Are Cloud Providers eating Server Markets’ Lunch?

by Omer Siddiqui  June 7, 2013

Two reports, one interesting insight:

You might have already heard about the continuous decline in the global server market. According to an IDC (International Data Corporation) press release on 29th May, 2013 [1], both HP and IBM saw more than a 10% decline in revenues on a year-over-year basis, while the overall industry observed a dip of 7.7%. The only company that performed relatively well was Dell (no pun intended), which witnessed a 2.6% growth.

IaaS and PaaS

In other news, cloud service providers witnessed a staggering growth of 56%. A research published by Synergy Research Group the very next day on 30th May, shows that IaaS and PaaS provider garnered more than $2 billion in revenues in Q1, 2013.

WORLDWIDE REVENUE MARKET SHARES
COMPANY Q1, 2012 Q1, 2013 % CHANGE
Amazon 24.7% 27.3% 10.5%
Salesforce 7.9% 6.8% -13.9%
Microsoft 4.8% 5.6% 16.6%
IBM 4.7% 5.1% 8.5%
Google 4.1% 4.9% 19.5%
Fujitsu 4.6% 4.8% 4.3%
NTT 2.9% 2.0% -31.0%
AT&T 2.0% 1.9% -5.0%
Others 44.3% 41.4% -6.5%

Enterprises are reluctant to deploy their own infrastructure

With increasing enterprise adoption of cloud solutions, it’s clear that companies are in fact looking for different options, before building and deploying a traditional in-house infrastructure. Emerging markets such as Africa and South Asia also saw a decline in server shipment.

The perks of cloud technology, such as metered billing, substantially lower CAPEX/OPEX (Capital Expenditure/Operating Expense) and agility in the form of instant scalability and High Availability, are getting firms to think twice before implementing a homegrown solution. Recently, word got out that the FBI is moving to the cloud [2], by building a “virtual private cloud” on Amazon’s public cloud architecture. So with another government body to adopt the cloud, it paves the way for enterprises to follow suit and entrust public cloud providers with data.

However, perhaps the best attribute of the cloud is the true democratization of utility computing, by enabling small and mid-sized firms to utilize the technology that was not long ago available only to large enterprises.

Whether many companies will switch to the cloud after their existing servers reach the end of their lifespan, is debatable. However cloud providers remain optimistic, and back it up with market performance metrics.

So what’s next then?

Server market proponents IBM, HP and Dell had predicted this change in demand. IBM announced last month [3] that it will adopt OpenStack while HP and Dell have already started to create their own versions of private clouds. The private/private cloud debate will likely continue for sometime but will the server market become almost not-existent? We don’t see that happening anytime soon. Gartner’s report goes in this direction as well [4]. While shipment was low worldwide, there was an increase in server shipment in Asia-Pacific and North America of 7% and 1.7%, respectively.

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[1] http://www.idc.com/getdoc.jsp?containerId=prUS24136113

[2] http://businessinsider.com/cia-600-million-deal-for-amazons-cloud-2013-3

[3] http:// informationweek.com/cloud-computing/infrastructure/ibm-openstack-adoption-ushers-in-new-clo/240151079

[4] http://gartner.com/newsroom/id/2497015

 



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About Omer Siddiqui

Omer Siddiqui oversees Marketing Communications, Digital Partnerships and PR at Cloudways. He has 6+ years of experience in the IT Services Industry.

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