Gartner: Virtualization Slows Server Sales

As more companies embrace virtualization technologies, they are buying fewer servers, according to the latest quarterly estimates of server sales from The Gartner Group. The report, released yesterday, shows that worldwide revenue from server sales grew by 4.4 percent to just over $13 billion, while unit volume grew by 9.1 percent to 2 billion servers. In the second quarter, sales rose 2.5 percent by revenue and 12.8 percent by unit volume.

"We have seen double-digit growth in the past," Jeff Hewitt, research director for Gartner, told Network World. "Server sales are still growing, but because of virtualization, customers don't have to buy as many servers."

Virtualization is a key driver in data center consolidation by enterprise IT departments. It reduces demand for servers by making more effective use of server disk space. Rather than running separate machines dedicated to Linux and Windows, companies can run both OSes on the same server in a virtualized environment.

Despite the need for fewer servers (and thus a smaller footprint for equipment), data center operators say virtualization actually stimulates demand for quality facility space by forcing companies to abandon older back-office data centers in favor of a state-of-the-art hosted environment.

IBM Corp. continued as the server market leader, according to Gartner, with 33.7 percent share and a 7.4 percent revenue gain to $4.38 billion. Hewlett-Packard Co. followed with 25.3 percent, and saw revenue decline 6 percent to $3.29 billion. Dell was third with a 10.8 percent share (+10.2% revenue to $1.41 billion) and Sun Microsystems Inc. had a strong showing in fourth place, with a 10.1 percent share and a 24.7 percent revenue gain to $1.31 billion.