Get Set for Server Savings

Lookout below! Server prices are falling, according to the latest quarterly server tracker from analyst firm IDC.

It’s definitely a good time to make a server investment. You can get some good deals,” says Hoang Nguyen, program director at IDC.

The news comes as a relief to users, who enjoyed a strong bargaining position when purchasing servers during the recent economic slowdown. Now, even as the server market picks up, prices are falling across many of the major technology areas.

Leonard Eckhaus, chairman of data center managers' organization Afcom, believes that users looking to expand their data centers should strike while the iron is hot: “If there’s going to be a need in the near term -- in the next six months or so -- then it makes sense to buy now.”

Unix servers offer some of the best deals, with prices falling 9 percent year-on-year. These are closely followed by machines based on x86 processors, which experienced an 8 percent price drop over the past year.Even the high-end of the market is feeling cost pressures, with mainframe prices falling 6 percent.

One area unaffected is Linux, where the average server selling price has grown 7 percent year-on-year. Ironically, the rising cost of the hardware has been prompted by the potential for long-term software savings. The major attraction of Linux is that it can enable companies to save on deploying prorietary software from companies such as Microsoft Corp. (Nasdaq: MSFT).

An increasing number of software vendors are writing applications for the platform, which is also adding to its popularity. “It’s a growing market," says Nguyen, "so it’s hard to compete on price there.”

But Linux servers have their pluses and minuses. One publicity-shy data center manager in a Fortune 500 company says, “Right now, they probably represent the lowest cost of ownership, but they are probably the least robust and functional.”

In particular, he feels that Linux servers lack the middleware and systems administration tools found on many other machines in this space.Nonetheless, the Penguin appears to be performing well against Microsoft. IDC’s study found that shipments of Linux servers have grown at 46.4 percent, compared to more modest growth in Windows servers, up 26.5 percent year-on-year.

Despite increasing price competition, the overall picture is looking rosy for the major vendors. IDC found that factory revenues grew at 7.3 percent on the year, to $11.5 billion in the first quarter of 2004. Amongst the major players, IBM Corp. (NYSE: IBM) enjoyed the strongest performance during the first quarter, winning 29.7 percent of the worldwide server market share. Hewlett-Packard Co. (NYSE: HPQ) followed closely behind, with 26.9 percent, and Sun Microsystems Inc. (Nasdaq: SUNW) came in at third place with 10.2 percent.

— James Rogers, Site Editor, Next-gen Data Center Forum