The cloud, virtualization, analytics, new technologies that promise to change the face as well as character of enterprise IT today, threaten almost all legacy knowledge. Traditional server boxes are under the onslaught of new, brave functionalities that are increasingly being demanded form IT. Where is the server headed? Is it oblivion? Or is it towards a transformation that will leave it smarter, faster and barely recognizable, but hugely applicable and fitting for the new IT environment?
According to a Gartner report, the global server revenues in the third quarter of 2014 grew 7.4 percent in revenue and 1.2 percent in units, to reach 2.5 million shipments, touching USD 12.6 billion.
This growth was apparently only merely 1 percent YoY compared to Q3 2013, which seems a little disappointing, given that almost every industry worldwide today rides on IT. A deeper look says that this even growth is only for x86 servers, while the RISC/Itanium Unix server shipments declined 17.1 percent globally for the period and declined 8.0 percent in vendor revenue compared with the same quarter last year, according to Errol Rasit, research director at Gartner, in a statement to press.
A rival research company, IDC, though showing drastically different rates of growth and decline (reported a 20.9 percent decline in non x86 servers over 2013), has painted an even more abysmal picture of the server market.
2014, says IDC, is the thirteenth consecutive year when non x86 servers are seeing slower growth, and the biggest vendor, IBM, (with almost 60% of the market), saw a YoY decrease of 23.9% in revenues in the revenue, compared to third Q of 2013. In the overall market, IDC puts HP as the leader with about 26 % market share and IBM a 23%.
The biggest reason for this downward sloping demand curve is the adoption of cloud and cloud based technologies and applications. While smaller companies find the advantages of the cloud too tempting to refuse, this is still adding to the demand for large-scale deployment by cloud service providers. While the general market for servers is slowing down, the demand for cloud based users is far outpacing that market.
“The Server market has been more or less flat or negative in last few 
quarters, the kind of growth we need to see has not happened.” says Nitin Mishra, Senior Vice President, Product Management, NetMagic. “This slow growth will continue due to cloud computing. What will happen now is each enterprise will opt for few servers but with higher computing power. Growth will be muted, mainly fuelled by the demand by eCommerce and net related organisations. But this demand is not adding to the growth of the market because it is being evened out by increasing virtualisation.”
The server market, according Nitin Mishra, will not die away but simply transform with the changing times. “It will move towards high performance servers, service providers and large web companies, and move out of the common market. A major chunk will get sold to eCommerce companies, and more of high performance servers will be on the market. The market will increasingly become smaller for niche severs as well,” he says.
The industry players have clarity on the dynamics. For organizations that utilise this insight, the trend is not only about servers, but about the direction in which storage technologies are headed.
In India, this decline is not so strongly visible. As per a recent report by Gartner, the Indian IT infrastructure market, comprising of server, storage and networking equipment, will total $2 billion in 2015, a 5.3 percent increase from 2014. In fact, India will be the second largest and second fastest growing market for Datacenter infrastructure within the Asia/Pacific region, and it will also be the second fastest growing market in Asia/Pacific in 2015.
“Storage modernization and consolidation, backup and recovery, and 
disaster recovery are some of the key drivers to this market, and they are likely to remain relevant drivers over the forecast period through 2017,” says Santhosh D’ Souza, Director- Systems Engineering, NetApps Marketing & Services Pvt. Ltd India.
Solution providers who are actually on the ground, have a clearer vision. Venkat, the Prime Mover of the team Alpha, at 22by7 observes, “Applications are leading IT architecture today. Conventional servers’ sale is driven by applications, they are deciding what needs to be bought for the infrastructure, and a lot of consolidation is also happening. With applications, different kind of hardware is required, and that is dictated by the business. In Servers, Blades are becoming prominent rather than towers. This is because scalability is becoming important while capacity is not a major issue. Big data and analytics, that are fast becoming an important part of IT, require very high end processing power…so they need more power to hand in that kind of compute. I feel Cisco is taking the lead, taking things further.”
Of course, from the RoI point of view, blades offer a lot of advantages in terms of savings of power, cooling energy, as well as real estate. It is no wonder that they are favoured today, in times of constant crunch.
But the real reason behind this downfall of servers is the shadow of the Cloud. The cloud and its obvious advantages are shaping this new future.
The Shadow of the Cloud
The decline of the server market as we know it, is largely drive by the newer paradigms of computing- virtualization and the cloud. For the past few years, IT organizations have acknowledged that cloud computing delivers concrete benefits, but security and privacy concerns have largely necessitated private cloud initiatives. Enterprises across the globe are shifting their business applications from dedicated infrastructures to private and public cloud environments. New age challenges and businesses demand new age IT infrastructure. Increasingly all Infrastructure vendors are designing and providing Cloud Integrated solutions to help Enterprises take advantages of some of the obvious benefits that Cloud has to offer “2015 will find enterprise platforms beginning to encompass hybrid cloud architectures. Every decision that puts an application in the public cloud means one more application that will never be deployed internally,” Santhosh D’ Souza says.
So, in the coming months and years, CIOs will sort their application portfolio into one set that they must control entirely (in on premise private clouds), another that they control partially (in enterprise public clouds), and workloads that either involve no data privacy issues or are transient (in public or hyperscalar clouds). Says D’Souza, “IT teams will function as service providers and architectural mediators across these diverse models. Abstraction is going to spread from computing to storage, networking and security resources as well – converting all hardware elements into pools of resources that can be utilized by applications and users on demand and at scale.”
However, estimates show that in 2020 over 70% of infrastructure spends will still be on-premises. “It’s also clear that a Hybrid model is the future and that customers will be looking for vendors that can provide a consistent environment and consistent management tools across both their private and public clouds,” elaborates Manish Alshi, – Partner Sales Head – VMware India
Whether it is public, private or hybrid, the shadow of the cloud has 
certainly fallen on the server market. Some big players have seen this trend coming and prepped their market strategy to match the changing demand. “We have noticed a big shift in companies adopting high density server to public cloud, while micro servers continues to reside on premise. In an era of cloud, enterprise mobility and BYOD, organizations of all sizes are experiencing data deluge with terabytes of data being created, stored and managed within an ecosystem, ” adds Srikanth Karnakota, Director – Server and Cloud Business, Microsoft India
Channel players and the real solutions providers also see the changing winds blow a different way. Observes Venkat of 22by7,” Cloud is changing the direction …whether an enterprise is opting for the adoption or not, a lot of consolidation is happening, which is encouraging virtualisation, and so throughput capacities are going up. Cloud is changing the architecture of the Datacenter and that’s changing the server market, impacting in numbers. Server markets today need to come out with more powerful machines- agile, scalable server solutions, if they are to survive.”
As K H Krishna of Chennai based SpudWeb, hosting partner for Datacenter service provider Sify, says, “More and more customers are essentially looking at the cloud- AWS, Sify, IBM. Recently, IBM selling out their server business to Lenovo is a sign of the times that is the market pointer that is significant. Margins are shrinking because of competition; a company like IBM is now moving to cloud business. “
However he does not think that the server market is completely lost. There are still some applications that need a proper old fashioned server to execute- File Server, Active Directory etc., “these will not move away from the on premise model,” Krishna points out. “Most business will not move their core operations to the cloud just yet. Maybe CRM and some other peripheral processes may move into the cloud because they do not need constant surveillance. In the trade off between keeping processes internally and off premise, the biggest problem was the availability of bandwidth. Now it is largely stable, so enterprises will look at the option of off premise apps. However, the core will remain inside and other things will be off premise.”
However he says, though this will change the direction, it won’t make servers obsolete. Core business activities may not all be migrated to the cloud, and hence enterprises will still need servers. It will be a mix of on premise and cloud.
Market opportunity
The changing server market, even though a downturn, hold opportunities for vendors and partners alike. The biggest opportunity comes from the demand for much more efficient servers that makes sure innovation is a continuous process. “The moment the SLAs get more stringent, the number of physical servers is already a shrinking because of virtualization, at least from a hardware perspective. And even this smaller hardware needs to be extremely reliable for higher efficiency software to run optimally on it, so much high availability and efficiency is built into every server today,” Venkat summarises the market sentiment.
Besides, as long as on premise models are being used, high availability and cluster servers are in great demand, since zero downtime is key for applications that run critical business processes, like SAP, which use a company’s core data, Krishna feels. As explosive growth of data now impacts more organizations across more business segments than ever before, the benefits of clustered storage have both dramatically increased and become increasingly affordable. It’s not always the most appropriate platform for all businesses – no technology ever is. But, as more companies learn about clustering, and how it could work for them, many are pleasantly surprised to discover it is an affordable and extremely powerful solution to their data needs.
Bigger enterprises also can benefit from this new paradigm. As NetApps D’Souza says,”Clustered storage has driven more and more organizations to adopt and benefit from scaling their data infrastructures out (horizontally) as opposed to exclusively scaling them up (vertically). Clustered storage was traditionally assumed to be primarily, or even only, appropriate for enterprise-level businesses. The ever-intensifying explosion of data and the changing role of IT operations, however, are motivating more midsize and even small businesses to investigate the advantages of clustering. Some clients assume that the cost of clustered storage outweighs the benefits it offers. “
Opportunities are everywhere. Evolving technologies have created newer opportunities, and VMware’s Manish Alshi sees the advantages the changed circumstances have to offer, “We still see a big opportunity for our virtualization business as the industry transitions from the aging RISC/UNIX-based servers to newer and more advanced x86-based architecture. Just as server virtualization changed the paradigm for server operations and management, we expect network virtualization to change the paradigm for network operations and management here in India as well.”
The server market is no longer what it was a decade ago. With the arrival of virtualization, there was a Teutonic shift in the landscape. Less utility of physical servers was a big reason for innovations in the server space, giving rise to newer, smarter, faster and small technologies. But this has not lead to the death of the market, only a transformation of the product, and the way the technologies have been used. There is a new market awaiting the new family of servers that will be used in the new age of IT- an age dominated by analytics, insights and mobility. The new business dynamics will require new efficiencies and functionalities, newer definitions of RoI and also, newer way of functioning of enterprises.
There is a new market growing where the old one is slowing down, so it’s not cause for concern, not yet at least!
The Brave new Survivors
Today, there is a new category of enterprise servers that are taking over the market. These new boxes are high-density servers that will soon replace, or at least partly replace traditional server racks. But on ground may not be such an encouraging picture. Krishna reveals, “They are for niche usage, so people are waiting and watching, and holding on to investments. There is a slowdown in server market as such, while enterprises are trying to make a trade off between the cloud and on premise infrastructure. Finally, if they see value in it, they will certainly go for it.”
Says Nitin of NetMagic, “we are clearly seeing servers with more high RAM and computing power in the market, and most of this high density, high performance servers are going into private cloud or public clouds. Secondly, there is clearly the trend of convergence of systems. It started with unified communications but now, convergence will be adopted across all IT infrastructure components. This adoption is all set to go up, and we will see more adoption by large enterprises with requirements for high compute environment. Thirdly, customers are moving towards more open systems than proprietary, towards Hurrix platforms, and that will continue, and will gain strength.”
Emergence of specialised usage appliances is also going to increase, he opines, basically converged applications like HANA, a combination of hardware and database.
Though server virtualization is not a new concept, lately it’s in the public and private clouds that the big brands are making their investments.
While a number of IT trends are resulting in the transformation of today’s Datacenters, the use of flash storage has begun to play an important role in the enterprise market in India. New Flash technologies have developed in many forms and have achieved high reliability and extreme performance at impressively low latency.
Convergence, clusters and flash seem to be the trinity that will keep the servers alive, according to NetApps’ D’Souza. “As customers try to optimize IT performance while simultaneously balance their cost and agility in their Datacenter, new metrics for flash will be of great help and flash adoption, hence, will see an increase. Converged infrastructure will also witness a strong momentum as it will enable integration of open and scalable systems that will increase the business outcomes. Customers looking for scalable storage and zero downtime will boost the market for clustered storage adoption as well, and we are positive we will see a rise in this technology,” he says.
Another interesting industry adoption is that of software defined Datacenters. As D’Souza says,” Software Defined Datacenter architectures are increasingly prominent in redefining IT frameworks – focusing on storage, security and networking, while extending cloud computing. Clustered storage is driving increased adoption as it helps to scale the data infrastructures out (horizontally) as opposed to exclusively scaling them up (vertically), while delivering enterprise class performance, reliability and service ability.”
At VMworld 2014, held at Barcelona last year, VMware announced new virtualization, cloud management and integrated OpenStack solutions a product portfolio for implementing a software-defined Datacenter, and empower customers to deploy VMware software-defined technologies within open frameworks. These would also help to implement software-defined Datacenters and hybrid cloud environments on both VMware and non-VMware technologies. Says Manish Alshi, “The transformation of the Datacenter is inevitable. When it comes to solving customers’ most pressing problems with IT, flexibility and agility always win. We believe that the power of software, decoupled from hardware, is the way forward. Whether a customer is building out a new Datacenter, or updating an existing Datacenter, they are making an investment in the business. Virtualization is the enabling technology for a whole new wave of IT innovation.””
Another trend in the servers transformation process is the adoption of hyper scale devices, but only for limited markets. “These are meant to be for enterprises that need to scale applications to a large extent. Many organisations are doing their own designs, but we address both SMBs and large enterprises, we have not faced the need for hyper scale designs. E-Commerce giants may need it; they have that scale for requirement for loads. Otherwise for products markets, we don’t see much adoption of that. It’s a niche requirement for large scale internet companies,” says Nitin of Netmagic.
According to Venkat, today, the footprint of conventional servers is reducing because the usage of blades is preferable by enterprise, owing to the scope for savings and higher efficiency that they provide. Their smaller footprint ensures much less investment in real estate as well as energy dissipation. “CISCO’s Blade servers and HP products are making a lot of impact in the server market in terms of blades. From a technology positioning point of view, they have an edge,” he said.
Trends in server technologies
1. Realising the increasing need for flexibility, scalability and efficiency, the latest value to the server technology will come from Hyperscale computing. Till now it has been big web based business brands like Google, Amazon and Facebook that have seen its power for their business, but over the next year, an increasing number of organizations will demand for this super technology. Vendors will leverage this opportunity, but in a manner differentiated to industries.
2. Flexible and scalable technologies: Big data, analytics, mobility, social media collaborations, a whole host of emerging technologies and offerings that will add untold value to business processes and strategy- need a smarter, faster and cleaner server base. This is the biggest trend for 2015.
3. High performance servers that will be able to meet the demands of new social media and analytics technologies swill be adopted faster this year
4. Cloud technology will create a whole new paradigm of technology usage- virtualization will no longer be an isolated process. The Hypervisor creator, VMware is also bending down for collaborations that will drive better customer experience.
Why the Cloud will not Kill Servers
Hybrid cloud: Despite being the most disruptive technology in the it world today, the cloud has some points of pain for users – security, lack of bandwidth for connectivity, and some insecurity about sharing data on a public platform. Hybrid clouds, therefore form the bulk of usage, and this means on site servers will not die away, they will still need to be around, partly for metal peace and partly for on-prem storage needs.
Collaboration and mobility: the converged IT model that is rapidly catching up, will need mobility, to balance between compete SaaS models and on premise deployments. There will definitely be a demand for rack servers and towers, and even blade servers, to ensure easy usage of VDI- that needs upgrade of network bandwidth.
Internet of Things: while being the next best thing to happen to humanity since sliced bread, will also take a while to provide the secure operationalities that enterprises are looking at. Even while they migrate, the demand for servers on ground will not die out.
Big Data will be the Big Boss, but will require infrastructure upgrades to meet the growing demand for storage, even as data is migrated to the cloud. Big data projects, in fact will require better and updated storage, servers, and other analytical solutions.”
While cloud computing will challenge traditional servers, the final say in adoption has a number of factors- the decisions will finally be about cost, security, comfort, specific business objectives.
Top Trends Fuelling Server Transformation
The server market in India has always been dynamic and brewing with changes prompted by the emergence of new technologies. In 2014, there has been a greater need for integration, efficiency, automation, consolidation and reduced costs across verticals. Due to a complete shift in densification of servers, workloads and investments in data analytics and web applications, the server industry in specific has been most impacted. An increasing number of organisations are eying cloud as a replacement to traditional servers, storage, and other hardware to save on their capital expenditures (CAPEX).
With this the server landscape is changing significantly, resulting in partnerships, mergers and acquisitions. Lenovo’s acquisition of IBM’s X86 server division and VMware’s acquisition of Nicira to come up with new architectures for servers and networking equipment are some indications of the prevailing transformation in the server industry.
Traditional server manufactures like Intel and AMD are now focussing on offerings which are built for specific usage for efficient utilization of energy. The demand for mobile, cloud and Internet of Things (IoT) workloads are also fuelling the market for Micro Servers.
Greyhound Research believes that the following trends will influence the server market in the coming years-:
Evolution of Micro Servers for specific requirements – Energy efficiency and compact sizing are the key reasons which will make Micro Servers a suitable option for operations like serving small, static HTML pages. Greyhound Research believes that with persistent innovations in 64 bit ARM and x86 technologies, the adoption of Micro servers will increase in the next 3 – 5 years. The demand for Micro servers will also come from SMBs which do not require a tower server.
Flash Storage to gain popularity- Enterprises suffer in sales and customer satisfaction if business critical applications fail to respond lightning quick. As enterprises are increasingly demanding better speed and efficiency from data centres; Flash cache technology will gain traction as it offers higher Input and Output (I/O) data rates than a conventional Hard Disk Drive (HDD). Flash based solid state drives (SSDs) can also manage a considerable amount of workloads without increasing the cost of data centre operations.
Virtualization- To address the increasing performance demands, enterprises of all sizes will either transform their physical infrastructures to virtual hosts to optimize their workloads, or will move to a completely hosted virtual infrastructure in the coming years for scalability.
Focus on converged infrastructure- In order to implement a more scalable, simplified and cost efficient IT infrastructure, enterprises in the coming years will increasingly focus on converging servers, data storage, networking equipment and software.
Mobile Applications for data centre management- Mobile applications like Op Manager from Manage Engine and Big Brother from Dell are improving work order communications and collaborations in a data centre. Such applications are relieving data centre managers from dashboard applications running on PCs, while also delivering system status and actionable information on a mobile device. Vendors in the coming years will increasingly focus on developing mobile applications for monitoring, management and automation of infrastructure hardware from a mobile.
Data centre architectures are changing to meet the demands and complexities imposed by increasing business requirements like scalability, efficiency and security to stay competitive. Challenges including an abrupt growth in data have given rise to trends such as data centre consolidation and server virtualisation which in turn are reshaping the data centre designs.
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