas such as converged solutions and hyperscale environments.
That the server is slowly losing its grip is actually a blessing in disguise for some systems makers. Dell and Cisco in particular, have taken advantage of the situation to press their lead in these emerging trends, resulting in growth in their overall server revenues even as the evolving dynamics of the data center eats away at other areas of their businesses interests. For the likes of Oracle, HP and IBM however, there’s less reason to be cheerful.
IDC and Gartner yesterday released separate second quarter figures for the global server industry, with both analysts firms concurring that the market is in a downward trend. IDC reported a 6.2% drop in server revenues compared to the second quarter of 2012, with shipments also declining by 1.2%. Gartner’s figures were slightly more favorable though, with server shipments rising by 4% despite a 3.8% fall in revenues. Both analysts were consistent with regards to the star performers Dell and Cisco, which achieved growth in both revenues and shipments. As for IBM, HP and Oracle, the numbers for these three firms all fell.
According to IDC, the troubles with the server market are nothing new. OEMs are suffering from the trend towards businesses virtualizing their systems and consolidating – which means putting off buying any new hardware. The economy isn’t helping, with low budgets convincing enterprises to delay making any new investments in their IT systems, while the Unix market continues its downward spiral to the detriment of IBM, HP and Oracle.
Then there’s hyperscale environments, piling even more problems on OEMs. In a statement to eWeek, IDC’s Matt Eastwood noted that:
“The hyperscale buildout represents a shift from higher-margin mainstream computing to lower-margin cloud infrastructure builds. This has the added impact of not dragging [software] and services along as well.”
These problems have been plaguing the server market for some time, but perhaps the real story from the last quarter is not so much the plight of the big firms, but the impressive gains of what both analyst firms like to call the “Others”, referring to Chinese and Taiwanese manufacturers who sell low cost hardware with little or no brand association.
According to Gartner, the “Others” ranked third behind IBM and HP in total revenues. These firms saw revenue grow by 7.9% in the last quarter to $2.7 billion. Meanwhile IDC ranked the “Others” in fourth place. When it comes to volume, “Others” blew everyone else away. According to Gartner, these firms shipped 969,000 units for the quarter, representing a stunning increase of 14.4%.
The other stories inside the numbers were Dell and Cisco’s impressive gains. According to IDC’s Eastwood, Dell seems to be capitalizing on the hypervisor trend, selling its microservers to enterprises that are looking for dense, energy-efficient servers, and is most likely doing so at the expense of HP. Meanwhile Cisco’s network-based servers also appear to be gaining ground, justifying the company’s push into network-based cloud computing.