According to a press release of IDC, worldwide server market revenues declined by 3.7%, whereas the new category of Original Design Manufacturers (ODM) Direct Servers, which correspond to servers installed by cloud providers, grew 45.2% year over year in 3Q13.

If you want any more proof that something fundamentally new is happening in IT, you should have a look at this IDC press release. For the first time, IDC included a new category in their server market report that takes into account the rise of cloud computing. Vendors such as Quanta Computer, Wistron Group/Wiwynn, Inventec Corporation, and Compal Electronics are categorized as Original Design Manufacturers (ODMs), and the new market segment is called ODM Direct Servers.

I have heard of Quanta Computer before, but the other names are new to me. Taken together, all ODMs now have a market share of 6.5%, which puts them in fourth place after HP, IBM, and Dell. It is interesting to note that the ODM Direct Servers category amounts to 14% of all server sales, which means that the average price of a cloud server is significantly lower than that of a conventional server. ODMs produce servers for cloud providers such as Google, Amazon, and Rackspace, and they probably get a better price than does an organization that only buys a few hundred servers a year. You say you buy fewer servers than that? Rest assured, then, that the price tag on your servers is even higher.

Most interesting, certainly, is that the ODM Direct Server demand grew 45.2% while the overall server market declined by 3.7%. The UNIX server market continues to crash, with a 31.3% decline (I didn’t know that some IT shops still buy UNIX systems). Linux server demand increased by 5.6%. And Microsoft? Windows servers did a little better than the overall server market and “only” fell by 1.3%.

Thus, the difference between Windows and Linux servers certainly has something to do with the cloud. Actually, I thought that Linux would grow much faster considering that it is the preferred OS of many big cloud providers.

If 14% of all new servers went into the cloud, 86% were installed on-premises (except those that you didn’t unpack yet because of lack of time, am I right?). I am unsure if this calculation makes sense because, I guess, at least some HP and IBM servers are also running in the cloud. However, by any account, this means that the vast majority of servers continue to be added on-premises.

Moreover, you have to consider that many ODM servers that are bought by Google, Facebook, etc. have nothing do with traditional enterprise IT. And let’s not forget about all these new services, such as Hulu and Dropbox, that mostly target consumers but require lots of computing and storage capacity and therefore all run in the cloud (most of them on AWS). Thus, I disagree with InfoWorld author Patrick Thibodeau when he claims that these developments can be mostly attributed to IT managers who are increasingly replacing servers with SaaS.

IDC ascribes the strong growth of the ODM Direct Sever segment (45.2%) to the transition from the 2nd Platform to the 3rd Platform. According to IDC, the 1st Platform consisted of mainframes and terminal servers, the 2nd Platform corresponds to the client-server model and the PC generation, and the 3rd Platform builds on “mobile devices and apps, cloud services, mobile broadband networks, big data analytics and social technologies.” You bet that Facebook needs quite a few servers but does not really belong in the SaaS category. (You might recall that Facebook is mainly a NaaS provider.)

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Nevertheless, there is no doubt that we are now dealing with two categories of IT. One is rapidly growing, while the other one is stagnating. One happens in the cloud, and the other one is in your server room.


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