Serving it up
On the back of growing SMB demand, infrastructure consolidation and virtualization drive among large enterprises, the Indian server market is on a roll.
By Faiz Askari
There has been considerable growth in the server market in recent times. The reasons are many, including the overall increasing dependency on technology infrastructure and the adoption of various business applications.
According to IDC, in the fourth quarter of 2007, the overall Indian server market has seen a healthy growth as customers continue to build their IT infrastructure. During 2007, the Indian server market factory revenue grew by 24 percent over 2006 to touch $ 727 million, and unit shipments grew by 19 percent to 135,615 during the same period. Apart from traditional sectors like telecom, BFSI and manufacturing, 2007 also saw the emergence of retail and construction sectors as key demand drivers.
According to Vivek Malhotra, Vice President, General Business, IBM India, “The server market has been witnessing positive growth because customers continue to refresh and expand their IT infrastructures. In future, there will be immense opportunities in both the enterprise and mid-market segments.”
Ashok Pamidi, Director for Commercial Accounts at HP India adds, “The entire ecosystem for the server market has been very well created. Overall business growth, government regulations, growth among software vendors—these are all good signs for the market. Even small and mid-sized organizations are adopting advanced server technology. For example, SAP is targeting SMBs in a big way and offering cost-effective solutions for them.”
The market is also witnessing large number of first-time buyers. As Pamidi informs, “Every quarter we add around 300-400 new customers across our server portfolio. These are generally companies that have used PC-based servers till now, but are currently in the process of overhauling their IT infrastructure due to high growth. These type of customers are coming from smaller cities as well. Presently, the demand for servers is limited to 70-80 cities, but with wider adoption we expect broad-basing of demand to 300 cities over the next couple of years.”
Embracing SMBs
Indian small and medium businesses (companies with up to 999 employees) are set to spur more than 20 percent growth in server spending amidst concerns of an overall server market slowdown in 2008.
A recent AMI study reveals that over 35 percent of PC-owning Indian small businesses in the 20-99 employees category are planning to purchase servers for the first time this year.
“Server technology is constantly evolving to keep pace with the ever-changing business requirements and expansion needs of the SMB,” explains Partha Sarathi Sengupta, Manager for Strategic Market Analysis at AMI. “There is hardly any possibility that the rate of growth in spending will drop significantly in the coming year because the industry is in a phase of rapid infrastructure upgrades. SMBs, and especially medium businesses with 100-999 employees, have definitely moved up the value chain and are now looking at a consolidated approach where the server should be able to do multi-level complex tasks resulting in higher optimization of IT investments and lower TCO.”
x86 growth
According to IDC India, the x86 server market grew by 19 percent to 1,26,940 unit shipments in FY2007. The demand for virtualization in the x86 server market is on the rise. Far from bringing about the demise of the x86, the widespread move from physical to virtual servers is actually preserving the x86 market.
During CY2007, factory revenues of the Indian x86 server market grew by 24 percent over 2006 to touch $ 414 million, while unit shipments grew by 21 percent to 126,940 units during the same period. Also in 2007, the Indian x86 blade server market recorded a growth of 103 percent over 2006 with 12,146 units shipped.
Virtualizing existing x86-based infrastructures allows businesses to grow, and creates demand for new, enhanced systems that offer superior memory and tools for resource allocation and failover protection. IT companies have the opportunity to build and install newer high-end x86 systems with these requirements in mind, thereby improving their ability to support virtualization. Talking about the drivers of x86 Malhotra says, “By providing customers with what they need to solve their IT challenges,meet their business needs and improve their TCO and ROI margins, the x86 server market will shift into a new, profitable gear.” With the adoption of virtualization technology, utilization rates for x86 systems have jumped from less than 10 percent to 30-50 percent.
“x86 servers are emerging as the ideal server platforms for Indian SMBs running enterprise applications,” opines Sengupta. The trend of server virtualization is also catching up among Indian SMBs, and the impact of virtualization is more on x86 servers.
“There is huge opportunity for entry-level servers especially among small businesses with up to 99 employees. Small companies even in upcountry markets are looking for a robust infrastructure for their business needs and are investing in technology solutions,” notes Sengupta.
Unix adoption
A lot of SMBs are showing interest in Unix servers. There is a perception that Unix is more reliable, robust and secure as compared to other available offerings. “Due to certain drivers in the market, SMBs are getting attracted toward Unix, and are adopting it in a big way,” Pamidi says. “Our entry-level Unix-based product has grown up to 70 percent in the past nine months. This is of course a unit-based growth rate.” HP’s pre-sales partner community is very strong in this. “Training the pre-sales partners is a high priority area for our Unix range of products. As of now, we have trained over 120 people in the last one-and-half year,” discloses Pamidi.
He emphasizes that the growing knowledge regarding IT among the CEO and CFO community is also driving this market. “These days, a lot demand comes from the top management. They understand the unique qualities of Unix and how it may add value to their technology infrastructure. This is a positive factor for the Unix server market.”
Blade servers
The blade server market is constantly gaining momentum in India. The blade server platform is the fastest-growing segment of the server market, and, according to IDC, is expected to account for 10 percent of global server unit sales in 2007. The segment will generate $11 billion in worldwide revenue by 2010, and India will play a critical role in this growth.
According to Amit Dalal, Assistant Manager, Enterprise Computing Products Research, IDC India, “The blade server market continued to be the hot segment for x86 servers during 2007. The market was abuzz with initiatives from vendors who were ramping up their product portfolios and educating customers through events and contact programs. These programs demonstrated product benefit themes such as hot swapping, reducing redundancy and reducing cabling, power and space requirements.”
The mid-market tends to have a lot of computers, and they often buy a machine to do a specific job. Being able to use blades within a chassis— instead of a number of individual machines—can make life easier for small businesses.
Blades are easy to manage, virtualize and scale up. They excel on the lower power consumption parameter, and have internal storage as well. “The blade market is doing exceedingly well,” points out Malhotra. “With more specific products for the mid-market, vendors are busting the myth that blades are only for large enterprises. I believe the penetration of blades will witness steeper growth. For its part, IBM intends to make its blade servers more attractive to mid-market customers, and help its business partners target those users.”
Observes AMI’s Sengupta: “Blade servers are making inroads into the traditional rack and tower server market.
These new generation servers, which consume less power and occupy less space, are gradually gaining acceptance in the Indian SMB market as customers look to minimize their energy and operational costs while expanding their IT infrastructure.”
Nevertheless, blades have their limitations. Says Karthik Ramarao, Director, Technology Team, Systems Practice, Sun Microsystems India, “Blades generate more energy than racks. They are also not as scalable as racks. Blades are not going to affect the rack market—the technologies are going to co-exist.”
The swing to virtualization
Companies in India are in the middle of adopting server virtualization platforms. They understand the value it brings to their organizations, and are comfortable with the maturity levels that these technologies have reached over the years. The main drivers for virtualization are the customers’ desire for infrastructure flexibility and lower costs. Virtualization technology allows users to safely run multiple applications and workloads on single systems, thus radically increasing efficiency and utilization rates while lowering overall costs. As enterprises go green and think about the environment, they think about virtualization because it also makes great business sense for all involved.
“Virtualization brings many benefits,” agrees Ashok Pamidi, HP India’s director for commercial accounts. “But there is also the challenge of coordinating virtualized machines across the infrastructure. HP looks at this as an opportunity to provide a solution for such customers.”
The green factor
Talk about servers and one can’t help talking about the need for eco-friendly computing. It’s well-known that power and cooling costs are very high, and that organizations spend around 60 percent of their IT budget on this. Indeed, as per IDC, by 2010, for every $1 spent on hardware 70 cents will be spent on power and cooling, but by 2012 for every $1 spent on hardware another $1 will be spent on power and cooling.
“This is the main reason why organizations are adopting virtualization and consolidation,” explains Ramarao. “Organizations are striving hard for achieving savings. They want optimum outcome from their investments so they want their servers to be more agile.”
Partner Speak
“There is a good demand from the market,” comments Chandrashekhar, Vice President, Technical Services, PC Solutions. “I see a lot of traction coming from emerging verticals such as retail and real estate. I also see a huge opportunity from B- and C-class cities. The government is promoting development in these cities. The IT-ITES sector is going aggressively toward C-class cities, so I think it’s time for us to understand the needs of this market.”
Gurunath Prabhu, of Bangalore-based System Tech, who is an HP enterprise business partner, speaks about his experiences.
“The demand in the server market can be gauged from the fact that vendors have today started stocking and selling even their Unix servers, which was not the case earlier. This simply indicates that customers are getting serious about their server purchases and want the latest technology not just in terms of processing power but also in terms of greenness and virtualization.” |