Why the Big Three for servers aren't quite as big
Dell, HP and IBM are getting nipped at by smaller competitors and an emerging trend toward custom hardware.
The head of the data center group at Intel, Diane Bryant, has gone on record with an interesting metric on how the state of the server market has changed in the past four years. She says that, in 2008, the three giants — HP, Dell and IBM — accounted for fully 75 percent of Intel’s sales of chips designed to go into servers. This year, that 75 percent is taken up by no fewer than eight companies.
Why this major shift in the market?
Before anyone starts talking about the relative state of the economy, please keep in mind that we are not talking about actual sales volumes. These are percentages of total sales, so we should expect that they would be about the same no matter the literal levels.
The one major reason for the change is the increasing predominance of major market online providers moving away from off-the-shelf equipment and either building or custom-ordering their own. They do this to cut costs and improve service in their particular economies-of-scale. Google has been doing this for almost a decade, and in more recent years, companies such as Facebook and Amazon seem to be following suit.
However, the latter two are going to manufacturers while, according to Bryant, Google is ordering its chips directly, so the company must be building its own equipment. The Pluto mystery switch indicates that Google does this with switches, so it isn’t a surprise that it also does this with servers.
Another reason is the rise of smaller companies, such as SuperMicro, into the server arena. In the Lab we have tested many computers from SuperMicro, including this server. We have often noted their ability to make high-performance systems for bottom-dollar prices, so we are not surprised to see SuperMicro referred to as a full-fledged original equipment manufacturer.
How are the Big Three, which supply a lot of hardware and services to government agencies, reacting to this shift in their marketplace? Well, as you’d expect from any business, given the choice of “adapt or die” they will choose “adapt.” Dell has announced its Dell Data Center Services, which builds custom components for large web customers. And all three companies now offer a cloud service.
But are they adapting quickly enough?
The answer is: probably not. HP, Dell and IBM will continue to be major forces in the overall computer industry, and with government buyers. But unless they come up with a radical way to sell more servers, they will likely continue to buy fewer heavy-duty Intel processor chips, and making fewer servers.
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