New Intel, AMD Chips Drive Enterprise Server Growth

Cloud service providers have been the primary system buyers in recent quarters, but businesses are now getting back into the market, IDC says.

servers

The global server market for the past several quarters has been kept afloat by system-hungry hyperscale cloud service providers like Amazon, Google and Facebook that continue to need to fill their massive data centers. However, enterprises began buying servers again in the third quarter of 2017 after holding back while awaiting systems powered by new processors from Intel and Advanced Micro Devices.

According to numbers from IDC analysts, revenue in the worldwide server market jumped 19.9 percent in the third quarter, reaching $17 billion, while shipments of the systems grew 11.1 percent. The increased enterprise activity in the quarter could be seen in the significant revenue jumps experienced by such vendors as Dell, IBM and Cisco Systems.

"Hyperscalers continued driving volume demand in the third quarter, with Amazon again leading the charge, as Google and Facebook also began ramping up their server deployments again," Kuba Stolarski, research director for IDC’s Computing Platforms unit, said in a statement. "While ODMs [original design manufacturers] have largely been the beneficiaries of hyperscaler server demand, some OEMs have now begun to experience significant growth related to the enterprise segment.”

Dell’s revenues jumped 37.9 percent, while IBM saw an increase of 26.5 percent and Cisco 6.9 percent. Hewlett Packard Enterprise—whose numbers included those from its year-old Chinese joint venture New H3C Group—declined 1.1 percent, while Lenovo’s revenue fell 12.6 percent.

Google, Facebook, Amazon and other hyperscalers have driven the growth in business for ODMs, which are smaller manufacturers that produce the small, low-cost systems that the cloud service providers—which buy large numbers of systems—are looking for. The combined revenue growth for ODMs was 45.3 percent in the third quarter, according to IDC’s numbers.

Enterprises tend toward OEMs such as Dell EMC, HPE and IBM, which also provide integration and other services. Hyperscalers often prefer to do the integration and other work themselves.

IDC’s Stolarski said Dell has taken advantage of its $60 billion-plus acquisition last year of storage giant EMC to help grow its server business, while HPE has begun to move away from the hyperscale business to focus on the enterprise. The short-term results are poor year-over-year number comparisons, but the system vendor is showing strength in the enterprise, the analyst said. China is a strong enterprise market, with both Dell and HPE growing revenues in the country by more than 40 percent (and almost 50 percent in HPE’s case).

IBM saw revenue for its refreshed System z mainframes grow 63.8 percent, another indication of the growing enterprise spending as well as companies’ interest in systems other than those based on x86 chips.

Enterprises have largely sat on the sidelines in recent quarters, waiting for Intel and AMD to release their latest chips. AMD earlier this year launched its Epyc processors, which are based on the vendor’s Zen architecture. Intel several months later released its long-anticipated 14-nanometer “Skylake”-based Xeon Scalable Processor chips. The chips promised improvements in everything from performance to energy efficiency. Now with systems powered by the processors coming onto the market, enterprises are beginning to buy again.

When introducing the new Xeon SP chips in September, Intel officials said they were targeting emerging workloads like artificial intelligence, machine learning, virtual reality and data analytics and touted the new Mesh Architecture, which is designed to deliver faster connections between processor cores and other components in the processors.

AMD’s Epyc chips are part of a larger turnaround effort by the chip maker, which over the past decade has lost ground to Intel in the server and PC markets. Company officials said their chips were designed to challenge or beat Intel’s offering in performance, power efficiency and cost.

Intel is by far the dominant chip maker it the server space, with its more than 90 percent market share. But enterprises are looking for a second supplier to improve pricing, drive innovation and protect them against supply chain issues. AMD is looking to become the preferred alternative, as is IBM with its OpenPower initiative and Arm, which got a significant boost in September when Qualcomm launched its Centriq 2400 Arm-based server system-on-a-chip (SoC).