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Analysis

Events move in favour of Blade Servers
Martin Banks By: Martin Banks, Associate Analyst - Datacentre & Mainframe, Bloor Research
Published: 11th December 2007
Copyright Bloor Research © 2007
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While both revenue and volume growth rates across the worldwide server market are not just modest but getting close to flattening, the market for Blade Servers is going from strength to strength. Even at a currently conservative year-on-year growth rate of 40%, it is not unreasonable to see Blades taking around half the server market within five years. If market leader HP's currently year-on-year revenue growth rate of 79.6% (or 89.3% unit volume growth if you prefer) is not only maintained but matched by other vendors then five years could see Blades dominating all but the high-end niche corners of the server marketplace.

HP is the current hot ticket in Blades and while IBM has held second place it has slipped to a market share of around 33%, with revenue growth of under 7%. But in any fast growth market such movements are always possible, and there is some expectation that its next round of Blade announcements—traditionally made around early February—could give the company a boost in revenue and marketshare.

While new launches and technology developments are important to the market dynamics, external events are now also playing a significant part in accelerating market moves towards Blade architectures. Current global economic factors are likely to produce some shifts in the market shares by taken different geographic sectors. For example, the US and Western Europe server market sectors are obviously now at some risk due to the ‘credit crunch’ in the banking sector. The medium-term effects of this are difficult to predict, even for accepted experts in the field. Indeed, the current talk is of the US slipping into recession on the back of this and other factors.

Such potential gloom has, however, to be set against the fact that many enterprises in these regions will still need to upgrade and expand their IT infrastructures. The chances are they will move towards the most cost-effective alternatives that reduce demands on capital expenditure while still meeting operational demands. That is likely to be a positive pressure in favour of Blades wherever possible.

Eastern Europe is a fast growing market—though admittedly from a small base. That small base, however, also indicates a small user base of older, legacy technologies, which means many new enterprises in the region will start building their IT infrastructures on a clean slate, making them more receptive to new, Blade-architectured offerings. The same can be said for the China/India/general Asia-Pacific sectors, which also offer significant growth potential.

Technology is also playing a part with the arrival of dual-core x86-family processors, giving vendors the opportunity to increase the power and performance available to users. This is even allowing vendors to offer Blade Servers with greater unit value, because they are still more cost-effective than the equivalent standard rack-mounted x86-based servers. This is why Blade Servers are expected to grow to take over 18% of the overall x86-based server market by the third quarter next year, from a 12% share this year.

There are other, market-related, issues also driving Blade Server growth, not least of which are the ‘green’ issues. There is no avoiding the issues of energy consumption and physical infrastructure demands now confronting users. While large datacentres give operational and management flexibility they consume significant amounts of energy. A single rack of servers can consume 12kW of electricity. According to research conducted by HP Laboratories in the USA, each rack is likely to also consume another 12kW in air conditioning in order to keep it cool enough to work. Total management costs will be the equivalent of an additional 12kW of energy—that's a total energy cost equivalent of 36kW per rack.

The design and technology of both Blade Servers and their chassis systems is such that energy consumption, and the associated location costs, can be significantly reduced. Coupled to the lower costs of the servers and chassis systems themselves, this means major capital and operational cost savings can often be made for all but the most compute-intensive applications.

Strong pressure on users to consolidate widely distributed servers into manageable datacentres continues. The availability of Blade Servers now makes this approach a sensible and achievable option for the Small/Medium Business (SMB) sector, as small, low-cost datacentres requiring little or no physical infrastructure change can be constructed. The Blade Server architecture of low-cost, single-card servers slotting into pre-built, fully serviced and managed chassis systems matches the requirements needed for many consolidation exercises.

Virtualisation is also a growing trend. There are signs that it may be, at least in part, one of the contributing causes of a current dip in server unit volume sales because users are running multiple virtual servers on one physical system. This does not preclude future growth, however—particularly for Blade Servers. Virtualisation is driven by a growing user requirement for flexibility in meeting rapidly changing business opportunities, which demand the ability to adapt operational IT services and infrastructures as fast as possible to catch a market opportunity. This requirement maps strongly onto Blade Servers as the physical platform, as this can be rapidly and easily extended and adapted.

The combination of easy-to-use and low cost Blade Servers, coupled with a wide range of third-party support and peripheral Blades—all configured to work within a standardised, fully serviced chassis system—is allowing Blade vendors to create ‘ecosystems’ that map very favourably onto the large and growing SMB community as the ideal IT platform.

The SMB sector is also a market with high growth potential, and the availability of these Blade Server ecosystems provides it with exactly the type of cost-effective, highly flexible and adaptive platform infrastructure that they require.

Taken together, these factors are shaping up to move Blade Servers as a key option for a wide range of users, from the smallest SMB to the largest enterprise.

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