The New Normal for Enterprise Hardware

Arthur Cole

After nearly two years of dismal sales in the enterprise server market, it's certainly understandable if industry watchers grasp onto any positive change as a sign that economic turmoil may be over.

But I think that even as the economy pulls out of recession, IT spending, particularly when it comes to hardware, is fundamentally changed. And it appears the latest numbers from IDC are bearing this out.

Most headlines latched onto the fact that while third-quarter server sales across the board remained below last year's dismal numbers, there was a 1.2 percent gain in blade server revenues. That marks the first glimpse of growth that anyone has seen in a while. But a closer look at the numbers reveals that blade shipments actually fell by some 14 percent, which means that enterprises are interested in buying more powerful servers, but fewer of them. That's a marked departure from the past decade or so when the mantra was "small, faster, cheaper."

Still, growth is growth, right? Perhaps, but it does point out some of the major changes that are hitting the server market right now, not all of them related to the economy. First, there are virtualization and the cloud to consider. If the goal is to distribute resources across a broad infrastructure and then dynamically allocate those resources as needed, that is much more easily done with the higher-end blades than the commodity machines that have dominated for the past few years. There's also the power draw of all those smaller machines to consider.

Second, new generations of processors are making it easier to pack more power into a standard blade enclosure. IDC's Daniel Harrington specifically pointed out the new processors from Intel and AMD, namely the Nehalem and Istanbul devices, as key drivers for the third-quarter sales, arguing that they have introduced a new value proposition for enterprises straining under aging infrastructure.

There's also the impact of high-speed connectivity to consider, according to the Dell-Oro Group. Back when 1 GbE was state of the art, it was hard to justify a more powerful server fleet that could rapidly exceed that capability, particularly as high-bandwidth applications like videoconferencing take hold. But with 10 GbE adapters, LAN-on-Motherboard and 8 Gb Fibre Channel shipments on the rise, the time has come to supplement those networks with heftier processing.

The trend to higher-speed networking is also key to the burgeoning storage market. IDC reports that nearly 2,700 petabytes of disk storage shipped in the third quarter, a 21 percent gain over the same period in 2008. Here, though, the trend is the opposite of the server market in that stronger sales nevertheless resulted in a decrease in revenue as enterprises continue to take advantage of falling prices.

All of this points out that the enterprise, and thus the hardware that empowers it, is changing as the nature of IT evolves from static silos of equipment to scalable, flexible conglomerations of dynamic resources.

"Getting back to normal" is not the way to measure the health of the server, storage and networking industries anymore. This time, success will go to those who take us into the future first.

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