Surprise! Virtualization hurts server sales after all

Surprise! Virtualization hurts server sales after all

Summary: Virtualization vendors would like you to believe that software that allows you to run more applications on one server actually helps server sales. The argument, which I heard from a few analysts and VMware after I questioned that logic here and here, goes like this: Virtualization means you'll upgrade servers.

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TOPICS: Servers
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Virtualization vendors would like you to believe that software that allows you to run more applications on one server actually helps server sales.

The argument, which I heard from a few analysts and VMware after I questioned that logic here and here, goes like this:

Virtualization means you'll upgrade servers. And these servers will have more bells and whistles with higher selling prices. Basically, server vendors would like you to believe they will sell fewer but pricier models. That's why server and virtualization companies are good partners. 

Maybe I'm a little thick headed (actually a lot of thick headed) but I still couldn't follow the logic even after a conference call with VMware about the topic. Sure server sales may go up initially, but after that spurt it's a downward spiral.

Luckily, IDC is giving me a little support on my theory. Stephen Shankland reports:

IDC on Tuesday lopped 4.5 million units off its forecast for the number of x86 servers to ship in the second half of the decade after concluding that virtualization and multicore processors are cutting into purchases.

That 4.5 million number is a major change--about 10 percent of the servers the market analysis firm had expected would be sold from 2006 to 2010. In addition, the firm trimmed its spending forecast by $2.4 billion. "Overall, x86 (server) shipments that were once projected to increase 61 percent by 2010 are now facing just 39 percent growth during that same period," IDC said.

The reason for the change is that customers are buying fewer, more powerful systems, IDC argued. 

Go figure. CIOs are actually using virtualization to cut their hardware spend.  Who knew?

Topic: Servers

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3 comments
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  • Of coure X86 servers are dwindling

    We aren't buying them anymore. Still buying Servers though just not X86. I don't know but they sure seem like 64 bit X86 to me but vendors refer to X86 as the 32 Bit then there is the Itanium 64 Bit and the AMD64/EM64T line.

    Also with processing power the way it is these days a Server lasts a lot longer than it did at the begining of the decade. Now it seems you can get about 5-6 years of life out of a server while in the past you were getting 3-4.

    I don't see virtualization as saving hardware costs. I see it as method of isolating applications that don't play well together. So no loss there because the server is more than enough to run both apps. Just hardware vendors were lucky in the past as sometimes you'd have to waste the money on two servers but that's not really a virtualization issue. New versions of software do the same thing. Older version of software that didn't play well together seem to play better with Windows 2003 as the OS than Windows 2000.
    voska
  • Of course, Moore's law is back on track again

    The way I see this is that customers thought they were getting the benefit of Moore's Law, but they weren't - or they were getting only 10% of it (the average utilization per box). So it's not the fault of the virtualization vendors - virtualization is just a handy tool to let customers get the benefit of what they bought - a point on the Moore's Law curve.
    xenrocks
  • Duhhhh..

    Considering your average server is running at about 10% utilization (or less) Virtualization makes tremendous sense. If customers can reliably run 10 OS instances on a single server, they not only reduce hardware acquisition costs, but also reduce maintenance / warranty / admin costs as well.

    Of course, test/dev and QA servers are one thing, and production servers another. I have always maintained that when you put all your eggs in one basket, you'd better buy a damn good basket.

    Vendors who have HA features (like hot plug / RAID memory etc.) will benefit from the higher margins of robust boxes. The commodity vendors will suffer.

    I can't wait to see what Dell comes up with as their "virtualization-optimized" server.

    Without some serious R&D spend, no amount of marketing will fool IT buyers who need a stable host platform....
    JackPastor