Server budgets down, but Intel sales go up
Ideal price-performance for poverty-stricken customers...
The last time the world was in a serious recession, a little more than a decade ago, Windows NT did not yet exist, Novell ruled the Intel-based server market, and Intel servers were not really practical platforms for enterprise applications,writes Timothy Prickett-Morgan.
And at that time, there was a dramatic shift towards data center consolidation and a move of applications off expensive mainframes toward Unix servers - both moves that put big dents in the mainframe businesses of IBM Corp, Unisys Corp, Hitachi Ltd, and Fujitsu Ltd and to a lesser extent curtailed sales of expensive proprietary midrange equipment from IBM, Digital Equipment Corp, and Hewlett Packard Co.
This time around, in the economic downdraft of 2000, 2001, and 2002, Intel has packed some pretty serious computing power into very inexpensive servers, Windows and Linux are perfectly viable platforms for small and medium businesses, and a large number of them are buying these platforms instead of others. The upshot, say market researchers at International Data Corp, is that low-end server sales are actually growing, even in this poor IT buying climate and uncertain economic situation.
"We are not saying that the server market has broken free from the economic freeze," says Vernon Turner, group vice president of global enterprise server solutions at IDC. "IT enterprises are buying only the minimum amount of incremental capacity to get the job done. But this represents the first step toward improving market conditions." That is, unless you happen to make a living selling big Unix, OS/400 and mainframe servers.
"Customer demand has shifted substantially to buying smaller increments of infrastructure capacity, fueling growth in the volume server market and continuing to create a very aggressive pricing and competitive environment in the midrange and high-end segments," says Mark Melenovsky, program director for server and infrastructure hardware research at IDC.
He says further that the server market in the United States and in some emerging markets in the Asia/Pacific region are seeing some growth, Japan, Western Europe, and Latin America, each groping with different economic problems that nonetheless all impinge on IT spending, are keeping a lid on growth in the server market.
IDC expects server spending in the U.S. to increase by 4.7% in the third quarter of 2002 compared to the same period last year. According to IDC, most of the major server vendors saw increased sales in July and August and saw an increase in requests for proposal. The sales level in Q3 2002 will represent an 8.6% sequential growth rate compared to Q2 2002. But the poor sales in Q1 2002 will wipe out these gains, and server sales are nonetheless expected to contract by 9% in 2002 compared to 2001, which itself was a pretty rough year for server makers.
Analysts at IDC say that they expect the server market to grow at a compound rate of 3% over the next five years, eventually reaching $63.4bn in 2006. IDC says that Linux server sales will triple to $6.5bn and Wintel server sales will increase by $5bn to $19bn. RISC-based servers, dominated by high-end Unix offerings, are expected to comprise $27.7bn of sales in 2006. That leaves another $10.2bn in sales for other platforms, such as IBM and Unisys mainframes. email@example.com
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