The server hardware market is sending a decidedly mixed message. On the one hand, interest in data center servers remains high, and sales continue to climb. However, movement to virtualization, cloud computing and converged systems are forcing companies to value server hardware less and other computing elements more. Consequently, the future of servers seems a bit tenuous at the moment.
A few factors have contributed to their ongoing popularity. Corporations continue to invest in IT solutions to operate and improve their businesses. As a result, companies are expanding the reach of existing applications to new mobile devices and social networking systems, like Facebook and Twitter.
"Companies with 'legacy' heavy-duty enterprise applications and databases still buy standalone servers to run them on -- for compatibility, performance, resilience, compliance and control reasons," said John Abbott, chief analyst at 451 Research.
Also new high-performance applications are emerging.
"Big data has been a recent driver in the need for more server processing power," said Sam Barnett, directing analyst for data center and cloud at Infonetics Research.
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Companies are collecting oodles of information and then relying on high-powered hardware to glean trends that improve their operations.
In turn, server suppliers are responding with solutions targeted at that growing market segment. For instance, Hewlett-Packard Co.'s ProLiant SL4500 server handles up to 240 terabytes (TB) in a 4.3U server chassis and can be scaled up to a nine-chassis configuration for a total of 2.16 petabytes (PB) of capacity.
The emergence of big data applications underscores another business driver. "A bright spot in the server market is hyperscale data center servers, which are seeing double-digit growth," said Abbott.
With the movement to consolidated data centers and cloud computing, information is becoming more concentrated. Rather than spread information out at the department level, companies are centralizing it. Consequently, central data centers are becoming bigger -- and need more powerful servers -- and the remote centers are smaller. Gartner found that in 2010, 2% of the world's data centers contained 52% of total data center floor space and accounted for 63% of data center hardware spending. In 2015, those numbers are expected to rise to 60% of data center floor space and 71% of data center hardware spending.
A ripple effect is growth in x86-based servers. Technology Business Research Inc. (TBR) found their revenue rose by 13% in the second quarter of 2012 compared to the second quarter of 2011. "Linux has become a viable low-cost server option for large companies," said Christian Perry, senior analyst for computing practice at TBR.
Scalability had been an issue with those servers but that has been changing. In fact, the delivery of Intel's newest Xeon chips provides companies with sufficient processing power found in proprietary solutions.
But there are new market challenges, the most notable one being revenue from proprietary hardware. TBR found that revenue from those products dipped by 5.0% in the second quarter. A couple of factors contributed to the reduction. As noted, the growth of x86 servers has often come at the expense of proprietary solutions.
Also, product lifecycles played a role in the decrease. "The proprietary vendors are in the midst of delivering a new generation of processers, and users hold off from making hardware investments during such a time period," said Perry. Moving forward, TBR expects product refreshes from companies, like HP, IBM and Oracle, will lay the foundation for improved revenue growth in the proprietary server sector.
Computing paradigms shifts are also impacting server sales. "Companies are trying to maximize the utilization of their existing hardware infrastructure through virtualization," said Abbott. Virtualization, which emerged a decade ago, improves hardware performance and lessens the need for standalone servers.
Cloud computing offers businesses the option of outsourcing some of the compute load and reducing the number of in-house servers. Theoretically, it offers businesses the ability to reduce hardware costs and simplify ongoing maintenance.
However, cloud is a broad term, and its impact has been felt in varying degrees in different market segments. On-demand server resources, such as those Amazon offers, have proven to be popular with small and medium businesses.
But large companies have not been as willing to adopt these services because they think it compromises data integrity. "Look at the outages suffered by Amazon and Google; enterprises cannot afford to have their systems [down] very long," said Barnett.
Security is also a concern. In many cases, cloud vendors operate multi-tenant systems, so different companies share server resources. Because information is not fully sequestered, intrusions are possible.
Because of the limitations, large enterprises have been opting for private cloud services rather than public ones. Vendors, such as IBM, have been trying to fill that void and could eventually convince conglomerates that public cloud services are robust enough to trust with key applications. If that occurs, the standalone market would take another hit.
Unified computing systems are also gaining popularity. Rather than tinker with a variety of autonomous elements, corporations purchase integrated systems, offering server, storage and network functions. Cisco Systems Inc. has done quite well in the market segment. "IBM and HP will gain more traction with their integrated systems moving forward," said Perry.
In sum, the need for more computing power continues as businesses deploy new big data applications and enhance existing systems. However, the days when those needs fueled server hardware sales are seemingly drawing to a close. Rather than standalone servers, corporations are scratching their computing itch with virtualization, cloud computing and unified computing solutions.
About the author: Paul Korzeniowski is a freelance writer who specializes in cloud computing and data center-related topics. He is based in Sudbury, Mass., and can be reached at email@example.com.
This was first published in February 2013