The shift to public cloud computing continues to impact on-premises IT data centers. Vendor revenue in the worldwide server market declined 4.6 percent year-over-year to $11.8 billion in the first quarter of 2017 (1Q17), according to the latest market study by International Data Corporation (IDC).
Overall server market growth continues to slow down with most hyperscale service providers waiting until the second half of the year for new investment. High-end server sales continue to be a drag on overall market performance.
The market has also been negatively affected by DRAM pricing issues. Worldwide server shipments increased 1.4 percent year over year to 2.21 million units in 1Q17. That said, one customer accounted for more than 10 percent of the servers shipped in 1Q17.
IT Server Market Development
Volume server revenue declined by 3.4 percent to $9.5 billion, while mid-range server revenue grew 16.5 percent to $1.3 billion. Demand for high-end systems experienced a year-over-year revenue decline of 29 percent to $1 billion. IDC expects continued long-term secular declines in high-end system revenue.
"The server market continues to struggle to find growth," said Kuba Stolarski, research director at IDC.
According to the IDC assessment, as the market prepares for the switch to Intel Skylake this year, we may be witnessing a shift in how workloads are deployed in the future, and what architectural choices will be made around modularity, operating environments, software, and cloud services.
As indicated by this quarter's results, one large server customer appears to be betting on a major transition to cloud services, as it alone accounted for approximately a quarter of a million servers deployed in the first quarter.
Results for the quarter were right in line with what IDC had forecast in the fourth quarter of 2016. Demand for two-socket form factors continues to control a majority of unit shipments now and going forward as they are the focal point for density-optimized servers.
Two-socket machines are attractive for data center deployment in terms of both power usage and cost per server. Their growth rate may slow down over the short term and, because they control a significant portion of the overall server market, the growth rate will be dampened worldwide.
Outlook for Server Market Momentum
On a geographic basis, Central and Eastern Europe (CEE) was the fastest growing region with 7.2 percent year-over-year growth, followed by Canada with 2.8 percent, and Asia-Pacific (excluding Japan) with 0.9 percent.
Within the Asia-Pacific region, China grew a modest 1.7 percent. the United States declined 2.3 percent, Japan declined 4.3 percent, Western Europe declined 14.3 percent, Latin America declined 14.6 percent, and Middle East and Africa declined 14.8 percent.
Demand for x86 servers was flat (0 percent) in 1Q17 with $10.6 billion in revenues. Non-x86 servers declined 30.9 percent year-over-year to $1.3 billion. These results continue to indicate an apparent lack of server market momentum.
Overall server market growth continues to slow down with most hyperscale service providers waiting until the second half of the year for new investment. High-end server sales continue to be a drag on overall market performance.
The market has also been negatively affected by DRAM pricing issues. Worldwide server shipments increased 1.4 percent year over year to 2.21 million units in 1Q17. That said, one customer accounted for more than 10 percent of the servers shipped in 1Q17.
IT Server Market Development
Volume server revenue declined by 3.4 percent to $9.5 billion, while mid-range server revenue grew 16.5 percent to $1.3 billion. Demand for high-end systems experienced a year-over-year revenue decline of 29 percent to $1 billion. IDC expects continued long-term secular declines in high-end system revenue.
"The server market continues to struggle to find growth," said Kuba Stolarski, research director at IDC.
According to the IDC assessment, as the market prepares for the switch to Intel Skylake this year, we may be witnessing a shift in how workloads are deployed in the future, and what architectural choices will be made around modularity, operating environments, software, and cloud services.
As indicated by this quarter's results, one large server customer appears to be betting on a major transition to cloud services, as it alone accounted for approximately a quarter of a million servers deployed in the first quarter.
Results for the quarter were right in line with what IDC had forecast in the fourth quarter of 2016. Demand for two-socket form factors continues to control a majority of unit shipments now and going forward as they are the focal point for density-optimized servers.
Two-socket machines are attractive for data center deployment in terms of both power usage and cost per server. Their growth rate may slow down over the short term and, because they control a significant portion of the overall server market, the growth rate will be dampened worldwide.
Outlook for Server Market Momentum
On a geographic basis, Central and Eastern Europe (CEE) was the fastest growing region with 7.2 percent year-over-year growth, followed by Canada with 2.8 percent, and Asia-Pacific (excluding Japan) with 0.9 percent.
Within the Asia-Pacific region, China grew a modest 1.7 percent. the United States declined 2.3 percent, Japan declined 4.3 percent, Western Europe declined 14.3 percent, Latin America declined 14.6 percent, and Middle East and Africa declined 14.8 percent.
Demand for x86 servers was flat (0 percent) in 1Q17 with $10.6 billion in revenues. Non-x86 servers declined 30.9 percent year-over-year to $1.3 billion. These results continue to indicate an apparent lack of server market momentum.