Today's server offerings are no longer strictly tailored for the enterprise. As the small to medium business (SMB) sector become more IT dependent, tier one vendors are beginning to package server solutions for the mid-market.
In this SMB Server Buying Guide, Computerworld examines the major players and their offerings for this changing segment of the market.
Part 1: The rise of the SMB server
The SMB sector is the major beneficiary of fierce competition in the multi-billion dollar server market as providers increasingly look to the mid-market to boost their revenues in the face of a saturated enterprise market.
Traditionally, tier one vendors relied on the enterprise as a major source of server revenue but the market is shifting as technologies mature and SMBs become more IT-dependant.
The gap between the specific needs of SMBs and large enterprises is also closing rapidly, making SMB a major area of focus for tier one players such as HP, Dell and IBM.
In the past it didn’t make sense for major providers to customise solutions for niche users. However, today server vendors can offer more cost effective solutions to the mid-market and expect lucrative returns.
An example of this changing environment is Cisco's move into the server market in 2009 with its Unified Computing System, which combines servers and network gear in a single package.
New research from Gartner shows more midsize businesses are increasing server infrastructure and adopting more server based applications. Today SMBs account for about one third of worldwide server sales.
The competition among providers is highly concentrated with the top five vendors sharing some 85 per cent of the market, according to the analyst firm.
Just released second quarter results show all of the top vendors experiencing server revenue increases from a year earlier.
Fujitsu, the smallest of the top five, saw its revenue more than double. This is the fifth consecutive quarter of double digit year over year revenue growth for the major server providers.
Gartner said double digit growth for server sales in 2010 was spurred by a climate of economic recovery after the 2009 downturn.
Although SMBs are less resilient than enterprises during an economic recession they recover faster especially when it comes to server investments.
Gartner research vice president, Jeffrey Hewitt, said the mid-market undertook major upgrades and refreshes in 2010.
“It was the year that saw pent-up x86-based server demand produce some significant growth on a worldwide level,” he said. “The introduction of new processors from Intel and AMD toward the end of 2009 helped fuel a pretty significant replacement cycle of servers that had been kept in check during the downturn."
Despite ongoing restraints in RISC/Itanium Unix platforms, Hewitt said ongoing blade server growth and the introduction of skinless servers in the x86 segment also helped push results into double digits.
Although most SMBs buy x86 Windows rack servers, blades are gaining more attention because of power efficiency.
Blades are essentially a variation on the rack server but they are a lot smaller. It means much more power in a smaller space. This is why companies with hefty small business server needs are experimenting with blade servers as part of their overall IT strategy.
SMB spending patterns for 2011 show Asia Pacific businesses rank blade servers as a higher priority than their North American counterparts.
The same research into SMB hardware spending plans and server priorities for 2011 undertaken by Gartner show other trends shaping this segment of the market. It found that SMBs are buying larger servers, with more processing capacity and memory to support their newly virtualized environments.
Large rack servers (multisocket and multicore) have been the platforms of choice for server virtualization in the mid-market.
SMBs prefer to buy IT infrastructure for the computing they need today with the flexibility to expand to their future requirements.
“They buy technology as they need it and also value simplicity,” according to Gartner analyst, Andrew Kim. “SMBs do not seek best of breed server systems so to appeal to this segment of the market vendors need to offer add-ons allowing SMBs to leverage investments they have already made.”
Next, in part two: the role of virtualization