World Server Forecast Highlights
We’ve updated the sizing and forecasts a number of times since publishing this: so please contact us for a free update.
- In 2009 the worldwide value of server hardware revenue stood at $42.2 billion – an 18% decline on 2008
- HP led the market with a 27.6% share, closely followed by IBM
- In the x86 market HP led the market, taking 31.0% of the revenue and followed by Dell with 17.7%
- The decline in server spending in 2009 was steeper than the PC, software or IT service areas reaching a staggering -26% in Q2
- The upturn in the server market began in Q3 2009 (-17%) and continued in Q4 (-6%)
- ITCandor forecasts the server market to grow 2% in 2010 to reach $43 billion
- The recovery will continue into 2011 when revenue for all suppliers will climb a further 6%
- x86 servers fared better than other types (RISC and IBM z based machines) in Q4 2009
- ITCandor expects the recovery to be faster in the x86 area – other servers will not show positive growth within the forecast period
During the last few months I have been very busy building a market model, which I use to enhance the coverage of this blog. Of the various posts on market sizing and forecasts I have published those on the server market are some of the most popular. Perhaps because my readers remember the leading role I played for many years in researching this market in EMEA.
HP Led The Worldwide Server Market In 2009
There is a constant battle between HP and IBM for leadership of the server market, which I assess as the revenues attained from the sale of hardware. Figure 1 demonstrates that last year HP won, achieving a 27.6% share of the world market. It might have been different if IBM’s seasonally massive fourth quarter sales had returned to something like normal levels – however the z Series business declined by 20% against Q4 2008. Actually it might still be different if HP’s results for its 2nd financial quarter turn out to be worse than I forecast, but I doubt that given the strong signs of growth in the x86 chips posted by AMD and Intel for the 4th quarter.
Dell was firmly in third place in 2009 with a 12.4% share, although approximately half the size of IBM’s. The company became somewhat introverted during the year, appearing surprisingly absent from many of the debates about Cloud Computing and consolidation. I expect it to become more vocal as the recovery in business levels continues.
Sun of course is now part of Oracle – witness the (hopefully) temporary lack of information about its business with the withdrawal of the sun.com site. It’s server business actually fared no worse than many other server vendors, despite the continuous competitive campaigns waged against it. I expect it to become reinvigorated in 2010 and expect some innovative new offerings in both the Sparc and x86 areas.
The Server Market Suffered More Than Most Sectors During The Downturn
While the PC market saw a sudden ‘market revision’ in Q4 2009, the server market’s deepest decline was a quarter later (see Figure 2 for a comparison), reaching a point below most other categories of IT offering. A string of terrible quarterly results followed for a year from Q4 2008 (-13%, -22%, -26%, -17%). However it looks as if the market fell just 6% in Q4 2009, which is symptomatic of a strong recovery during 2010. My latest forecast is for a 2% growth in revenues in the year – from $42.1 billion to $43.0 billion. IT Service has recovered fastest, driven on by spending in Asia Pacific. To a certain extent the server business hides behind this category, as those machines used to drive Cloud Computing sites or used to provide Outsourcing aren’t counted as server revenues by their suppliers.
The Differences Between x86 and Other Server Types
For many years many analysts – sometimes egged on by Intel, AMD and their OEMs – predicted a rapid decline in traditional server purchases. This failed to materialise, although typically growth rates have been less than for x86 based machines. These alternative servers are based on RISC chips such as IBM’s Power7, Sun, Oracle and Fujitsu’s Sparc, or Intel’s Itanium, or on IBM’s S390 microprocessor. They run Unix operating systems (AIX, Solaris, HP-UX), or proprietary ones (zOS, i5/OS). While the decline in business was similar during the first part of the downturn, the alternative machines have done far worse in Q4 2009. My forecast for the recovery is for the x86 market to pick up strongly leading to a 4% growth in 2010. There will be no such success for alternative servers, which will show no growth in 2010 or 2011. Figure 3 shows a rolling four-quarter analysis of the comparative growth scenarios for the different server types.
Some Conclusions – Better Times Ahead For Server Vendors And Users
The pick-up in the server market is underway and will lead to happier times for suppliers and users alike. Especially in the x86 space, where both Intel and AMD have some stunning new products we will begin to see some pervasive reasoning for replacing older machines in the areas of power efficiency (less electricity), processing power (less numbers of servers) and virtualisation (especially in the virtual desktop area). 2010 is the year in which the investments made by vendors in building Cloud Computing data centres will begin to pay off and a number of leading large organisations will begin to consolidate to incorporate Cloud delivered applications to their users and customers. I expect this to be strongest in vertical markets such as Energy, Health and Government. Despite the positive signs we shouldn’t forget that the market has undergone a drastic downturn over the last year. There may be repercussions as time goes on.
Is this interesting to you? Are you a server supplier? Please let me know if you’re interested in my upcoming report on the server market by commenting here.