Q1 2018 – Dell tops the server market for the first time

I’ve been researching the server market since 1983 (when we called them ‘multi-user computers’); for the first time since then Dell has become the leading vendor (see the Figure, which shows rolling 4-quarter revenues for the leading suppliers since 2005). It has inched ahead of HP which duelled with IBM for top spot in all those 35 years apart from a brief period in which Sun (now Oracle) was the leader.

In Q1 2018 the server market grew by 5.0% to $18.8b in revenues and 5.2% to 6.2m in shipments; the installed base grew by 2.9% to 76m.

While Dell may want to celebrate, the real winners have been Intel, Microsoft. In particular:

• Intel‘s Xeon has become the dominant server chip and was at the heart of 85% of market revenues; I’ve watched its entry into the market (when we called these products ‘PC servers’) in the 1990s and its victory over minicomputers (typically running Unix and based on RISC chips). AMD has competed strongly with Intel for many years, peaking with a share of 22% in 2003 by being the first to introduce 64-bit products. ARM chips could – but have so far failed to – win a significant share of this important market.
• Microsoft‘s Windows is by far the most important server operating system, achieving a 72% in the year to the end of March. Although it still lacks the rich features of OS/390, AIX, HP-UX, Solaris and other mainframe and minicomputer OSes, it is easier to use for those with experience of PCs and to package for vendors selling complete systems through distribution.

VMware has also been wildly successful, achieving a 47% share of all servers by users to add virtualisation to x86 servers – an essential feature if x86 servers were to compete seriously with the established systems, which already offered strong forms of virtualisation. VMware’s majority share holder is now Dell of course and, although the two companies manage their businesses independently, I’m sure their common ownership has created an increasingly effective partnership.

The Figure shows my estimates of the virtualisation status of server shipments by quarter since 2005; it demonstrates that, although the majority of shipments have remained the predominant type (due mainly to their use in smaller companies and branches of bigger ones), the number of virtual machines has reached 10 million – over twice the size.

As for the future, I’m sure Dell and HP will jockey for market leadership in a similar way to the duel between IBM and HP in the past. AMD and various purveyors of ARM processors will chip away at Intel’s dominance, Linux distributions at Windows and KVM and Hyper-V at VMware’s. The key for the server vendors is to find a way of building better business with MSPs and CSPs and working out what they can do for Amazon, Google, Microsoft Azure and others of the largest CSPs which at the moment prefer to build their own servers. It should be an interesting ride!