HP slips, IBM stumbles, white boxes rise in server market

HP still commands the server market, but IBM is dropping fast, and ODMs may soon rule the roost

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Thinkstock (Thinkstock)

For the big winner in this quarter's IDC Worldwide Quarterly Server Tracker report, look at the server market as a whole, which expanded about 5 percent over the past four quarters. All the big-name vendors are potential losers, though, as generic hardware eats into their profits. That generic hardware comes in the form of the ODM (original design manufacturer) market, which is up 44.2 percent over the last four quarters and now commands nearly 9 percent of the total sales in the server market.

ODMs represent the biggest threat to the server world on multiple fronts. Their hardware is powering more of the big cloud data centers -- which are themselves taking revenue away from server makers as more businesses go cloud-centric -- and using crowdsourced designs from the Open Compute Project to further cut costs. In the face of this pressure, the other major players are exploring ways to keep a unique stake in the market.

At the top of the heap stands HP, and for the time being, the sheer market share HP commands -- 26.5 percent at last count -- keeps it in a prime position. But HP has to know the numbers confer no immunity. IDC noted that while HP's more conventional x86-based ProLiant servers have helped buoy the company, its more ambitious server product, Moonshot, hasn't sent sales to the moon despite its ingenious design. Furthermore, the effects of HP's impending split on its business-side bottom line remain to be seen.

In second place is the biggest loser for the server market: IBM. Big Blue's server revenue has shrunk by a staggering 17.8 percent over the past 12 months, not only because it's shed its x86 server business to Lenovo. IDC reported that all three proprietary server brands IBM kept close to the vest -- Power, x, and z -- are losing customers left and right as those systems are being retired. IBM's been stumping hard for its systems as the fastest machines of their kind (they run Watson!) and thrown money at Linux software investment on those platforms, but little of it has let IBM retain market share.

Dell, by contrast, has kept a solid 17 percent sales stake, and in fact managed to grow 9.5 percent over the past year. Some of this is due to smart tactical alliances with other data center hardware and software vendors like Microsoft -- which generic makers can't even attempt. That said, Dell server chief Forrest Norrod is gone, and it's unclear how his replacement, Ashley Gorakhpurwalla, will pick up where he left off. The company has been dabbling in creating ARM-powered servers for the data center, but the fruit from that labor -- or revenue for Dell -- won't be seen for a while.

In terms of raw percentage of sales growth, Cisco has surged the most -- 31.2 percent year-over-year -- but the company still only has 6.2 percent of sales in the market. The striking jumps in the company's sales percentages caught our eye earlier this year, although some of that may be due to smart marketing to existing Cisco customers. But Cisco has developed its technologically intriguing Unified Computing System blade-management suite to appeal to data center builders, including support for OpenStack. These changes are motivated at least as much by Cisco's own slumping sales in its core business as any other factor, as the company posted 7 and 4 percent declines over the past year in its routing and switching gear businesses, respectively.

Another strategically significant slice of the market's growth comes from Chinese manufacturers, in total representing $1.7 billion in sales, or around half of HP's entire market share. Lenovo and Huawei are the most familiar names, and the former will likely get a big lift now that IBM's sale of its x86 server division has gone through. However, don't expect to see those numbers stack up until at least another full year has gone by. By that time, who knows what kinds of leaps and bounds the ODM market will have made?