According to International Data Corporation's (IDC) EMEA Quarterly Server Tracker, EMEA server revenue in the third quarter of 2010 reached $3.1 billion, up 6.4% on the same quarter last year. The number of servers shipped was up 10.2% year on year after nearly 550,000 were sold. The strong results, with shipment volume back to double-digit growth, and revenue growth also significant, must be read in the context of a very weak third quarter last year, favoring year-to-date comparisons. When looking at revenue in absolute terms, it becomes apparent that the server market results are a long way from the peak seen in the fourth quarter of 2007, when revenue reached $5.4 billion.
By technology, x86 industry standard servers consolidated their position as the dominant technology, with $2.2 billion in revenue and 533,000 shipment units, an annual growth of 26.5% and 11.0% respectively. It is worth noting that the strong revenue growth, more than double the unit growth rate, is a positive sign that industry standard servers are avoiding the trend toward commoditization seen in previous quarters. Higher ASVs are a sign that enterprises are moving their mission-critical applications to x86 from RISC, CISC, and EPIC, and demanding more richly configured systems with higher availability features.
On the other hand, spending on non-x86 servers continued to slide in 3Q10, with sales of $939.3 million, down 22.5% annually. This was the first time revenue for this segment was below the $1 billion mark since IDC records began in 1996, and far from the peak of $3.7 billion reached in the fourth quarter of that year. However, the evidence for pent-up demand taking place in 4Q10 and subsequent quarters is mounting as IT organizations in banking, government, and telecoms are currently actively looking into upgrading their scale-up server infrastructure following the availability of product refreshes from all the major vendors.
"Cloud is increasingly turning into a driving force on the European server market place. Telcos, service providers, and hosting companies of all sizes and across the land are engaging in datacenter consolidation projects and at the same time investing in additional server capacity to support new offerings centered on cloud computing," said Nathaniel Martinez, research director in the Enterprise Server Group for IDC EMEA. "Large HPC deals across multiple segments such as defense, academia, banking, and the pharmaceutical and utilities industries are also fueling additional demand for x86 servers."
"The EMEA server revenue growth is a positive indicator that the market is gaining traction and benefitting from refreshment activity in the hardware area. Banks and to a lesser degree insurance companies are currently engaged in server refreshes and adding new server capacity," said Beatriz Valle, senior research analyst in the Enterprise Server Group for IDC EMEA. "Server spending in the government segment remains healthy in France and Germany, although it is contracting in the U.K. and Italy. In the SMB segment, virtualization deployments are gaining steam."
Blade Server Segment
"Blade servers performed stronger than the overall server market , but paradoxically that was due to the boost in non-x86-based machines, accounting for $63 million in revenue in the wake of strong double-digit growth in the EPIC and RISC offerings from HP and IBM particularly. The outlook for non-x86 blades remains strong in 4Q10 too as vendors transition part or all of their midrange portfolios onto the blade form factor. The situation is different in the x86 camp. Here, the new focus on scale-out infrastructures and on scale-up multiprocessor boxes has kept blade unit shares virtually unchanged year on year. Despite huge demand in emerging countries such as Russia and Israel, x86 blades produced 19% yearly revenue growth, which did not match the 40% year-on-year revenue growth in rack-mount machines in the quarter," said Giorgio Nebuloni, senior research analyst in the Enterprise Server Group for IDC EMEA.
Emerging Markets
Central and Eastern Europe, the Middle East, and Africa (CEMA) recorded year-on-year growth of 14.6% in value and 17.9% in volume in 3Q10 from shipments of 147,000 units worth $743.50 million. Central and Eastern Europe (CEE) recorded the highest growth due to market recovery across most countries in the region. Revenue in CEE reached $383 million, representing 27.8% year-on-year growth. In contrast, the growth rate for the Middle East and Africa (MEA) was only 3.3% year on year, with the market value rising to $360.5 million.
The strong growth in CEE was driven by the three largest countries - Russia, Poland, and the Czech Republic - each of which reported double-digit value growth; combined, they made up over 70% of total server market value in CEE. According to Senior Research Analyst Jiri Helebrand, IDC CEMA, "The server market was driven by demand in both the public sector and the large-enterprise end-user segment. After the slowdown witnessed during the crisis, investment in IT is returning, and we expect it to continue in the coming quarters. Contrary to the situation in CEE, only two countries recorded double-digit growth in MEA, namely South Africa and Israel; the markets in Saudi Arabia, Turkey, and United Arab Emirates all declined."
Top Server Market Findings
- x86 servers consolidated their position as the dominant technology in EMEA by a big margin, with 70.2% of total revenue in 3Q10, a total of $2.2 billion, up 26.5% year on year. Non-x86 sales took 29.8% of total revenue with $939.3 million, down 22.5% annually. Non-x86 shipments were also down 17.5% to around 10,000 units.
- Volume servers gained market share, growing 22.8% year on year and generating $2.1 billion in sales. Midrange servers also grew, by 6.8%, on the back of demand for richly-configured x86 servers. High-end systems, typically in the non-x86 segment, were down 28% annually.
- Blade servers were on a statistical tie with rack systems as the fastest-growing form factors, with blades growing 22% and racks 22.6% year on year. Revenue for racks reached $1.7 billion in EMEA in 3Q10, 53.1% of the total market, with market trends such as demand for 2-socket ultra-dense racks gaining traction. Pedestals continued to decline, down 19.1% annually.
- Windows revenue was over 50% of the total market, at $1.6 billion. Linux was the fastest-growing operating system, up 23.7%, while Windows grew 23.4%. Unix was down 16.6% year on year at $647.0 million, and z/OS was down 14.2% at $193 million in revenue.
- RISC suffered the sharpest year-on-year revenue decline of all non-x86 categories, down 29.3%, and with sales of $438.7 million. CISC systems or mainframes were down 15.6% and EPIC-based servers were also down, by 15.4%. However, RISC, CISC, and EPIC figures are expected to pick up in 4Q10, a traditionally strong quarter for this segment.
Vendor Highlights
- HP continued in first position for the 11th consecutive quarter after growing its market share more than three percentage points in 3Q10 on 2Q10. Its x86 ProLiant server line exceeded the $1 billion mark in EMEA for the quarter.
- IBM displayed strong results for its x86 server line System x, whose revenue was up 13% in 3Q10 on 3Q09, generating more than 40% of its EMEA revenue for the quarter.
- Dell saw its revenue share of the EMEA market increase by two full percentage points on the back of strong sales of its PowerEdge Series, up 19.1% year on year, and continued strength in its DCS division for scale-out datacenters.
- Oracle saw its overall market share decrease year on year on the back of weaker market sales of RISC Unix systems.
- Fujitsu's sales of the x86 line of Primergy servers improved in line with the market, growing 15.1% year on year for around 65.3% of the vendor's total EMEA revenue.
IDC's EMEA Quarterly Server Tracker is a quantitative tool for analyzing the server market on a quarterly basis. The tracker includes quarterly shipments (both ISS and upgrades) and revenues (both customer and factory), segmented by vendor, family, model, region, country, operating system, price band, CPU type, and architecture. For more information, please contact Nathaniel Martinez on +44 (0) 20 8987 7184 or email nmartinez@idc.com, contact your local IDC office, or visit www.idc.com.
All product and company names may be trademarks or registered trademarks of their respective holders.
By technology, x86 industry standard servers consolidated their position as the dominant technology, with $2.2 billion in revenue and 533,000 shipment units, an annual growth of 26.5% and 11.0% respectively. It is worth noting that the strong revenue growth, more than double the unit growth rate, is a positive sign that industry standard servers are avoiding the trend toward commoditization seen in previous quarters. Higher ASVs are a sign that enterprises are moving their mission-critical applications to x86 from RISC, CISC, and EPIC, and demanding more richly configured systems with higher availability features.
On the other hand, spending on non-x86 servers continued to slide in 3Q10, with sales of $939.3 million, down 22.5% annually. This was the first time revenue for this segment was below the $1 billion mark since IDC records began in 1996, and far from the peak of $3.7 billion reached in the fourth quarter of that year. However, the evidence for pent-up demand taking place in 4Q10 and subsequent quarters is mounting as IT organizations in banking, government, and telecoms are currently actively looking into upgrading their scale-up server infrastructure following the availability of product refreshes from all the major vendors.
"Cloud is increasingly turning into a driving force on the European server market place. Telcos, service providers, and hosting companies of all sizes and across the land are engaging in datacenter consolidation projects and at the same time investing in additional server capacity to support new offerings centered on cloud computing," said Nathaniel Martinez, research director in the Enterprise Server Group for IDC EMEA. "Large HPC deals across multiple segments such as defense, academia, banking, and the pharmaceutical and utilities industries are also fueling additional demand for x86 servers."
"The EMEA server revenue growth is a positive indicator that the market is gaining traction and benefitting from refreshment activity in the hardware area. Banks and to a lesser degree insurance companies are currently engaged in server refreshes and adding new server capacity," said Beatriz Valle, senior research analyst in the Enterprise Server Group for IDC EMEA. "Server spending in the government segment remains healthy in France and Germany, although it is contracting in the U.K. and Italy. In the SMB segment, virtualization deployments are gaining steam."
Blade Server Segment
"Blade servers performed stronger than the overall server market , but paradoxically that was due to the boost in non-x86-based machines, accounting for $63 million in revenue in the wake of strong double-digit growth in the EPIC and RISC offerings from HP and IBM particularly. The outlook for non-x86 blades remains strong in 4Q10 too as vendors transition part or all of their midrange portfolios onto the blade form factor. The situation is different in the x86 camp. Here, the new focus on scale-out infrastructures and on scale-up multiprocessor boxes has kept blade unit shares virtually unchanged year on year. Despite huge demand in emerging countries such as Russia and Israel, x86 blades produced 19% yearly revenue growth, which did not match the 40% year-on-year revenue growth in rack-mount machines in the quarter," said Giorgio Nebuloni, senior research analyst in the Enterprise Server Group for IDC EMEA.
Emerging Markets
Central and Eastern Europe, the Middle East, and Africa (CEMA) recorded year-on-year growth of 14.6% in value and 17.9% in volume in 3Q10 from shipments of 147,000 units worth $743.50 million. Central and Eastern Europe (CEE) recorded the highest growth due to market recovery across most countries in the region. Revenue in CEE reached $383 million, representing 27.8% year-on-year growth. In contrast, the growth rate for the Middle East and Africa (MEA) was only 3.3% year on year, with the market value rising to $360.5 million.
The strong growth in CEE was driven by the three largest countries - Russia, Poland, and the Czech Republic - each of which reported double-digit value growth; combined, they made up over 70% of total server market value in CEE. According to Senior Research Analyst Jiri Helebrand, IDC CEMA, "The server market was driven by demand in both the public sector and the large-enterprise end-user segment. After the slowdown witnessed during the crisis, investment in IT is returning, and we expect it to continue in the coming quarters. Contrary to the situation in CEE, only two countries recorded double-digit growth in MEA, namely South Africa and Israel; the markets in Saudi Arabia, Turkey, and United Arab Emirates all declined."
Top Server Market Findings
- x86 servers consolidated their position as the dominant technology in EMEA by a big margin, with 70.2% of total revenue in 3Q10, a total of $2.2 billion, up 26.5% year on year. Non-x86 sales took 29.8% of total revenue with $939.3 million, down 22.5% annually. Non-x86 shipments were also down 17.5% to around 10,000 units.
- Volume servers gained market share, growing 22.8% year on year and generating $2.1 billion in sales. Midrange servers also grew, by 6.8%, on the back of demand for richly-configured x86 servers. High-end systems, typically in the non-x86 segment, were down 28% annually.
- Blade servers were on a statistical tie with rack systems as the fastest-growing form factors, with blades growing 22% and racks 22.6% year on year. Revenue for racks reached $1.7 billion in EMEA in 3Q10, 53.1% of the total market, with market trends such as demand for 2-socket ultra-dense racks gaining traction. Pedestals continued to decline, down 19.1% annually.
- Windows revenue was over 50% of the total market, at $1.6 billion. Linux was the fastest-growing operating system, up 23.7%, while Windows grew 23.4%. Unix was down 16.6% year on year at $647.0 million, and z/OS was down 14.2% at $193 million in revenue.
- RISC suffered the sharpest year-on-year revenue decline of all non-x86 categories, down 29.3%, and with sales of $438.7 million. CISC systems or mainframes were down 15.6% and EPIC-based servers were also down, by 15.4%. However, RISC, CISC, and EPIC figures are expected to pick up in 4Q10, a traditionally strong quarter for this segment.
Vendor Highlights
- HP continued in first position for the 11th consecutive quarter after growing its market share more than three percentage points in 3Q10 on 2Q10. Its x86 ProLiant server line exceeded the $1 billion mark in EMEA for the quarter.
- IBM displayed strong results for its x86 server line System x, whose revenue was up 13% in 3Q10 on 3Q09, generating more than 40% of its EMEA revenue for the quarter.
- Dell saw its revenue share of the EMEA market increase by two full percentage points on the back of strong sales of its PowerEdge Series, up 19.1% year on year, and continued strength in its DCS division for scale-out datacenters.
- Oracle saw its overall market share decrease year on year on the back of weaker market sales of RISC Unix systems.
- Fujitsu's sales of the x86 line of Primergy servers improved in line with the market, growing 15.1% year on year for around 65.3% of the vendor's total EMEA revenue.
IDC's EMEA Quarterly Server Tracker is a quantitative tool for analyzing the server market on a quarterly basis. The tracker includes quarterly shipments (both ISS and upgrades) and revenues (both customer and factory), segmented by vendor, family, model, region, country, operating system, price band, CPU type, and architecture. For more information, please contact Nathaniel Martinez on +44 (0) 20 8987 7184 or email nmartinez@idc.com, contact your local IDC office, or visit www.idc.com.
All product and company names may be trademarks or registered trademarks of their respective holders.
