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Cloud Computing Boosts Server Sales

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Contrary to popular perception in the IT industry, server sales are not dying out: in fact, they’re experiencing a growth spurt. And the type of growth says a lot about where we may be headed in the near- and long-term.

Gartner Inc. recently released its worldwide server revenue tracker, showing that sales for x86 servers increased more than 16% year-over-year, while shipments grew 5.1% from the third quarter of 2016. This may fly in the face of conventional wisdom, which has maintained for years that virtualization has decreased the need for physical servers.

While that was true at one time, the trend appears to be reversing. The reason? Cloud computing.

Jeffrey Hewitt, research vice president at Gartner, confirmed this in a press release. “The third quarter of 2017 produced continued growth on a global level with varying regional results. A build-out of infrastructure to support cloud and hybrid-cloud implementations was the main driver for growth in the server market for the period.”

Industry Standings

Hewlett Packard Enterprise Co. (HPE) and Dell EMC remain the leaders in the space. HPE continues to make the most money, with $3.1 billion in revenues, and leads in market share, with 21%. Those numbers, however, represent a slight decline of 3.2% from 2016.

Dell comes in second in both revenues and market share, but unlike HPE, it showed strong growth of nearly 38 percent over 2016.

While those numbers are interesting, the most eye-opening figures in the report come from Inspur Electronics, a Chinese company that specializes in cloud computing. Inspur surpassed $1 billion in revenue for Q3, more than doubling its growth, and nearly catching IBM for third place on the list. Gartner stated that Inspur’s staggering growth was “driven by ongoing sales into China-based cloud providers.”

Inspur specializes in end-to-end HPC, cloud computing, and private and public cloud management. It provides a full service stack and the gamut of “as-a-service” offerings, including Infrastructure-as-a-Service, Platform-as-a-Service and Software-as-a-Service.

Inspur has been around a long time, but their sudden rocketing growth in the cloud space will come as a surprise to many.

Should it, though? Increasing server sales shouldn’t surprise anyone who’s been paying close attention to trends. Cloud computing requires more resources, not fewer. The need to move data back and forth between on-premises data centers and public/hybrid clouds demands faster, more efficient CPUs and storage. Pooling resources only gets you so far; eventually, you have to increase the size of the pool if you want to keep up. Latency – a key factor in cloud usage (or lack thereof) – won’t be overcome only by strategies like using containers and other technologies. You eventually need more hardware, too.

All Thanks to the Cloud

Gartner’s figures were more than backed up by another major analyst firm, IDC, when it released its own Q3 figures. It showed a similar increase in server shipments, and chalked the increase up to the same cause:

“Hyperscalers continued driving volume demand in the third quarter, with Amazon again leading the charge, as Google and Facebook also began ramping up their server deployments again,” said Kuba Stolarski, research director of Computing Platforms at IDC. “While ODMs have largely been the beneficiaries of hyperscaler server demand, some OEMs have now begun to experience significant growth related to the enterprise segment.”

Key Insights

There are several takeaways from this news. One is that you have more choices than ever when it comes to the cloud. Private, public, hybrid – they’re here now, and there’s a lot more coming. New options are open to you to find the perfect fit for your company’s needs and budget. Choice is good.

It also shows the increasing strength of the hyperconvergence market. Hyperconvergence is white-hot right now, and those devices are being built on x86 servers. Hyperconvergence scales fantastically well, and adding capacity is easy. That’s why they’re favored by cloud vendors.

The news follows on similarly good sales news from the previous quarter, demonstrating that this isn’t likely to be a momentary blip on the radar, a small uptick followed by a crash. Propelled by the various manifestations of cloud computing, servers are back, and the future is looking brighter.

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Keith Ward
keithw@keithwardfiction.com

Keith Ward is a veteran technology journalist. He's been covering the IT space for 17 years, and was the founding editor Virtualization & Cloud Review magazine. He's also served as editor-in-chief for Redmond magazine and TechNet magazine, and worked in IT in the early Cretaceous Period.

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