Server Market Declines for Second Straight Quarter Says IDC

English: IBM BladeCenter front view

Traditional server sales declined sharply for the second straight quarter, reports IDC, but blade servers like this one from IBM increased. (Photo credit: Wikipedia)

In a somewhat surprising turn, the market for traditional servers fell for the second straight quarter, IDC reported this week.

First a look at the numbers (as they say on Marketplace). According to a statement from IDC, “Factory revenue in the worldwide server market decreased 2.4% year over year to $11.8 billion in the first quarter of 2012 (1Q12).”

And sales were in decline everywhere whether it was in the US, Europe or even Asia where China has reportedly been spending more than a billion dollars a quarter on servers.

At a time when cloud computing and Big Data are all the rage in IT circles is seems counter-intuitive that server sales would be declining. Haven’t Facebook, Google, Apple, Microsoft and Amazon (among others) been building monster data centers? Don’t these installations require tons of servers?

They do of course, but they might not be traditional server boxes. Instead says Tom Henderson, who is principal researcher at Extreme Labs says that market is in upheaval right now as people move to smaller footprint servers.

“The “traditional” server market is going through enormous upheaval. We progressed from washing machine-sized servers to those that fit in racks, ala the 1Us and 2Us, etc. Then we crammed a bunch of CPUs in them for density. Then we put the CPUs on cards and evolved blade servers, which often don’t count in server market scores,” Henderson said.

Henderson believes that’s because these older style machines are getting too expensive to run and the new data centers are looking for more cost-effective and energy-efficient alternatives. “Long term [Total Cost of Ownership] (including importantly: electricity costs) look very good for ultra-dense servers, while the traditional 1U and 2U and even commodity blade server are in decline,” he explained.

This is in line with what IDC was reporting, which found in contrast to traditional servers, space-saving blade servers had a year over year increase of 7.3 percent while density optimized servers increased an impressive 38.8 percent.

In terms of marketshare numbers, HP, which has been in the news lately with massive layoffs, lead the pack with a 31.7 percent marketshare, yet had a 9.8 percent loss in revenue growth. You can see the entire marketshare numbers in the chart below.

IDC reported the worldwide server market experienced sharp decline for the second straight quarter.

(Chart courtesy of IDC)

IDC reports on the plus side Linux server revenue was up 16 percent, while the Windows server markets was up a more modest 1.3 percent. What took a big hit was the Unix server market, which declined by 17.2 percent.

Kuba Stolarski, research manager for Enterprise Servers at IDC says Unix servers appear to have been undone by demand for other types. “The Unix server refresh has largely ended as the Unix server market is in decline again, driven by workload consolidation and migration to competing platforms,” Stolarski explained.

It seems that the market is shifting some and the types of products people are willing to buy is changing as companies have to take many factors into consideration when they make their server buying choices.

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