IDC Numbers In: IBM and Blades Likely to Lead out of Recession

Rob Enderle

IDC's server numbers were recently released, and while HP remains dominant in several key areas, IBM actually came out on top overall -- largely, I think, because of its early and aggressive moves to take share from Sun as it struggled with being acquired. Linux is actually falling off against Windows, which is kind of amazing given the economic conditions, and blades appear to be the segment with the greatest strength. The market has a feel, I think, of being on the cusp of recovery and it looks like IBM as a company and blades as a segment may lead the way out.

 

This is interesting because HP is actually the market leader in blades.

 

Server Market

 

As I mentioned earlier, IBM positioned aggressively as the alternative to a failing Sun when Oracle won the business from them. The IDC numbers just in showcase that its gambit trumped all others, gaining nearly 2 points of share to lead the market for servers with a dominant 34 percent, followed by HP with 28.5 percent and Dell at 12.4 percent. Sun, once the company to beat in this segment, was down to 10 percent share and expected to fall even further once IT starts buying again. Year-over-year, the market was down a crippling 30 percent, showcasing just how sick the market is at the moment.

 

In the UNIX market, down 31 percent and historically Sun's strongest, IBM picked up a whopping 7.4 percent of share to reach a near-dominant 41 percent. With continued Sun competitive migrations, IBM has 50 percent share in sight and, against a weakening Sun, 50 percent or better market share is achievable. Sun fell 4 points to 27 percent share and this decline should continue to accelerate as the uncertainty surrounding Sun's future continues.


 

Low-cost x86 servers really took it on the chin, with a 30.9 percent drop in revenue; IBM showed growth but still falls into third place with 1.4 percent gain to 17.5 percent. HP continues to lead this segment with an impressive 36.9 percent share (keeping PCs really helped here), followed by Dell at 23.7 percent share. You would think during these hard times revenues would be shifting to lower-cost x86 products, but that doesn't seem to be the case. Apparently buyers are finding equivalent value through scale in the higher-end products. It is also interesting that of the top three, only IBM is reported as gaining significant share in that it is the only one without a PC business.

 

Comparatively, blades were a massive hit, declining only 12.1 percent year over year and possibly reflecting an increasing market view that this path may be in IT's future. Shipments declined 19.1 percent, indicating that the value of each sale increased, suggesting that buyers were shifting to more expensive, more highly capable blades as well. Once again, IBM showcased the greatest growth, gaining nearly 4 points. However, HP remains dominant with nearly 53 percent -- more than Dell and IBM combined, as Dell has only 9.1 percent share of this segment.


Linux vs. Windows

 

This wasn't a great year for either platform, but Linux revenue declined 28.9 percent with 12.8 percent share, while Windows declined 27.7 percent and represents the biggest portion of the market now (based on revenue) at 38.1 percent. For those Linux folks looking at when Linux will bypass Windows, at this rate it never happens. This is interesting in that you would think in particularly hard times the perceived cheaper Linux would gain share. Evidently, that isn't the case this cycle.

 

UNIX, as you would expect, is down sharply, losing 30.9 percent and dropping solidly below Windows Server at 31.5 percent of the market. Windows is within shooting distance of generating the combined revenue share of UNIX and Linux (44.3 percent vs. 38.1 percent -- it's within 6 points now).


Wrapping Up: Looking to Recovery

 

IBM continues to show benefits from focusing on the Sun opportunity and, based on IDC's numbers, is the only vendor showing strong-to-moderate growth as a result. On revenue, largely thanks to its dominant high-end position, IBM continues to lead the server market, while HP has a dominant position in the strongest segment, blades, which is both falling the least and increasing in per unit revenue. Sun is looking less and less relevant and the soon-to-be-combined company desperately needs to put the merger behind it and focus on the future. It continues to look like HP is the most likely buyer for the Sun hardware portion of the company, but with the value of that property dropping sharply and the low likelihood that HP will want to retain many of the existing Sun staff, slowing the decline in the interim will likely be near impossible.

 

In any case, the segment to be in, based on this report, is blades, and the company showing the strongest growth is IBM. This makes it likely, if recovery is close, that IBM as a company and blades as a segment will recover first.



Add Comment      Leave a comment on this blog post
Sep 4, 2009 11:18 AM Michael Vizard Michael Vizard  says:

As much as we might like to think that the economy is having a positive effect on server sales, it's far too early for a few "shoots of grass" to have a meaningful impact. Rather, IT organizations are using the recession as an impetus to consolidate more servers by buying a few more powerful servers to replace a slew of others. They need to do this because virtual machines are memory hogs that run poorly on their existing systems, which creates application performance problems. Basically, they are spending a little money now to save a whole lot of money on existing hardware and software licenses. More on this line of thought can be found at http://tinyurl.com/lu8ckx

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Sep 4, 2009 11:33 AM Rob Enderle Rob Enderle  says: in response to Michael Vizard

Actually, Mike, I never said the economy was having a positive effect on server sales I said, based on these numbers; blades and IBM are likely to lead the corporate segment out of the recession.   Given every segment was down sharply it would be impossible to argue anything but the adverse impact of the economy on the segment, however, as the economy recovers and money frees up it will flow into some buckets before others.   IBM reflects the consolidation you point out because their platforms appear to be favored for UNIX server consolidation at the moment (and there is no reason to assume that won't continue at least as long as the Sun opportunity exists).   However, the ramp in blades is more of a replacement trend as Blades are often used instead of or in addition to virtual machines with each blade carrying a distinct server load (granted there are blades that run virtual machines and multiple instances but not to the degree that large servers and mainframes do).  

In any case, and sorry if what I wrote was confusing, we are in agreement that the economy is not yet driving a tech recovery.  On the contrary, these numbers may indicate that we are beginning to see a trend that may indicate the tech segment can help drive an economic recovery.   It's a cart and horse issue, I was suggesting Tech was becoming a part of the horse not the cart. 

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