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Will the Cloud Continue Driving Revenue Growth Across the Server Market in 2018?

By Paul Rubens (Send Email)
Posted February 27, 2018


Hybrid clouds have become very important for sever virtualization vendors like VMware — it's something we discussed in this column very recently. VMware is interested in hybrid clouds for the same reason bank robbers raid banks: that's where the money is.

But it's not just the likes of VMware that have dollar signs in their eyes when the topic of hybrid clouds comes up for discussion. Hardware vendors are also having something of a bonanza on the back of hybrid clouds too.Virtually Speaking

Want proof? Consider this. In the third quarter of 2017, worldwide server revenues jumped 16% over the previous year, according to research published by Gartner. And where is all this growth coming from?

"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," says Jeffrey Hewitt, a research vice president at Gartner.

The importance of huge hybrid clouds (and public clouds) is having a marked effect on the whole server landscape. x86 servers increased 16.7% in revenue, while RISC/Itanium Unix servers declined 18.3%.

The market leader in the server space is HPE, but the increasing importance of hybrid clouds does not seem to be providing the company with a boost: its market share declined by more than 3%. Not a death blow of course, but not particularly encouraging for HP.

The biggest gainer in terms of market share was Inspur Electronics. It's a name you many never have heard of, but the China-based company concentrates on supplying servers to cloud data centers, particularly (but not exclusively) to Chinese cloud providers. Inspur's market share skyrocketed over 116% during the quarter.

The other big winner in terms of market share growth was Dell EMC. That's significant, as you'll remember Dell acquired EMC last year, and, even more significantly, EMC owned most of VMware.

As a result, Dell now controls VMware and its virtualization technology, and, most significantly of all, the net effect is that Dell's now selling a heck of a lot of computers that use VMware's technology. Seems like the acquisition was a clever move on that front.

Cloud Costs Could Be a Hot Topic in 2018

Of course, VMware is far from the only name in town when it comes to hybrid clouds, and choosing VMware is often perceived to be a pricey option.

That may be the company's undoing — at least, that's the view of Alex Polvi. He's the controversial boss of CoreOS, a company that offers container-based infrastructure for, you guessed it, clouds. He points out that the combined IaaS, PaaS and SaaS market is now worth more than $70 billion per year, so companies like VMware can make big bucks. But, he asks, what about their customers?

What he's hinting at is that the theme for this year may be one of cutting hybrid cloud costs by avoiding vendor lock-in.

"Don't be surprised… if 2018 is the year that cloud billing — and how quickly it can balloon out of control — becomes a hot talking point across the industry," he said. "Once customers become reliant on a vendor's proprietary cloud services for their applications, it becomes nearly impossible for customers to take their business elsewhere.

"Cloud computing isn't going away, but customers are demanding choice — which is why application portability across data centers and clouds will surely be one of 2018's hottest topics," he concludes.


Paul Rubens is a technology journalist and contributor to ServerWatch, EnterpriseNetworkingPlanet and EnterpriseMobileToday. He has also covered technology for international newspapers and magazines including The Economist and The Financial Times since 1991.

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