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HPE, Dell and IBM suffer Q4 server sales slumps, as demand for ODM hardware grows

IDC's latest EMEA-wide server market sales tracker suggests soaring demand for ODM servers is hitting tier-one manufacturers hard

The titans of the server market saw year-over-year revenue plummet by 12.9% across Europe, Middle East and Africa (Emea) during the fourth quarter of 2016, as demand from hyperscale cloud firms for white box servers continues to soar.

According to IDC’s Emea-wide server market tracker data, suppliers suffered a 4.7% year-on-year decline in shipments, with just under 600,000 units sold during Q4, generating $3.4bn in revenue.

The market watcher’s figures revealed just one of the top five Emea server manufacturers, Cisco, reported year-on-year revenue growth (2.8%) for Q4.

Market leader HPE saw year-on-year revenue decline by 11.9%, while second place Dell experienced a smaller slump of 8.1%.

IBM, however, posted the largest year-on-year revenue drop (33.7%) of any supplier in the top five, followed by fourth place Lenovo, which saw sales dip by 18.9%.

“An overall revenue decline in the 4Q16 Western European server market was fuelled by mild earnings decreases across most major suppliers,” said Michael Ceroici, research analyst of European Infrastructure at IDC. “In particular, revenue for IBM declined by 33.7%, due in part to non-x86 refresh cycles and the continuing trend of declining non-x86 shipments.”

Eckhardt Fischer, senior research analyst for European infrastructure at IDC, said the downturn in demand for servers made by the likes of HPE, Dell and IBM comes at a time of large growth for hardware produced by white-box, original device manufacturers (ODMs).

Many of the hyperscale cloud suppliers, for example, are increasingly opting for custom-built, ODM-produced hardware in their datacentres for cost, performance and agility reasons, rather than off-the-shelf kit from the major tier-one suppliers.

Read more about ODM server sales

  • Traditional server providers still have the lion’s share of the on-premise datacentre market, but original design manufacturers are now a major force.
  • Server ODMs are targeting datacentres operated by IT giants such Amazon and Microsoft, threatening traditional server OEMs.

For instance, Amazon, Google and Facebook are all known to favour the use of custom hardware in their server farms.

“The ODM market continues to show strength as it gains another percentage point share in Western Europe in 4Q16. This continued growth from the ODM market is indicative of the continued drive toward cloud, be it through well-established tier-one providers, smaller service providers or the hoster community in Western Europe,” said Fischer.

From a geographical perspective, IDC declared Finland, Ireland and the Netherlands as Q4’s worst performing countries, with all experiencing year-on-year revenue declines in the region of 25-35%.

The Central, Eastern Europe, Middle East and Africa region also reported a collective decline in revenue of 16.8% over the past year, with IDC citing the rising demand for ODM hardware, coupled with a slowdown in non-x86 refresh projects.

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