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Minimalist boxes for hyperscale cheapskates

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The cookie-sheet servers created by Google for its own use – recently commercialized by all the top-tier vendors in one form or another as hybrid rack-blade boxes – have become a sizeable and important part of the server business.

In the third quarter ended in September, the box counters at IDC reckon that end users snapped up 2.07 million machines from server makers and their channel partners, an increase of 8.7 per cent compared to the year-ago period. Revenues increased a more modest 4.2 per cent, to $12.74bn. The market is cooling a bit thanks to tough compares, and as fellow box counter Gartner pointed out earlier this week, shipment and revenue levels on a global basis have more or less recovered to the levels prevailing ahead of the server crash in the wake of the Great Recession three years ago.

Blade servers, which have been around for a little more than a decade, are in essence racks in miniature with integrated backplanes for linking servers to integrated switching and system management processors in the chassis, seemed poised to become a dominant server architecture based on the hockey-stick uptake of rack servers during the dot-com boom, but blades are a high-end product that is a tougher sell than many server-makers had expected. Still, blades are the best option for many customers, and at $2bn in sales for the quarter (16 per cent of revenues) and just under 280,000 units (13.5 per cent of machines sold) they are an important system option even if they have not knocked out rack servers, as many expected.

Blade servers are full of system management and resiliency features that most supercomputer and hyperscale cloud operators simple won't pay for. That's why over the past several years the cookie sheet server – which jams multiple server nodes into a rack chassis on metal trays – has become popular. These nodes are all about low-cost and ripping out any extraneous stuff in a blade box – such as service processors, integrated node management, and switching. The assumption with hyperscale servers is that compute and local storage are all that matter and the application environment itself will provide the resilience. And hence these hyperscale servers, as IDC calls them, have come into their own.

In some cases, such as those of Google and Amazon, the company is building all or some of their own hyperscale machines, and even while Facebook has designed its own servers, it still farms out the manufacturing and thus those servers get counted as commercial boxes in IDC's numbers.

In the third quarter, the hyperscale server segment accounted for 118,888 shipments and $428.5m in revenues, which is an increase of 8.7 per cent in terms of sales and 4.3 per cent in terms of shipments. So hyperscale machines now account for 3.4 per cent of revenue and 5.7 per cent of shipments and have much lower average selling prices per node.

How much lower? If you do the math across the whole server market in the third quarter, the average server cost $6,149. There were a few thousand mainframes and high-end RISC/Itanium boxes in there to raise the class average, but x86 machines account for the lion's share of shipments in any quarter these days. (All but about 70,000 machines in this case.) The average rack or tower server cost $6,163, and the average blade server cost $7,151. You can see now why blades have had limited appeal: they offer operational cost advantages, but you pay a premium for the hardware. The average hyperscale server cost a mere $3.604 according to IDC's data, which shows you why you might want to build resiliency in your software stack instead of on any particular server node.

Dicing and slicing server sales

In addition to casing server sales by form factor, IDC takes a stab at estimating the shipments of servers based on the primary operating system that gets installed on the boxes as well as by price band. The System zEnterprise 196 mainframes announced a little more than a year ago gave Big Blue a big bump in sales, but that refresh cycle is starting to slow; the company only booked $970m in sales of mainframes in the third quarter, according to IDC. Windows server sales also cooled a bit, with revenues up 5.3 per cent to $6.3bn against shipment increases of only 2 per cent. That said, Windows-based machines are by far the dominant server platform in the world in terms of shipments.

Unix machines showed some life, with sales up 1.6 per cent to $2.6bn, thanks mainly to IBM pushing its AIX boxes like crazy. "IBM is really starting to dominate this market," Jed Scaramella, research manager of enterprise servers at IDC, tells El Reg, adding that IBM accounted for 46 per cent of all Unix revenues in the third quarter and gaining five points of revenue market share.

Hewlett-Packard lost 5 points of share and Oracle lost 1.5 points, and they were in a statistical tie for second place in Unix system sales in the quarter. Linux systems saw a very nice 12.3 per cent revenue jump in Q3, to $2.3bn and now account for 18.6 per cent of total server revenues. If you want to be generous, you could say that the combined Unix and Linux markets – call it Unilinux – experienced a 6.4 per cent revenue bump to $4.9bn.

Various proprietary platforms from Unisys, Fujitsu, Bull, NEC, IBM, and HP (not including IBM System z mainframes) accounted for a mere $570m in sales, down 8.8 per cent over last year's third quarter.

Server sales were not uniform around the world, as you might expect given the differences in regional economies and the state of IT infrastructure in different regions.

"After nearly two years of steady revenue growth, the server market began to decelerate in Q3 2011 as demand stabilized for many system categories," explained Matt Eastwood, general manager of enterprise platforms at IDC, in a statement accompanying the server stats. "Asia/Pacific and Japan exhibited strong revenue growth while server demand in EMEA, North America, and Latin America was flat to slightly down year over year. IDC continues to believe that weakening macroeconomic conditions around the world will serve to further moderate demand for new servers in 2012."

By segment, IDC calculates that volume servers (machines that cost under $25,000) had a 5 per cent increase in revenues as a group in the quarter. The high-end segment, which covers machines that cost more than $250,000, had a 1.1 per cent revenue bump (despite the System z decline and because of improving Unix system sales), and the midrange machines between these two bookends had a 4.7 per cent revenue increase as a group.

If you look at the server business by vendor, IBM and Hewlett-Packard were in a dead heat in Q3 as far as IDC can tell, with IBM and HP both getting $3.79bn in sales. (Technically, IDC believes Big Blue had $3m more in sales, but declares a tie when the difference between the vendors is less than one per cent.) IBM grew 3.5 per cent and HP dropped 3.8 per cent.

Dell was the number three server seller, with $1.93bn in sales, and grew at a pace that was nearly three times as fast as the market at large. Another way of saying that is this: If you take Dell out of the numbers, the other vendors only grew their sales by 2.7 per cent, so Dell accounted for two-thirds of the growth of the overall market. Oracle's server sales declined by 3.2 per cent to $764m, and Fujitsu shrank four-tenths of a per cent to $605m. Other vendors – helped by supercomputer-makers Silicon Graphics and Cray as well as upstarts Lenovo and Cisco Systems – grew as a group by 22 per cent to $1.86bn. ®

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