According to the International Data Corporation (IDC) Worldwide Quarterly Server Tracker, vendor revenue in the worldwide server market increased 4.8% year over year to $12.7 billion in the third quarter of 2014 (3Q14). This is the second consecutive quarter that the server market has experienced a year-over-year improvement in worldwide revenue. Server unit shipments improved 5.7% year over year in 3Q14 to 2.38 million units as investments in hyperscale datacenter capacity expansion continue to aggressively reshape the core server market. Additionally, IDC continues to see signs of a server refresh cycle, which we expect will continue to lift the market into 2015.
On a year-over-year basis, volume systems experienced 8.8% revenue growth. This was the sixth consecutive quarter that volume system demand increased year over year. Midrange systems also experienced growth of 18.4% year over year as technology refresh cycles began to positively impact the segment, while high-end enterprise systems experienced a year-over-year revenue decline of -23.2% primarily because of difficult year-over-year comparisons and product cyclicality issues.
"The server market continues to be deeply impacted by the shift to the 3rd Platform and the affect of mobile, cloud, social and big data analytic technologies. IDC has seen increasing market influence from Greater China, hyperscale datacenters, ODMs and native Chinese OEMs, all of which grew sharply in the third quarter," said Matt Eastwood, Group Vice President and General Manager, Enterprise Platforms at IDC. "We also saw the continuation of a cyclical enterprise refresh cycle, which IDC expects will continue well into 2015. This refresh will be further accelerated by Microsoft's announcement that it is ending support for Windows Server 2003, coupled with Intel's recent release of its Grantley Xeon EP."
Overall Server Market Standings, by Vendor
HP held the number 1 position in the worldwide server market with 26.5% vendor revenue share for 3Q14. HP's -0.5% revenue decline included improving demand for x86-based ProLiant servers and continued weakness in Itanium-based Integrity server revenue. IBM held the number 2 spot with 18.2% share for the quarter as vendor revenue decreased -17.8% compared to 3Q13. Demand for all three IBM server brands - x, Power and z - declined sharply year over year, in advance of October's divestiture of their x86 server business to Lenovo, coupled with significant technology refresh cycles, which are impacting both Power systems and mainframes. Dell maintained the third position with 17.8% vendor revenue market share in 3Q14 as its revenue increased 9.5% compared to 3Q13. Dell is focused on datacenter transformation solutions that leverage deeper partnerships with leading ISVs. Cisco and Oracle ended the quarter with the number 4 and 5 market positions with 6.2% and 4.1% vendor revenue share, respectively. Cisco's 3Q14 vendor revenue increased 31.2% compared to 3Q13, gaining 1.3 points of market share. Oracle's vendor revenue was up 3.4% year over year in 3Q14.
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Top Server Market Findings
- Regionally, the United States, Asia/Pacific, and Western Europe experienced the sharpest growth with year-over-year revenue increases of 8.8%, 8.5%, and 8.3%, respectively. China continued to exhibit significant growth with year-over-year revenue up 20.9% to $1.7 billion. The top 4 Chinese OEMs - Inspur, Huawei, Lenovo, and Sugon - all grew revenue on a year-over-year basis by more than 35% for the third consecutive quarter.
- Demand for x86 servers improved in 3Q14 with revenues increasing 11.6% year over year in the quarter to $10.7 billion worldwide as unit shipments increased 6.0% to 2.36 million servers. HP led the market with 29.0% revenue share based on 1.1% revenue growth over 3Q13. Dell retained second place, securing 21.1% revenue share following 9.5% year over year revenue growth.
- Non-x86 servers experienced a revenue decline of -20.9% year over year to $2.0 billion, representing 15.8% of quarterly server revenue. This was the thirteenth consecutive quarter of revenue decline in the non-x86 server segment. IBM leads the segment with 60.8% revenue share following a year-over-year revenue decrease of -23.9% when compared with the third quarter of 2013.
- Blade servers, which are highly leveraged in enterprise's virtualized and converged environments, increased 1.9% year over year to $2.3 billion. Blades now account for 18.0% of total server revenue. HP maintained the number 1 spot in the blade server market in 3Q14 with 43.2% revenue share; Cisco and IBM held the second and third positions in the blade market with 25.6% and 14.6% revenue share, respectively.
- Density Optimized servers, utilized by large homogeneous datacenters, experienced a difficult year-over-year comparison due to several large deployments that occurred in 3Q13. Revenue declined -4.4% year over year to $836 million as unit shipments decreased -5.6% to 253,443 servers. Density Optimized servers represent 6.6% of all server revenue and 10.6% of all server shipments.
"The server market is in a state of transition. To compete, vendors must be able to innovate on server designs and go-to-market strategies," said Jed Scaramella, Research Director, Enterprise Servers and Datacenter at IDC. "The software-defined datacenter is the goal for many IT organizations. Technologies, such flash storage, virtualization, and advanced management are important design enhancements that vendors need in their server offerings to enable their customers to transform the IT environments to the next era of IT."
"Hyperscale deployments by cloud service providers continue to drive considerable growth in the server market," said Kuba Stolarski, Research Manager, Enterprise Servers at IDC. "Over the past year, the top four customers in the server market, all of them cloud service providers, have accounted for more than 20% of all servers shipped worldwide, and over 10% of worldwide server revenue. Public cloud demand for new servers will continue to outpace the general market over the next several years, as established enterprises and start-ups alike continue to ramp their usage of cloud services for infrastructure and application hosting."
IDC's Server Taxonomy
IDC's Server Taxonomy maps the eleven price bands within the server market into three price ranges: volume servers, midrange servers and high-end servers. The revenue data presented in this release is stated as vendor revenue for a server system. IDC presents data in vendor revenue to determine market share position. Vendor revenue represents those dollars recognized by multi-user system and server vendors for initial server shipments and upgrades sold through direct and indirect channels and includes the following embedded server components: frame or cabinet and all cables, processors, memory, communications boards, operating system software, other bundled software and initial internal and external disk shipments.
IDC's Worldwide Quarterly Server Tracker is a quantitative tool for analyzing the global server market on a quarterly basis. The Tracker includes quarterly shipments (both ISS and upgrades) and revenues (both customer and vendor), segmented by vendor, family, model, region, operating system, price band, CPU type, and architecture. For more information, please contact Hoang Nguyen at 508-935-4718 or hnguyen@idc.com.
On a year-over-year basis, volume systems experienced 8.8% revenue growth. This was the sixth consecutive quarter that volume system demand increased year over year. Midrange systems also experienced growth of 18.4% year over year as technology refresh cycles began to positively impact the segment, while high-end enterprise systems experienced a year-over-year revenue decline of -23.2% primarily because of difficult year-over-year comparisons and product cyclicality issues.
"The server market continues to be deeply impacted by the shift to the 3rd Platform and the affect of mobile, cloud, social and big data analytic technologies. IDC has seen increasing market influence from Greater China, hyperscale datacenters, ODMs and native Chinese OEMs, all of which grew sharply in the third quarter," said Matt Eastwood, Group Vice President and General Manager, Enterprise Platforms at IDC. "We also saw the continuation of a cyclical enterprise refresh cycle, which IDC expects will continue well into 2015. This refresh will be further accelerated by Microsoft's announcement that it is ending support for Windows Server 2003, coupled with Intel's recent release of its Grantley Xeon EP."
Overall Server Market Standings, by Vendor
HP held the number 1 position in the worldwide server market with 26.5% vendor revenue share for 3Q14. HP's -0.5% revenue decline included improving demand for x86-based ProLiant servers and continued weakness in Itanium-based Integrity server revenue. IBM held the number 2 spot with 18.2% share for the quarter as vendor revenue decreased -17.8% compared to 3Q13. Demand for all three IBM server brands - x, Power and z - declined sharply year over year, in advance of October's divestiture of their x86 server business to Lenovo, coupled with significant technology refresh cycles, which are impacting both Power systems and mainframes. Dell maintained the third position with 17.8% vendor revenue market share in 3Q14 as its revenue increased 9.5% compared to 3Q13. Dell is focused on datacenter transformation solutions that leverage deeper partnerships with leading ISVs. Cisco and Oracle ended the quarter with the number 4 and 5 market positions with 6.2% and 4.1% vendor revenue share, respectively. Cisco's 3Q14 vendor revenue increased 31.2% compared to 3Q13, gaining 1.3 points of market share. Oracle's vendor revenue was up 3.4% year over year in 3Q14.
This chart is intended for public use in online news articles and social media. Instructions on how to embed this graphic are available by clicking here.
Top Server Market Findings
- Regionally, the United States, Asia/Pacific, and Western Europe experienced the sharpest growth with year-over-year revenue increases of 8.8%, 8.5%, and 8.3%, respectively. China continued to exhibit significant growth with year-over-year revenue up 20.9% to $1.7 billion. The top 4 Chinese OEMs - Inspur, Huawei, Lenovo, and Sugon - all grew revenue on a year-over-year basis by more than 35% for the third consecutive quarter.
- Demand for x86 servers improved in 3Q14 with revenues increasing 11.6% year over year in the quarter to $10.7 billion worldwide as unit shipments increased 6.0% to 2.36 million servers. HP led the market with 29.0% revenue share based on 1.1% revenue growth over 3Q13. Dell retained second place, securing 21.1% revenue share following 9.5% year over year revenue growth.
- Non-x86 servers experienced a revenue decline of -20.9% year over year to $2.0 billion, representing 15.8% of quarterly server revenue. This was the thirteenth consecutive quarter of revenue decline in the non-x86 server segment. IBM leads the segment with 60.8% revenue share following a year-over-year revenue decrease of -23.9% when compared with the third quarter of 2013.
- Blade servers, which are highly leveraged in enterprise's virtualized and converged environments, increased 1.9% year over year to $2.3 billion. Blades now account for 18.0% of total server revenue. HP maintained the number 1 spot in the blade server market in 3Q14 with 43.2% revenue share; Cisco and IBM held the second and third positions in the blade market with 25.6% and 14.6% revenue share, respectively.
- Density Optimized servers, utilized by large homogeneous datacenters, experienced a difficult year-over-year comparison due to several large deployments that occurred in 3Q13. Revenue declined -4.4% year over year to $836 million as unit shipments decreased -5.6% to 253,443 servers. Density Optimized servers represent 6.6% of all server revenue and 10.6% of all server shipments.
"The server market is in a state of transition. To compete, vendors must be able to innovate on server designs and go-to-market strategies," said Jed Scaramella, Research Director, Enterprise Servers and Datacenter at IDC. "The software-defined datacenter is the goal for many IT organizations. Technologies, such flash storage, virtualization, and advanced management are important design enhancements that vendors need in their server offerings to enable their customers to transform the IT environments to the next era of IT."
"Hyperscale deployments by cloud service providers continue to drive considerable growth in the server market," said Kuba Stolarski, Research Manager, Enterprise Servers at IDC. "Over the past year, the top four customers in the server market, all of them cloud service providers, have accounted for more than 20% of all servers shipped worldwide, and over 10% of worldwide server revenue. Public cloud demand for new servers will continue to outpace the general market over the next several years, as established enterprises and start-ups alike continue to ramp their usage of cloud services for infrastructure and application hosting."
IDC's Server Taxonomy
IDC's Server Taxonomy maps the eleven price bands within the server market into three price ranges: volume servers, midrange servers and high-end servers. The revenue data presented in this release is stated as vendor revenue for a server system. IDC presents data in vendor revenue to determine market share position. Vendor revenue represents those dollars recognized by multi-user system and server vendors for initial server shipments and upgrades sold through direct and indirect channels and includes the following embedded server components: frame or cabinet and all cables, processors, memory, communications boards, operating system software, other bundled software and initial internal and external disk shipments.
IDC's Worldwide Quarterly Server Tracker is a quantitative tool for analyzing the global server market on a quarterly basis. The Tracker includes quarterly shipments (both ISS and upgrades) and revenues (both customer and vendor), segmented by vendor, family, model, region, operating system, price band, CPU type, and architecture. For more information, please contact Hoang Nguyen at 508-935-4718 or hnguyen@idc.com.
