The server market is growing, despite strong competition from IaaS and PaaS cloud services. In 2018 the market was worth $85b worldwide – up 9% on 2017, while unit shipments grew by 5% to 26m. Looked at over the long term (see my Figure above) the major change in the market came with the Credit Crunch in 2008, which was like a sling shot driving virtualization faster during the recovery than it would have been with out it. The dips in 2014 and 2016 demonstrated the stochastic nature of server purchasing – not only of the predominant Intel Xeon machines, but also of IBM’s z and Power systems. Customers delay their purchases in the quarters before new processors come on tap.
Dell EMC overtook HPE as the world’s largest server supplier in the middle of 2017 – a lead it has extended in 2018 (see my Figure above). IBM and Oracle’s positions have dropped from second and third positions in 2005 to third and seventh respectively. For IBM is was self-imposed as it offloaded its x86 server business to Lenovo (which is now not far behind, despite making significant changes to the management team it inherited.). Oracle has managed to grow its server business in 2017 and 2018. Cisco’s server business (which is based exclusively on rack-mount products) reached a peak in 2016, although its UCS Manager is used on a number of other Converged Infrastructure and Hyper Converged Infrastructure systems. The strong rivalry it has with Huawei in the network market is being played out to a smaller degree in the server market. Huawei has a wider set of offerings and focuses its business on the Asian Pacific and EMEA, rather than US, markets.
The vast majority of servers run x86 processors (86.7% of all spending in 2018 – see my Figure opposite), although there are still three major alternatives – IBM’s z System is used by the majority of large organisations in the Financial sector for transaction processing and increasingly in this and other industry sectors as a Linux platform; IBM’s Power processor is being used by a number of other manufacturers to run Linux, while its own products can run this, iOS and/or its AIX Unix operating system. Oracle’s Sparc chips are used in its own and Fujitsu servers. HPE’s strategy is based very strongly on x86 chips, although it was a long-term supporter of Mips and Intel Itanium and launched – but has not been successful with – Moonshot servers based on ARM chips.
Back in 2000 x86 servers were unsophisticated; almost all of them were ‘physical-only’ machines, each with a single operating system (almost always Microsoft Windows). The introduction of hypervisors by VMware and others from 2003 onwards allowed users to create virtual machines, which are multiple operating systems running on a single server. These have been very successful (represented as ‘hyperised’ servers in my Figure above, which gives unit shipments for the each year from 2005 to 2018). The number of virtual machines (the multiple operating systems running on a single machine) overtook the remaining physical-only machines back in 2009. Since Q4 2014 server users have also been able to deploy containers on their servers based on the docker Open Source project (represented as ‘containerized’ servers in my Figure). Containers are widely used by cloud service providers and those deployed on self-built servers by AWS, Google, Azure and others are not shown in my stats here; nevertheless they are beginning to take hold with advanced enterprise customers. They have not yet affected a reduction in the number of hypervized servers being shipped, but certainly will in future.
How is the server market doing as enterprises continue in their mass adoption of cloud services? It’s difficult to tell definitively, but it’s important to try. My Figure above shows a comparison of server spending with cloud server services, which I calculate as roughly half of all spending on IaaS and PaaS services. Those customers who buy cloud services from the largest providers are helping the market shift from branded to self-built server platforms of course; server spending would have shown more growth in the last few years if they had not and may fall significantly in future if the current growth in spending on cloud services continues. My Figure also shows Intel’s revenues from its Data Center business. Intel is arguably the most important supplier in the server market; not only has it managed to take an increasing share of spending on branded servers over the years, it also provides huge volumes of chips at massive discounts to the self-built server manufacturers/CSPs. Unlike branded server vendors (Dell EMC, HPE, etc.) it will be able to thrive whichever way spending goes in future.
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