Sizzles and Fizzles in the Server Forecast

Transcription

1 Sizzles and Fizzles in the Server Forecast Forecast Analysis Abstract: Intel Architecture 64-bit-based-server revenue will grow at more than 90 percent per year through 2008, surpassing $7 billion worldwide. By Jeffrey Hewitt and Karen Benson Strategic Forecast Statements Intel Architecture 64-bit (IA-64)-based servers will exhibit the highest relative growth in revenue with a compound annual growth rate (CAGR) from 2003 through 2008 of more than 90 percent, surpassing $7 billion on a worldwide basis. The high growth rate for IA-64-based servers can be attributed to a relatively new technology growing from a small base in 2002 IA-64-based servers represented 0.2 percent of worldwide server revenue, but this will rise to over 16 percent by year-end Through 2008, the CAGR for Linux server revenue is projected at approximately 18 percent, reaching $6 billion. Publication Date:15 July 2003

2 2 Sizzles and Fizzles in the Server Forecast Forecast Overview Gartner Dataquest's quarterly worldwide server forecast includes coverage of the following regions: Asia/Pacific, Canada, Eastern Europe, Japan, Latin America, Middle East and Africa, the United States, and Western Europe. Gartner Dataquest's forecast model takes a bottom-up approach, with regional analysts submitting their respective regions' forecast assumptions and conclusions. This regional input is then compiled to form the worldwide forecast database. This approach allows for local drivers and inhibitors to be incorporated into the model, resulting in a more accurate worldwide forecast. This database, "Servers Worldwide Market Share Database and Forecast Database," HWCP-WW-DB-SV02, can be accessed and manipulated for a more detailed view and a thorough understanding of the dynamics of this market. The purpose of this document is to examine the macro trends that can be found in that forecast relative to CPU and OS groups. These trends provide some insight into the growing and maturing trends in the worldwide server market. Forecast Scenario Dominant Market Accelerators Dominant market accelerators from a global perspective include the following: An increasing use of compute-intensive applications to solve business problems is driving demand for both vertically and horizontally scalable servers. From fluid dynamics analysis to human genome mapping, the lessons learned from these fields have shown signs of being applied to other business problems to increase competitive effectiveness. This is resulting in growing demand for high-performance-computing-type solutions in general business environments, beyond the traditional domains of government and educational establishments. Computeintensive types of applications have traditionally required high-end server platforms providing leading performance and throughput. While demand is strong for these high-end architectures, interest is growing in building lower-cost clustered systems, built on commodity technology such as Intel Architecture 32-bit (IA-32) microprocessors. Linux has been particularly successful in this domain. Continuing growth of pervasive computing technology on thinner platforms (for example, smartphones, PDAs and stations) resulting in more Internet-based activity and more need for server technology at the back end to enable related applications. Web-based business activities requiring more servers to enable their effectiveness. Recent Gartner Dataquest IT spending surveys indicate that top spending priorities for 2004 include Web/Internet application deployment as well as back-end application Web integration Gartner, Inc. and/or its Affiliates. All Rights Reserved. 15 July 2003

3 Security continues to be high on users' investment priorities. While this revenue opportunity is still a relatively small proportion of total IT spending, it does represent new solutions opportunities for vendors. The move to alternate or replacement technologies (for example, Intelbased servers, Linux and servers costing less than $10,000) to increase competitive capabilities or reduce costs is producing shipment growth in specific areas but is reducing overall market revenue at the same time. Within the current economic climate of IT spending caution, demand is particularly price-sensitive. This has resulted in a swing toward low-cost server architectures and intense pricing competition in the marketplace as vendors compete for what little new business is on offer. This climate has and will continue to benefit one- and two-way servers and clustered solutions. There has, in parallel, been a steep decline in spending on traditional reduced instruction set computer (RISC) midrange servers, which are being eroded by lower-cost commodity platforms or consolidated onto high-end siblings. Consolidation is driving different areas of the server market. Spending on midrange Unix servers has already been negatively affected by rationalized consolidation onto higher-end servers. Users' ongoing demand for reduced complexity will buoy the sales for these higher-end servers. Similarly in the Intel server world, rationalized consolidation of one- or two-way server workloads onto four- and eight-way servers will drive demand for more-scalable platforms. In contrast, improvements in logical consolidation tools will help to drive sales of lower-end systems for specific workloads that lend themselves to clustered environments. Business value will be the deciding factor when it comes to choosing between the two approaches. Dominant Market Inhibitors Market inhibitors for the server space include the following: The single most-pervasive inhibitor is economic constraint that limits capital expenditure. Many times these acquisition limitations fall on IT departments in the form of budget constraints. Recent Gartner Dataquest surveys indicate that IT spending will continue to be constrained to year-end 2003, with 2004 expected to see a small increase (3 percent to 5 percent, depending on the region). Ongoing price competition and budget restrictions are limiting the growth of the RISC server market, which, in turn, negatively affects the overall space. The availability of applications to take advantage of specific server technology. Hardware typically leads software in its technical capabilities because software that takes advantage of new hardware features may not be readily available at the release of the hardware technology. This can limit the adoption rate of the hardware. A great example of this "hardware lead" is Itanium. Even though Itanium servers have been shipping for two years, software that takes advantage of the CPU's 64-bit width and its Explicitly Parallel Instruction Computing (EPIC) architecture is only now becoming widely available Gartner, Inc. and/or its Affiliates. All Rights Reserved. 15 July 2003

4 4 Sizzles and Fizzles in the Server Forecast Legal issues related to open-source software may create some growth inhibitions for Linux (see "SCO's Threat to Sue Linux Users Serious but Remote," FT ). Server consolidation will inhibit the sale of some server units in cases in which workloads can be combined effectively through such technologies as partitioning onto single, more-scalable servers and result in a perceived improvement in total cost of ownership. Macro Trends CPU Trends From the CPU standpoint, if we examine IA-32 and IA-64, as well as RISC, and proprietary architectures (hereinafter referred to as "others") a few trends become apparent. The first is that the greatest relative growth opportunity can be found in the IA-64 area. Primarily, the Itanium family of processors from Intel fuels this. IA-64 servers will reach shipment levels of more than 230,000 by 2008 and revenue surpassing $7.4 billion on a worldwide basis, achieving a CAGR from 2003 through 2008 of more than 90 percent for shipments and revenue. These high growth rates are an obvious result of the small base from which IA-64 servers are growing. Itanium is a relatively recent technology and has yet to reach what can be categorized as "volume shipments." To put this into perspective, in 2002, fewer than 3,500 servers built on Itanium microprocessors shipped worldwide, which is barely 0.1 percent of the total worldwide market. With the recent introduction of the Itanium 2 CPU code-named Madison, we will begin to see a steady turn in the tide for Itanium-based server shipments. This CPU introduction already has wide vendor support, and the prospect of future Madison variants later this year means that we will see vendors expanding their current Itanium 2-based product portfolios. Itanium 2-based server portfolios will be further enhanced with the introduction of the low-voltage version of Itanium 2, code-named Deerfield, later in Server shipments will initially be driven predominantly by Hewlett-Packard's desire to move its installed base from PA-RISC and Alpha to Itanium. HP has been the leader among server vendors in driving independent software vendor commitment to Itanium to protect its installed base. Initial shipments therefore will be predominantly HP-UX and Linux. As 64-bit Windows matures and a full third-party application software portfolio is realized, we will see increasing momentum from Windows deployment. In contrast, the RISC and others categories are projected to decline. RISC server shipments will decline through 2008 with a negative 6.8 percent CAGR, while the revenue CAGR will fall 4.3 percent. Servers utilizing other CPUs show a slightly greater shipment CAGR decline of about 7.6 percent, and their revenue CAGR decline is more severe, approaching 6.7 percent through RISC is projected to stay ahead of IA-64 servers in relative revenue at well over $14 billion while other-cpu-based servers will drop behind to about $4.5 billion worldwide by Gartner, Inc. and/or its Affiliates. All Rights Reserved. 15 July 2003

5 IA-32 servers will show growth for shipments and revenue through The shipment CAGR is predicted to be approximately 5.7 percent through 2008, and IA-32 servers will exhibit a relatively lower revenue CAGR for thesametimeperiodatabout3percent.thiswillbethelargestcategory of servers from a CPU standpoint in shipments (more than 5.8 million) and revenue (more than $19.8 billion) in OS Trends For the sake of examining the macro trends in this area, we will divide server OSs into four categories: Linux, Unix, Windows and others. With respect to relative growth, Linux servers show the greatest promise. Through 2008, the CAGR for Linux server shipments is projected at more than 20 percent, reaching more than 1.5 million by In the same period, Linux server revenue is forecast to reach just over $6 billion with a CAGR of about 18 percent. Windows servers come in second in relative growth at a CAGR of over 4 percent for shipments and over 3 percent for revenue. This OS is projected to be the leader in overall totals, reaching more than 4 million shipments and over $15.5 billion by Unix server shipments are predicted to decline at a nearly 4 percent CAGR, falling to about 350,000 shipments by Revenue will grow at a CAGR of just more than 1 percent to reach more than $17 billion in The greatest decline from an OS perspective is in the others category. With CAGRs of about negative 8 percent in shipments and negative 7 percent in revenue, this category will decline to just over 308,000 shipments and just over $7.2 billion in revenue by Understanding that this category includes proprietary OSs as well as declining products outside of the others category (for example, NetWare) explains the nature of this decrease. 5 Gartner Dataquest Perspective Examination of the forecast server trends relative to CPU and OS types provides insight into the future of server usage. With the proliferation of 32-bit Intel servers and their increasing processor performance, a large percentage of server workload types can be handled acceptably with these low-cost servers. This trend will continue as other factors such as horizontal scaling through virtualization expand some of the workload capabilities of these servers and, in turn, their market growth. At the same time, the relatively high initial cost of proprietary servers and other factors (for example, lack of market momentum, lack of vendor choice and fear of being "locked in" to a vendor) make them less appealing and continue to drop the other CPU server types into a decline Gartner, Inc. and/or its Affiliates. All Rights Reserved. 15 July 2003

6 6 Sizzles and Fizzles in the Server Forecast IA-64 servers will capture a percentage of the RISC space by default as certain Unix variants migrate to the former (most notably HP-UX), helping to fuel the rapid rise of IA-64. Even so, through features such as partitioning and a continued focus on workloads in which symmetrical multiprocessing (SMP) and large amounts of memory have clear advantages, RISC servers will push themselves at higher levels of single system functionality. While revenue growth for RISC servers will be constrained by increasing competition among the market leaders, these servers still will occupy an important place in the overall server market by Linux will expand into other workloads beyond front-end Web serving, in which it has thrived well to date. The appeal of its licensing costs relative to other OSs, a continued push into the Linux server space by the leading server vendors, increasing functionality, the proliferation of available applications and the growth in the number of IT professionals with Linux experience will help to drive that trend. While continuing to lead in overall volume and sales, Windows servers will face their only real growth challenge from Linux. Despite that, Windows will maintain its relative lead and steal some share from the declines that will appear in the Unix and others categories. Gartner Dataquest Recommendations Based on this forecast view, the following recommendations can be made. For server vendors and market participants: With IA-32 servers, ensure the delivery of solutions that can effectively solve workload problems for the customer while demonstrating a cost/performance advantage. Target those customers whose budgets do not allow large single-server purchases by providing modular solutions and by pricing and positioning IA-32 servers to be within the signature authority of the maximal number of possible purchasers. With IA-64 servers, focus product introductions on demonstrable customer benefits and take advantage of the market traction that should begin to appear in Follow the open-source legal situation and ensure that contingency plans are considered in relation to Linux offerings. Forserverendusers: Look for the maximum cost/benefit in the IA-32 server area when considering moving new production workloads to these servers. Examine projected growth patterns of server technologies to determine whether an innovator, early adopter, or late-adopter position would be best depending on the risk/returns presented by particular hardware/os platforms. Ensure that open-source legal issues are resolved before moving critical applications and high numbers of servers to the Linux OS Gartner, Inc. and/or its Affiliates. All Rights Reserved. 15 July 2003

7 7 Key Issue At what rate will each computing hardware platform grow or decline in the next five years? 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 15 July 2003

8 8 Sizzles and Fizzles in the Server Forecast This document has been published to the following Marketplace codes: HARD-WW-DP-0535 For More Information... In North America and Latin America: In Europe, the Middle East and Africa: In Asia/Pacific: In Japan: Worldwide via gartner.com: Entire contents 2003 Gartner, Inc. and/or its Affiliates. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice