Servers are the heart of the IT industry and have a value far beyond the revenues made by their suppliers. Despite this the market has been slow to grow in recent years. 2017 was different – spending grew by 3% to $78 billion and unit shipments by 2% to 15.2 million, driven by new Xeon and Epyc x86 server ships from Intel and AMD respectivly. The Americas (and the USA in particular) have always been the strongest regional market (see Figure), with its lead being widened over recent years.
There are big differences between the suppliers of x86 and other processor types (see Figure for market shares for these and the total market in 2017). HPE is was the market leader overall in 2017 with a 17.7% share; however Dell has been catching up with it fast an has achieved an extra boost in the last year from being able to add Dell processors to EMC vxrack and vxrail hyper-converged systems. IBM was been able to grow its server business partially through its addition of new z processors. Along with Oracle it dominates the ‘other’ (i.e. non-x86) server business. One reason why the server market has been somewhat sluggish over the last few years has been competition from the largest IaaS and PaaS cloud services, which design and manufacture their own custom servers using raw processors and other components – I don’t count these ODM machines (around 3 million in 2017) in the general purpose server market. Dell became the x86 server market leader in 2017, with a 20.1% share – overtaking HPE for the first time. I expect these two vendors to continue to lead the market for the next few years, regularly exchanging market leadership positions in the process.
The three market leaders of the server market (see the Figure for their annual revenues between 2005 and 2017) have pursued totally different corporate strategies over the last few years. HP decided to split into a number of different organisations, with HPE becoming the supplier of servers, storage arrays, networking and associated services and solutions; Dell decided to privatise and merge with EMC, becoming a substantially more powerful enterprise supplier in the process; IBM decided to exit the x86 server and chip manufacturing businesses in order to invest in its transformation into an enterprise cloud services supplier.
Oracle server are based on Sparc processors, which made Sun the server market leader if you go far enough back. Chinese vendors Huawei and Lenovo have made significant progress as global server suppliers despite being relatively new to the market. Cisco (also a relatively new player) saw its UCS server revenue flatten off in 2016 and 2017, it is massively important through its up-stream partnerships, which see its servers and management software at the heart of Converged and Hyper-Converged Infrastructure (HI and HCI) systems such as Flexpod (with NeApp), vBlock (Dell EMC) and VersaStack (IBM). These systems are experiencing very strong growth in 2018. Dell EMC’s majority ownership of VMware also make it an essential feature of the HCI and most other virtualized x86 sub-markets.
I’m in the process of creating a user guide for HI and HCI systems – please contact me if you’re interested in collaborating.