[vc_row][vc_column][vc_column_text]Synergy Research Group recently released its rankings of the top vendors in cloud infrastructure, with Cisco, HP Enterprise, and Dell EMC claiming the top three spots for public cloud hardware. That’s the good news.
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The bad news is that every server vendor but HPE saw revenue declines over last year as big datacenters increasingly skip name-brand servers for no-name boxes from original design manufacturers (ODMs), as IDC data reflects. Even HPE’s server revenue barely eked out 3.5 percent growth. In other words, every big-brand server vendor is essentially a loser in the cloud.
Winning a losing battle
Dell combined with EMC to big itself up in a quest to compete with HPE, Cisco, and others. That strategy seems to have worked, at least as it relates to server sales in the private cloud infrastructure market.
Yes, private cloud is almost certainly a transition phase for enterprise computing, wherein risk-averse CIOs tiptoe toward true public cloud computing. Commenting on this point, analyst Curt Monash declares it is now “widely understood” that “due to economies of scale, only a few companies should operate their own datacenters.”
Yet many still do, believing that certain workloads are simply inimical to public cloud infrastructure. As such, HPE, Dell EMC, and Cisco each took a sizable chunk of the private cloud server market:
server market share
As seen in the chart, these same companies own the public cloud server market. Across both private and public cloud spending, which grew 16 percent year-over-year, these vendors earned market share of 15 percent (HPE), 14 percent (Cisco), and 13 percent (Dell EMC).
Or did they?
No name, big business
As IDC points out in its report, the name-brand vendors are getting squeezed by ODMs, which ship no-name, increasingly custom-built servers. Eckhardt Fischer, research analyst at IDC, noted that revenue decline “is strongly driven by the continued expansion of ODMs … a trend that IDC predicts will continue as mega datacenters and larger enterprises begin to source their hardware directly.”
We should expect this trend to continue as public cloud infrastructure outpaces private cloud growth. Already Gartner has found that public cloud VMs are growing at a torrid 20-fold pace, compared to a more leisurely three-fold growth rate for private cloud VMs. Couple this with IDC’s discovery that “rack-optimized [servers], often considered the backbone of public cloud datacenters … were the only form factor to experience revenue growth for the quarter,” and we see a perfect storm for cloud computing to trash the traditional server market.
One way that server vendors are fighting back is by embracing the custom server craze. As Agam Shah reports, Lenovo “is working toward offering custom-built converged servers targeted at specific tasks,” in a bid to satisfy customers that demand highly tuned software-plus-hardware stacks. It’s a trend that is roiling the server industry, as evidenced in both top-line revenue growth and profitability for server vendors, but there simply isn’t an option.
Even these desperate efforts may not be enough if the market continues to centralize spending around a few cloud vendors: AWS, Microsoft Azure, and Google. With growing powers like Facebook determined to build their own datacenters and the public cloud vendors customizing their servers, the leftovers look sparse for traditional vendors. [/vc_column_text][/vc_column][/vc_row]