Gartner reports that worldwide server shipments have declined by 4.2% in the first quarter of 2017.
Not a surprise considering the growth in cloud adoption but there are several points of interest.
One is that although Hewlett Packard Enterprise (HPE) is still ahead in revenue (over $3 billion revenue and 24% market share), Dell EMC is catching up, still number two with 19% share but posting growth of 4.5% versus 8.7% decline for HPE.
In unit shipments, Dell EMC is now fractionally ahead, with 17.9% market share and growth of 0.5% versus HPE at 16.8% and decline of 16.7%.
Clearly Dell is doing something right where HPE is not, possibly through synergy with its acquisition of storage vendor EMC (announced October 2015, completed September 2016).
The larger picture though is not great for server vendors. Businesses are buying fewer servers since cloud-hosted servers or services are a good alternative. For example, SMBs who in the past might run Exchange are tending to migrate to Office 365 or perhaps G Suite (Google apps). Maybe there is still a local server for Active Directory and file server duties, or maybe just a NAS (Networked Attached Storage).
It follows that the big cloud providers are buying more servers but such is their size that they do not need to buy from Dell or HPE, they can go directly to ODMs (Original Design Manufacturers) and tailor the hardware to their exact needs.
Does that mean you should think twice before buying new servers? Well, it is always a good idea to think twice, but it is worth noting that going cloud is not always the best option. Local servers can be much cheaper than cloud VMs as well as giving you complete control over your environment. Doing the sums is not easy and there are plenty of “it depends”, but it is wrong to assume that cloud is always the right answer.