Custom server market grows as established vendors struggle

Server market revenue declines in the fourth quarter, but white-box server makers thrive

The demand for customized servers is growing as buying trends change, with more companies designing servers in-house instead of buying from well-established vendors such as Hewlett-Packard or Dell.

Server market revenue in the fourth quarter last year was US$14.2 billion, dropping by 4.4 percent compared to the same quarter in 2012, according to a survey released by IDC. The survey showed that sales from smaller white-box server makers -- called "ODM Direct" by IDC -- collectively growing at the fastest rate of 47.2 percent year over year.

The group of white-box server makers includes Quanta and Inventec, which make servers for companies such as Google, Facebook and Amazon, which have mega-datacenters and deploy servers by the thousands. Those companies design servers in-house, which are designed to handle the growing flow of search and social networking requests.

The custom servers are also being plugged into hyperscale environments, where servers can be easily added to meet growing computing demands. Hyperscale environments are also being used for a growing number of public and private cloud deployments, which need to be flexible on computing and storage requirements.

The custom servers direct from white-box system makers are also attractive as they are less expensive, IDC said in a statement.

The growth of home-grown servers is hurting the top three server makers IBM, Hewlett-Packard and Dell, who sell servers based on proprietary designs and system management technologies. The top spot was shared by HP, whose server revenue grew by 5.7 percent and IBM, whose server revenue dropped by 28.5 percent. In third place was Dell, whose server revenue dropped by 2.4 percent in the quarter. One exception was Cisco, whose server revenue went up by 34.5 percent. Oracle, sharing the fourth place with Cisco, recorded a drop of 2.2 percent.

Most custom servers use x86 chips from Intel or Advanced Micro Devices. Revenue for x86 servers was $10.7 billion worldwide, growing by 7.8 percent. Unit shipments of x86 servers during the fourth quarter was 2.5 million units, growing by 8.6 percent.

The Unix server market took a hit with the growth in x86 server sales, IDC said in a statement. Growth in the hyperscale server segment is hurting the growth of servers with proprietary chips like IBM's Power, Oracle's Sparc and Intel's Itanium. Intel this month introduced the new Xeon E7 v2 x86 chip, which is expected to push Itanium close to its end of life, analysts have said.

The customized server market is receiving a boost from the Open Compute Project, which is making reference designs for servers, data centers, networking and storage equipment. Many companies, including financial organizations like Goldman Sachs, are warming to OCP server designs, which reduce the reliance on proprietary server designs. Intel, Advanced Micro Devices and others are making chips, motherboards and components that fit into these barebones servers. One specification called Group Hug will make it possible to put x86 and ARM chips in the same socket.

HP and Dell continue to introduce new servers, but are also making an effort to fit into the custom server market. Dell is refocusing the efforts of its Data Center Solutions (DCS) to build custom servers. But IBM is heading out of the x86 server market as in January it agreed to sell its x86 server business to Lenovo for US$2.3 billion.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags serversDellIBMIDCHewlett-Packardhardware systems

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Agam Shah

IDG News Service
Show Comments

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Cathy Giles

Brother MFC-L8900CDW

The Brother MFC-L8900CDW is an absolute stand out. I struggle to fault it.

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Laura Johnston

MSI GS65 Stealth Thin

If you can afford the price tag, it is well worth the money. It out performs any other laptop I have tried for gaming, and the transportable design and incredible display also make it ideal for work.

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?