Posted by: Bridget Botelho
Blade servers, DataCenter, Dell, HP, IBM, x86 server
Framingham, Mass.-based IDC released its Worldwide Quarterly Server Tracker for the second quarter of 2008 (2Q08) today showing that although the overall server market grew in the second quarter of 2008 (2Q08), x86-based systems experienced their slowest growth rate in 23 quarters.
As a whole, the worldwide server market grew 6.4% year over year to $13.9 billion in 2Q08, marking the ninth consecutive quarter of positive revenue growth and the highest Q2 server revenue since 2000.
Unit server shipments grew 11.1% year over year in 2Q08 driven by a hardware refresh cycle and infrastructure expansions, according to IDC.
Although volume systems revenue grew 2.1% in 2Q08, they underperformed the market for the first time since 4Q06, as server OEM’s experienced strong pricing pressure in the marketplace.
Matt Eastwood, group vice president of Enterprise Platforms at IDC, said in a statement, “IDC saw strong growth in blades, Unix systems, and IBM System z demand across the marketplace. Diversity in market demand demonstrates customers do not believe a single standardized infrastructure is capable of meeting all their computing needs.”
x86 Server Market Dynamics
x86-based systems experienced their slowest growth rate in 23 quarters. x86 server market growth slowed in 2Q08 to a rate of 3% year over year ($7 billion worldwide). The 2Q08 was also the first quarter that spending for non-x86 systems outpaced revenue growth for x86-based systems since 4Q00.
Could it be that server physical sprawl is slowing? Now that virtualization is mainstream, have people slowed down on their server hardware acquisitions?
IDC blames the x86 server market slowdown not on virtualization, but on the pricing climate, saying average selling values declined 8.4% year over year in 2Q08.
“The pricing challenges many OEMs experienced, particularly in the x86 server market, is a concern as it may foreshadow a slowdown in market demand as enterprise budgets face further scrutiny in the second half of 2008,” Eastwood stated.
“While all the major vendors exhibited strong unit growth, there was significant price competition throughout the quarter,” stated Jed Scaramella, senior research analyst for Datacenter Trends at IDC. “Low-end volume servers, such as 1- and 2-socket systems, are somewhat viewed as commodities and experienced the most pricing pressure. Additionally, the quarter was made noteworthy by the fact that several of the tier-one vendors began shipping their new systems targeting large-scale datacenters. Typically, these are stripped down servers that are designed to operate at maximum power efficiency. All components and features that are not essential, including server redundancy, are eliminated to reduce the capital expenditure of these datacenter customers.”
Nashua, N.H.-based Illuminata analyst Gordon Haff said speculation about virtualization causing server sales to decline have always swirled, but never seem to manifest.
“I’ve been hearing the “won’t people buy fewer servers?” question every time there were faster processors, more processor cores, etc. for as long as I’ve been an analyst. And the market just keeps on growing,” Haff said.
“What you are seeing here though–and which relates to virtualization to at least some degree–is the relative popularity of larger servers,” Haff said. “Virtualization really helps people more effectively utilize larger servers even when single apps don’t need all the
horsepower. Even within the x86 server space we’ve seen more interest in 4-socket servers after that category was in decline for years.”
Blade Server Market Shows Strong Shipment and Revenue Growth
Although blade revenue decelerated slightly in 2Q08, year-over-year revenue growth of 40.8% in 2Q08 was the third fastest over the past 2 years, IDC reported.
Overall, bladed servers, including x86, EPIC, and RISC blades, accounted for $1.2 billion in the second quarter, or 8.8% of quarterly server market revenue.
HP held the number 1 spot in the blade market with 53.3% market share and IBM held the number 2 position with 24.8% share. Dell and Sun also experienced blade revenue growth in 2Q08.