IDC estimates that in the third quarter of 2020, server sales grew 2.2% year-over-year despite a 0.2% decline in server shipments, meaning fewer machines.
IDC acknowledges that in some sectors of the global server market, there is a noticeable shift from buying infrastructure for own use as opposed to paying for compute resources from data centre and cloud service providers.
Paul Maguranis, senior research analyst, Infrastructure Platforms and Technologies at IDC, commented that: "We certainly see areas of reduced spending, but this was offset by investments made by large cloud builders and enterprises targeting solutions that support shifting infrastructure needs caused by the global pandemic. Investments in Asia/Pacific were also particularly strong, growing 31% year over year."
Shifting definitions
Servers are no longer defined by the physical attributes of type and number of processors, memory, storage, connectivity or the operating environments.
Rajnish Arora, vice president, Enterprise Computing, IDC Asia/Pacific, pointed out that a server basically is a multi-user system that delivers compute services to run workloads. The workloads could be traditional business-critical workloads or next-generation modern workloads running in virtual instances, bare metal or containers.
He concurred with Maguranis’ assessment of the growth server marketplace, that it continues to grow in part driven by the accelerated pace of expansion by cloud service providers. But he cautioned that whatever investments cloud providers are making to build their capability, he doesn’t see this as driven by enterprises moving their on-prem applications into the cloud but rather an altogether new set of business initiatives that are better served with computing infrastructure in the cloud.
He sees these new B2C services being rolled out and driving demand for public cloud infrastructure. He cites examples of Uber and Grab that started small, in the cloud, and grew in time.
But not all of these born-in-the-cloud businesses are staying where they are. He cites the example of Netflix, which started out in the cloud, but today has a “fairly large infrastructure of their own which they could be co-hosting in a third-party data centre. But they own and manage all the resources. Despite this build-up, Netflix still has a lot of public cloud resources.”
“At the end of the day, the conversation that every organization needs to go through is what's the business value? Where do we tend to drive the most value of having the infrastructure? Is it an on-prem or in an off-prem public cloud environment?” he asked in a rhetorical fashion.
Fit-for-purpose computing needs
He was quick to point out that there is no mass exodus of business-critical enterprise systems away from on-prem installations. He believed the definition of business-critical systems is becoming nebulous.
Arora added there are many applications that can be defined as business-critical but are not traditional or legacy core applications that run the company’s business operations. He said these applications are on-prem and maybe running on mainframes or UNIX systems for issues like performance, resilience and security.
Any hint of moving into a cloud will likely be a private cloud with the enterprise still owning and managing the infrastructure, its just sitting on someone else’s data centre. And they will stay there for much longer.
He believes that many of the core systems are still running on an on-prem environment with migration discussions centred on the use of private cloud.
He does concede that there is a new generation of providers that are offering core systems that cater to businesses, for example, rural banks, that cannot afford to own their banking or payment services. He noted that these large cloud providers are able to innovate much faster by virtue of their resources.
“For the much larger organisations, the scale of the transactions they want to process, the kind of security that they need, mainframes will continue to shine in these environments.”
“IBM has done a phenomenal job of not only making sure that they deliver value for the traditional workloads but at the same time also ensure that mainframes remain relevant in this new era,” he continued.
He cited the use of mainframes in very large Linux environments because that's where the security, the manageability, and the ease of operation tend to shine.
Click on the podchat player to listen to the full details of Arora’s responses to the questions posed to him during the dialogue, including:
- To begin, what is IDC’s definition of servers.
- What is IDC’s assessment of the overall server market in Asia, particularly as we hear an increased migration to the cloud across the spectrum of businesses of all sizes?
- Among business-critical applications – what are the top 3 reasons why enterprises are staying on-prem?
- Will this trend continue? At what point do you see a more realistic migration to the cloud for many of these business-critical applications?
- Looking at the server marketplace, what is your assessment with regards to server hardware and operating systems?
- What is your view of edge cloud in 2021?
- Final thoughts as we look to 2021, your views on what will characterise the server market in Asia (which vertical markets will continue to buy for on-prem use for much of 2021?
