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Credit the Cloud for the Booming Server Market

In case you hadn't noticed, server sales are booming.

Market researchers at IDC reported Tuesday night that the third quarter represented the highest total revenue in a single quarter for servers ever.

For those of you looking around at much emptier server rooms than you might remember from a decade ago, before the financial crisis and other factors pushed the computer hardware market sideways, it's clearly not the same. As they say, the cloud is just someone else's datacenter, and those someone elses are loading up on hardware.

By the numbers, the server market soared year over year in the third quarter by 38 percent in revenues to $23.4 billion and by 18 percent in shipments to 3.2 million units.

It's the fifth consecutive quarter of double-digit revenue growth, according to IDC.

"The worldwide server market once again generated strong revenue and unit shipment growth due to an ongoing enterprise refresh cycle and continued demand from cloud service providers," said Sebastian Lagana, research manager for Infrastructure Platforms and Technologies at IDC, in a statement. "Enterprise infrastructure requirements from resource intensive next-generation applications support increasingly rich configurations, ensuring average selling prices (ASPs) remain elevated against the year-ago quarter. At the same time, hyperscalers continue to upgrade and expand their datacenter capabilities."

The increases reach across the board -- with volume server revenues up 40 percent to $20 billion, midrange revenue up 39 percent to $2 billion, and high-end systems up 7 percent to $1.3 billion. Dell led the quarter both in revenue and unit shipments, followed in revenues by HPE/New H3C Group, Inspur, Lenovo, IBM and Huawei in a tie, and Cisco. Dell, Inspur, Lenovo and Huawei are up; HPE, IBM and Cisco are down.

But as interesting as the slight jockeying for position among those enterprise vendors may be, it's the largely anonymous manufacturers who are making all the servers powering the hyperscale datacenters that create the Amazon Web Services, Microsoft, Google, Facebook and other clouds that are driving the steadiest growth.

IDC labels those vendors as ODM Direct, for original direct manufacturers who design specifically for a high-scale end customer's specific datacenter needs. Think, for example, about how particular Microsoft is about the system requirements in a modular Azure datacenter. It's not interested in off-the-shelf servers.

That group of ODM Direct vendors accounted for $6.3 billion in collective revenue, a gain of 52 percent year over year, and collectively above Dell's individual $4 billion in revenues.

Another rough way to think about this booming server market is that about one in four new servers are bound for the cloud.

Posted by Scott Bekker on 12/12/2018 at 10:25 AM


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