IDC: Volume servers behind server market growth

Worldwide server revenue increased 6.2 percent to $49 billion in 2004 driven by the volume server segment, according to analyst firm IDC.

Despite overall revenue growth, both midrange enterprise servers and high-end enterprise servers showed declining revenue. "A customer can do more than ever with a $25,000 server today," said Matthew Eastwood, program vice president of IDC's worldwide server group, explaining the strong growth of the volume server segment.

The last quarter of 2004 was the seventh consecutive of continued growth in the worldwide server market.

IBM still dominated with 33.3 percent revenue share followed by Hewlett-Packard keeping its market position since last year at 26.6 percent. According to IDC, IBM's growth was driven by its xSeries and pSeries servers. HP kept its position thanks to strong sales of Proliant servers.

Volume servers, priced less than $25,000, led the market in both revenue and unit shipment growth. "These servers are capable of addressing a greater workload than ever, so the customer doesn't necessarily need to buy a mid- or high-end server. The improving clustering technology adds to that trend," Eastwood said.

"Another factor is the price pressure on the servers priced $25,000 or more. IBM, HP and Sun are competing for market shares in the same accounts. Those days when a customer had habits and said, 'I'm a Sun user or I only trust IBM' are over," he said.

However, Eastwood doesn't predict doom for the mid- and high-end server market. "Financial services, leading retail and manufacturing systems still need these higher-end system's stability, but the market will continue to shrink over a period of time."

The x86 server market, the largest among the volume server segment, had revenue of $6.3 billion worldwide for the fourth quarter of 2004. Factory revenue, the revenue recognized by vendors as opposed to customer revenue, grew 14.4 percent while unit shipments grew 16.8 percent to 1.6 million servers in the last quarter.

Nearly one out of four x86 going out to the market today include 64-bit support in the form of Advanced Micro Devices's Opteron and Intel's EM64T processors. But the software still often demands only 32-bit support. "They get additional headroom for growth," Eastwood said.

The blade server market nearly doubled in size to over $1.1 billion in 2004 and 7 percent of x86 shipments in the U.S. were blade servers.

When it comes to operating systems, Unix and Windows servers continued to grow. Unix server revenue was $5.2 billion in the fourth quarter of 2004 while the corresponding figure for Windows was $4.6 billion.

Linux servers represented 9 percent of worldwide server revenue in 2004, which is 35.6 percent growth compared to the year before.

The IDC report's figures on server vendor market shares mirrors a report released by Gartner on Wednesday.

IDC is a subsidiary of International Data Group, the parent company of IDG News Service.