By Jim Bagley
[Editor’s note: This blog is courtesy of Jim Bagley, senior analyst for Storage Strategies NOW.]
IDC’s recent quarterly numbers on worldwide server sales revealed an unprecedented four consecutive quarters of decline as the total fell to the lowest level ($9.8 billion) since IDC began following the server market in 1996. Recession is obviously a driving factor in the unwillingness of server buyers to invest beyond the barest minimums. But technological factors have contributed to falling server revenue, with a compounding effect.
Virtualization has allowed enterprises to eliminate whole server farms with tremendous reduction in operating expense, often without any replacement of hardware capital expenditure. The introduction of super-hot multi-core servers, along with virtualization, can do the job of a whole server cluster. We believe that factor of new servers plus virtualization is about an order of magnitude – one does the work of 10. This is just the beginning of enhanced bandwidth at the server level. When coupled with solid state drives, now available in full duplex serial attached SCSI configurations, along with PCI-express switches, such as what Virtensys demonstrated recently, will further increase in the number of virtual servers that can operate out of a single tower or blade.
A similar impact on the storage side has been delivered through higher capacity drives. De-duplication strategies, automatic thin provisioning (as we have seen in the new 3PAR systems) and better archiving systems have offset the amount of storage needed at the same time organizations have scrutinized the storage growth assumptions that have been built into their business plans for a decade. But we also believe that in the storage realm, this is more like a one-time reverse windfall, that is, the basic drivers of storage growth, from regulations to media-rich requirements to historical data mining applications will put the growth in storage requirements back to its prior expansion rates, even with improved technology.
VMware, XEN, Hyper-V and other licensed virtualization platform and accessory revenues are clearly coming at the expense of server revenues during the recessionary period. But future server revenue growth may be more problematic, as the factors that allow one platform to do the work of 10, will continue to reduce the number of physical servers needed to meet even a robustly growing worldwide economy.
