Zardon

The market for traditional servers continues to fall away. However the growth of the Linux server market is the one (tiny) bright light in the market. Will the good news from the Linux community attract the VARs and Systems integrators it needs to take over the marketplace? Or will the server market simply evaporate ?

The bad news for server vendors never stops. Gartner Dataquest recently released news that the dollar volume generated by server sales continues to decline, as it has for better than 18 months. There are very few bright spots in this picture, but one of them is coming from the Linux segment of the market. According to Gartner, Linux server sales rose by an astounding 79% in the first quarter of 2001. Given that the overall market for servers fell by double digits, this is even more impressive. Gartner reports that the dollar volume generated by Intel servers fell by 17%.

According to Gartner, the growth in Linux servers was one of the reasons that IBM managed to hold and even grow its share of the server market.. In addition to an aggressive, Linux-oriented advertising program, the company has courted the Linux community with programs such as DeveloperWorks, and a variety of free tools and training programs. Today IBM claims an inventory of over 2,800 Linux based applications, available either through the company or its partners. Within the market for Open Systems servers, IBM's aggressive promotion and marketing has propelled it past Dell as the premier Linux vendor. In the last year IBM's share of the Linux market rose from 15% to 34%. Meanwhile Dell's share fell from 52% a year ago to 22% and falling.

While Linux's growth and IBM's numbers look impressive, Linux still generates a relatively puny financial footprint. Gartner's figures show the Linux server market generating a little under $236 million in the first quarter, or roughly 6% of the overall server market.

Computer Reseller News ran another survey recently hinting that the number may be misleading. According to CRN, the fall-off in name brand hardware hides a couple of important trends . One of these is the explosive growth in customized no-name "white box" systems sold through VARs and system integrators.

According to CRN, VARs and SIs report that they are now selling four white boxes for every branded system. Sixty-two percent of those polled by CRN reported that they built their own servers, compared to 51 percent last year. While these white boxes still tend to be loaded with Microsoft products rather than Linux, there is a substantial minority of developers who are either using or evaluating Linux. The two major considerations are flexibility and margin. SI's who build their own can make as much as a 25% margin on white box systems compared to branded boxes with Microsoft or other proprietary software. However a perceived lack of applications remains a major barrier to widespread adoption by this community.

Would more aggressive promotion of Linux by hardware vendors help turn the server market around?

There's substantial reason for doubt. For one thing, small servers, especially, have become a glut on the market. As Microsoft clients have migrated from NT to Windows 2000, they have found they no longer need the clutter of print servers and workgroup file servers required by the old operating system. In order to subsidize the cost of conversion, many of these machines are being cannibalized and converted to provide a patchwork of minor functions such as Intranet services. While a significant percentage of these "internal white boxes" may run Linux, this in-house after-market continues to be a significant drag on the demand, especially for workgroup level and mid-range servers.

In addition, the market is unlikely to improve because the underlying structure of the enterprise network is beginning to change. Mass storage of data is migrating to a variety of storage network appliances capable of handling terabytes of data. Directory Services architecture is becoming more and more sophisticated.

Peer-to-peer architectures and "Grid" schemes for sharing computing cycles across workgroups are beginning to go mainstream. All these developments are eroding the demand for traditional client/server technology. Over time, Linux could grow to dominate the server marketplace. Unfortunately, it is not clear how big that market will be.

by Jack Bryar