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Kicking goals in the $billion server game

Kicking goals in the $billion server game

Despite the global credit crunch, spending in the Australian server market surpassed the $US1 billion mark during 2007 for the first time in local history. What were the trends driving this growth and will they continue in 2008/2009?

The coach and fans would be happy; the Australian server market was kicking goals in 2007 and put its biggest ever score on the board.

In fact, it was the best form since the 1996 season. In any football parlance the end of season review would shower praise on the strong performance of this key-position player in the Australian IT game.

The local server market reported $US1 billion in spending, the strongest annual growth in a decade with a spending increase of 17 per cent and a ranking of third largest server market in the Asia Pacific (ex Japan) for 2007.

The stalwart market performance was driven across vertical segments by a 30.2 per cent spending increase in highend enterprises and healthy spending in medium size enterprises.

A list of the trends underpinning this growth, which somewhat surprisingly comes in the face of the global credit crunch, reads like a rap sheet of the usual server suspects: Virtualisation, multi-core processing, management tools, blade servers, mobility and green IT. But the question is, will these trends continue and can the market maintain consistency and improve on a solid season in 2008/09?

IDC research manager of Asia-Pacific enterprise servers and workstations research, Matthew Oostveen, claimed they will, particularly through the much-vaunted issue of virtualisation.

"I think virtualisation obviously is one of the hot button issues at the moment and it is primarily about reducing cost, decreasing server sprawl and driving down power cooling costs, addressing the space crunch and operating costs," Oostveen said.

"But when you look at the numbers it becomes a lot clearer why that is the case. Power and cooling accounts for $0.50 of every $1 spent on servers.

"From an operating point of view, $8 is spent on maintenance for every dollar that is spent on new infrastructure. And at the moment administrators have a 25:1 server to admin ratio.

The net effect of that is in Australia in 2007 overall the shipments grew by about 3 per cent; revenue grew by 17." While the statistics indicate a slow down in the number of boxes being shipped spending has increased. Oostveen coined this "the virtualisation effect".

"We see this being driven by a few things," he said. "One is customers are preparing to virtualise their applications so they are buying four-way or high-end two-way, and more richly configuring those systems with more memory and processing capacity, potentially more disk on those servers as well.

"But, consequently, customers are moving up and buying higher-end hardware in preparation for running a virtualisation layer, so they can encapsulate multiple applications and they can break that one server into one application paradigm."

IDC noted that across all verticals, except perhaps government agencies, companies which have more than 100 or 150 PCs or notebooks are joining the virtualisation fray.

IBM vice-president worldwide marketing and strategy, Scott Handy, agreed and pointed out many vendors are now shipping virtualisation offerings pre-installed to leverage the trend. "I would say it is accelerating how fast they are using virtualisation," he said.


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