HALF MOON BAY, Calif.--Just now coming to market, superslim "blade" servers already dominate the agenda, but even exciting new technology does little to dispel the gloom in the overall server market.
Blade computers are an outgrowth of the current trend in which those who run large computing centers need to pack their computers in ever more tightly. The superskinny servers dominated much of the discussion Wednesday at IDC's Enterprise Server Vision conference, a gathering where analysts and industry executives come together to gaze into one another's crystal balls.
Bladed-server sales are just a blip in 2001, with projections of about 50,000 unit shipments accounting for just a smidgen of the total revenue. But IDC predicts that by 2005, 2 million blade servers will be shipped, with a total revenue of $4.5 billion, analyst John Humphreys said. The total server market in 2005 is expected to be $102 billion.
Though nearly every presentation at the daylong conference mentioned blades, it was equally hard to avoid the subject of today's dismal market for servers, the comparatively high-end networked computers that handle tasks such as sending e-mail or processing credit-card transactions. Companies such as Sun Microsystems have been savaged by slowed server spending and increased price cutting in the current economic slowdown.
Thursday, IDC rival Gartner released preliminary statistics showing shipments of servers shrinking 11.2 percent in the United States in the second quarter of 2001. Dell Computer edged ahead of Compaq Computer, with an estimated 99,000 shipments to Compaq's 98,968, but Dell's unit growth of 15 percent over the year-ago quarter was sunnier news than Compaq's 26 percent decline in the same period.
Dell and Compaq each had 28.5 percent of the market, Gartner said. IBM, in third place with 17.1 percent of the market, had 14 percent growth. But Sun, in fourth place, dropped 21 percent; and HP, in fifth place, dropped 26 percent.
More important than unit shipments is revenue, but those statistics aren't yet available. From 1999 to 2000, IDC said server revenue increased 10 percent. Last September, the research company expected growth from 2000 to 2001 to be about 7 percent. But now IDC has revised the forecast to 5 percent. "We might see another 1 percent coming off that," IDC server analyst Vernon Turner said.
With the Year 2000 uncertainty followed so quickly by the extreme growth of the Internet and then the economic slowdown, professional prognosticators have had it rough. "This has been the toughest year for market forecasts," Turner said.
But the current spending pullback ultimately will end, Merrill Lynch analyst Steve Milunovich said in a report on blade servers Friday. "We believe the Internet infrastructure build-out is taking a hiatus but will return," he said. "The World Wide Wait is caused not by network congestion but by slow servers."
The growing use of blades is good news for start-ups such as RLX Technologies , Egenera , Scalant and < a href="http://www.fibercycle.com/">Fiber Cycle , which have a lead on bladed designs, and for server giants, including IBM, Dell, Sun Microsystems, Hewlett-Packard and Compaq, that are working on bladed designs. Transmeta, which makes low-power CPUs, has a strong interest in blades, though server maker Amphus switched to one of the blade designs being pushed by Transmeta rival Intel.
Blades typically are good for jobs at the "edge" of the network, where lots of small servers are used: Web servers and caching servers deliver Web pages to Internet browsers, SSL servers encrypt communications, streaming servers send out audio or video, and translation servers reformat Web pages for consumption by mobile phones with tiny screens.
The cores of corporate networks, where large databases reside, are still the domain of much more powerful servers. That could change, though, as database software such as Oracle's 9i and IBM's DB2 EEE allow data to be split up into chunks so a host of smaller servers can collectively hold a large database, Illuminata analyst Jonathan Eunice said.
For blade tasks, it's important to stuff as many servers as possible into a small space. But high density is only one reason for the trend, Turner and Humphreys said.
Other potential advantages of blades: They're easier to install; they have dedicated software that improves performance and reliability; and, ultimately, administrators will be able to quickly reassign groups of blades to different computing tasks.
But in order to make blades a useful addition to the computing industry, instead of a nightmarish profusion of servers, management software is essential, Humphreys said.
The predecessors of blade computers are rack-optimized servers, systems that are designed to be bolted into racks instead of parked on the floor. Rack-optimized machines, which began the trend toward higher density, have swept across the computing landscape, Humphreys said.
The trend toward ever-thinner rack-mountable servers illustrates the pent-up demand for blades, Humphreys said. From the first quarter of 1999 to the first quarter of 2001, rack-mounted server revenue grew from 6 percent of the low-end server market to 37 percent. The thicker "3U" models, 5.25 inches thick, dropped from 62 percent of the market to 16 percent, while the thinnest "1U" models, 1.75 inches thick, grew from 2 percent to 40 percent.
"Demand is building up beyond the 1U," Humphreys said. "There's a major form-factor shift" toward the thinner blade models.
And, he added, future blade designs will be more powerful. He projected that dual-processor machines, 19 percent of the market in 2001, will increase to 52 percent in 2005. Four-processor models will rise from zero percent this year to 35 percent in 2005.