Servers are attractive IT products to sell and there has been lots of change at the top of the market over the last few years. The Figure shows the revenues (on a rolling 4 quarter basis) of the top 7 vendors and demonstrates the effect of IBM’s off-load and the rising stars of Cisco. Huawei and Lenovo. In Q1 2106 spending increased by 9.6% to $19b and in the year to the end of March, by 6.5% to $77b. In the rest of this paper I’ll cover the essential developments.
Server market shares for vendors, operating systems and virtualisation status are shown in the Figure. It shows that HPE and Dell are leading suppliers, followed by IBM. Cisco, Lenovo, Huawei and NEC take up the minor positions. From an operating system point of view Microsoft Windows is the clear winner – taking up 72.2% of total server revenue in the year: Linux (currently at 11.9%) is growing slowly and is popular for service providers and Open Source database analytics. It maybe surprising for some, but the majority (60.1%) of server revenue in the year was for physical-only machines (i.e. those that do not host virtual machines on top of hypervisors). For the remainder which are virtualised, the majority run VMware ESXi: Microsoft Hyper-V, KVM (included in the kernel of all Linux distributions) and Xen (an earlier Open Source hypervisor) take up the minor positions. Total server revenues stood at $77b for the year to the end of March 2016.
Table – server market shares – revenue ($USb), shipments (million) and installed base (million) – year to end of March 2016
|Revenue ($b)||Share %||Unit (m)||Share %||Base (m)||Share %|
Source: ITCandor, 2016
Virtualisation is a major reason for growth. The Figure shows the installed base of servers by virtualisation status and the number of virtual machines running at the end of each quarter from 2005 to 2016.. It demonstrates the rapid growth of virtual machines running on top of virtualised servers, which accounted for 100m by the end of Q1 2016. As for the hardware itself, both physical-only and virtualised machines have been growing slightly each quarter. The advent of containers (used widely by Google and promoted by Intel) and Docker means that not all virtualisation needs to involve hypervisors in future – a threat to VMware and other x86 hypervisor suppliers. Within the virtualisation area a significant proportion of users are attempting to avoid VMware’s proprietary software by trialling and putting into production systems based on Open Source product. Their success is limited to a certain extent by the need to manage the overall server estate. Systems management products such as Microsoft’s System Center, VMware’s vCenter, Cisco’s UCS Director and others provide increasing help in managing servers, networking and storage from a single pane of glass. Advanced users are benefitting from lower priced disaggregated datacentre ‘elements’, while seeking to use systems management and infrastructure software to manage them as coherent pools of infrastructure resource.
Server spending is increasing unlike storage systems and enterprise networking, because they for the basis of ‘software defined’ usage. Taking the proprietary code out of storage systems and networking in these projects typically involves spending more on infrastructure software and servers, which run the transferred code. As we saw when analysing the storage market. even the capacity of disk and solid state disk drives is currently falling (revenues and shipments of raw and system storage products are also). One reason is the increased efficiency users are achieving, allowing them to avoid the massive over-provisioning of storage necessary in the past.
Cloud computing is taking revenue away from datacentre hardware spending, as customers increasingly turn to IaaS, PaaS and SaaS services rather than building datacenters and filling them with hardware and infrastructure software to run their applications themselves. Of course the service providers hosting these services are also customers for servers, storage and networking; however they acquire their hardware for very little either because they manufacture them themselves (IBM and Oracle for instance), or manage to acquire them for very little (I’d like to know what Amazon, Google, Alibaba, Microsoft Azure, eBay and other public clouds pay for chips and storage components.
As for the future I expect these shifts in spending to continue, with servers continuing to grow faster than storage systems and enterprise networking, but less than infrastructure software and cloud services.