Inside Advanced Scale Challenges|Friday, February 24, 2017
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Gartner: Virtualization, Slack Value Props put Server Sales in Funk 

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Citing conservative global spending, easy access to virtual machines and a need for reinvigorated vendor value propositions, industry watcher Gartner Group reported today that worldwide server revenues declined 5.8 percent in the third quarter of 2016 year over year, with shipments down 2.6 percent.

Among the top five vendors, only Cisco increased revenue in the third quarter, while Huawei and Inspur Electronics saw growth in shipments. HPE, Dell and Lenovo all experienced declines in both server revenue and shipments, according to Gartner.

"The server market was impacted during the third quarter of 2016 by generally conservative spending plans globally,” said Jeffrey Hewitt, research vice president at Gartner. “This was compounded by the ability of end users to leverage additional virtual machines on existing x86 servers (without new hardware) to meet their server application needs. Server providers will need to reinvigorate and improve their value propositions to help end users justify server hardware replacements and growth, if they hope to drive the market back into a positive state."

All regions showed a decline in shipments except Eastern Europe, which posted growth of 0.9 percent, Gartner said. In terms of revenue, all regions experienced a decline except Japan, which grew by 1.3 percent.

x86 servers declined 2.3 percent in shipments and 1.6 percent in revenue in the third quarter of 2016. All vendors in the top five except Cisco experienced a decline in revenue. In x86 server shipments, only Huawei and Inspur Electronics experienced growth.

Despite a decline of 11.8 percent, HPE continued to lead in the worldwide server market, based on revenue, with 25.5 percent market share, Gartner reported. Dell declined 7.9 percent, but maintained the second spot in the market with 17.5 percent market share. Lenovo secured the third spot with 7.8 percent of the market. IBM dropped to the fifth position and experienced the largest decline among the top five vendors.

Gartner said in Europe, the Middle East and Africa (EMEA), server shipments totaled 481,000 units in the quarter, a decline of 9.7 percent. Server revenue came to $2.6 billion, down 12.1 per cent from the third quarter of last year.

"This marks the third consecutive quarter of declining revenue in the EMEA market," said Adrian O’Connell, research director at Gartner. "The spending patterns of large cloud providers made the performance from the third quarter of 2015 difficult to repeat in some countries. However, the reality is that demand has been weak across the entire region."

O’Connell added that the slowdown EMEA should be attributed to the “Brexit” vote in the U.K.

"This is not a sudden slowdown following the UK referendum result, it is a sign of continuing weak demand across the EMEA market, with very few drivers having a positive effect," he said. "With non-x86 servers falling to less than 12 percent of overall revenue, the market is highly exposed to the negative effects that virtualization and external cloud services can have on lower-cost x86 platforms. EMEA is likely to remain a very challenging region for server vendors."

Source: Gartner Group

Source: Gartner Group

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