Global server shipments reached 2.47 million units in the three months ending Sept. 30, a 3% increase from the third quarter of 2012, but revenue slipped by 3% to $12.5 billion, Dell’Oro reported.
Notably, one of the growth areas in the server market is of white-box servers that companies manufacture without bearing a brand name like Dell or HP.
Together, white-box manufacturers added up to about 10% of the market in the third quarter, based on shipments, said Sameh Boujelbene, a senior analyst at Dell’Oro. She believes that white-box sales are coming at the expense of the more established brands and that the competition put downward pressure on average selling prices.
According to Boujelbene, white-box server vendors' ability to supply "customized servers at compelling prices" gave them a competitive advantage in the cloud and service provider markets. Even though overall server shipment growth is slowing down, Dell'Oro expects server shipments to cloud and service providers to reach 50% by 2017.
The report from the Redwood City, Calif.,-based Dell’Oro marks the first study from the 18-year-old firm on the server business. It has focused exclusively on networking research until now but the two components of a data center have become so tightly integrated of late that they have to be looked at together, said Tam Dell’Oro, founder and president of the firm.
“We see some of the servers integrating with more and more network equipment so there is a convergence taking place,” Dell’Oro said. “We see the networking aspect being the brains and the management of all of these different pieces. We see a more active role within the network trying to connect and direct traffic, and manage the whole data center. We cannot not be tracking it.”
Dell’Oro also pointed out that server growth and network growth are interrelated because networking gear has to expand to 10 gigabit and 40GbE Ethernet capacity to handle the traffic from more powerful servers.
[Read about a new chip architecture that facilitates CPU and GPU interoperability for faster processing and lower power consumption to boost server performance in "AMD Pushes HSA For Data Center Servers."]
China is recording strong server sales, particularly with the expansion of white-box production by companies like Quanta, the market leader, and others, Boujelbene said. It is particularly challenging for U.S.-based server makers to make gains in China due to a preference in China for China-based brands such as Huawei, Inspur, Lenovo and Sagan, she said. While the U.S. is far and a way the largest market for servers, China surpassed Japan as the second largest market in the third quarter.
“The problem for U.S.-based vendors ... is that they are having increased pressure from the local vendors. Sometimes, U.S.-based server vendors are not even allowed to participate in contracts,” said Boujelbene.
According to Dell'Oro's report, the top five server vendors globally in the third quarter, based on market share, are:
• HP: 29%share, up 1% from the third quarter of 2012;
• IBM: 21% share, down 5%;
• Dell: 16%, unchanged from a year ago;
• Cisco: 5% share, up 2%; and
• Oracle: 4% share, down 0.5%.