NEW YORK — Public clouds and virtualization will cause a major shift in the server market in 2014 that’s already underway, according to one server analyst.
Additional factors that influence the shift include: the presence of white box vendors -- contract manufacturers who create the product for others to brand -- in Taiwan especially, Chinese cloud companies who will do business locally but not with the traditional US-based server vendors, and the emergence of high-density servers and microservers.
US-based companies are active in the cloud segment, but their performance is expected to fluctuate quarter by quarter. While the overall server market is projected to grow, the increase is likely to be sluggish.
Sameh Boujelbene, senior analyst at Dell Oro, said that she expects a modest increase in server shipments for 2013. “Virtualization has been impacting server purchases and the move to more private and public clouds has really affected their purchase behavior,” she said.
Boujelbene said the portion of servers in the cloud is going to grow, but the servers sold to the enterprises are going to decline. “That’s a fact,” she said, “everyone agrees.” Some analysts are optimistic about the enterprise market, but they say it will grow at a slower rate.
Boujelbene sees only modest increases in server shipments -- 2% in 2014 and 4% in 2014. Attributing the slow growth to virtualization, she explained, “People are trying to squeeze as much as they can from their datacenters.” Majority of the server growth today comes from microsever and high-density server segments.
Dell Oro estimates that about 14% of servers shipped to the cloud in 2013 and more than 20% will be shipping to the cloud in 2014. That will decrease the number of servers that every enterprise will have to purchase individually.
Increasingly, enterprise servers will take only a smaller share of the overall market, since rack and blade servers take over the market.
“We’ve seen some pause in server purchases because of all the options IT managers have,” Boujelbene said. “They need to make decisions about where they should run their cloud, which kind of platform and which kind of server [they should use]. That creates some pause in purchasing decisions.”
The cloud market continues to be driven by the US-based companies such as Dell, IBM, and HP as well as cloud providers including Google, Amazon and Facebook.
While many of those companies are turning to low-power servers, the industry has yet to see a 64-bit ARM-based server in that segment. Several such products are slated to hit the market in 2014. However, Calxeda -- one of the early contestants in this field -- was forced to close its doors and give up its ARM server bid last month. Calxeda suffered because 32-bit ARM servers did not get much traction, in the wake of the anticipated emergence of 64-bit servers.
According to the 2014 IC Market Drivers report, server unit shipment growth will rise over the next several years, due to purchases of newer and cheaper microservers.
New microservers are targeted at a wider range of datacenter applications and cloud-computing platforms. As a result, leading chipmaker Intel is currently embroiled in a struggle with a number of processor suppliers interested in making 64-bit server MPUs based on ARM cores. Boujelbene, however, cautioned, despite the emergence of microservers based on ARM cores, “Never underestimate Intel’s ability to get into that market.”
Meanwhile, Boujelbene said she sees other new forms of competition and disruption challenging the traditional server market. They include Taiwanese companies taking business from the US-based vendors. So-called white box vendors have been penetrating the market for years, but they stand to gain more as a result of their recent success.