Monday, November 23, 2009

IT Departments Utilizing Virtualization

IDC released its Worldwide Quarterly Server Tracker on September 2, 2009, which reports that "factory revenue in the worldwide server market declined 30.1% year over year to $9.8 billion in the second quarter of 2009 (2Q09)."

According to IDC, this is the lowest quarterly server revenue since they began tracking this market in 1996.

The obvious implication is that the economy has been awful and companies have been avoiding / deferring IT spend. But beyond that it seems that virtualization has both benefited from and contributed to this decline.

With a single server now able to run multiple workloads, it seems inevitable that the server footprint is destined to continue getting smaller within the corporate data center. But the benefits of virtualization do not stop with simply running more apps on one machine; the whole datacenter becomes more agile, more flexible to deal with unexpected changes in workload.

The ability to get more from fewer boxes is certainly a contributing factor to less boxes being bought. And tight budgets in the 2009 economy have certainly contributed to IT managers seeking out less costly options.

It will be interesting to see how the server market rebounds.

Andy Patrizio in his blog quotes Rahul Agarwal, co-founder of Infiniti Research. Within the dismal sales figures, Agarwal notes that both Gartner and IDC report that unit costs are going up for server sales. Agarwal believes that this is due to sellers trying to widen margins by selling more feature-rich machines:

Our view is that to offset this volume pressure, hardware vendors will be
forced to improve unit margins by building in virtualization capability, memory
and I/O interfaces in the hardware.

So the strategy to improve revenues will enable IT departments to further utilize virtualization, continuing the trend toward fewer individual servers.

Agarwal noted that many servers out there are quite inefficient, particular amongst small-to-medium sized businesses, so the more successful players will focus on consolidation to increase efficiency and reduce the footprint. He says:

The server market of tomorrow will be a value game and not a volume game.