Servers continue to decline as hyperscale datacentres take over

Gartner predicts decline will continue in coming years

The downturn in server sales continues, acording to Gartner's latest quarterly server report, with all regions except Asia Pacific this actually grew shrinking as companies in the Western scrap servers in exchange for hyperscale datacentres and virtualisation.

Worldwide server revenues declined 1.9% year on year, while shipments fell by 0.6% in the final quarter of last year. Over the whole year, server shipments increased by 0.1%, but revenues from the sector reduced by 2.7%.

"There were some distinct factors that produced the final results for 2016," said Jeffrey Hewitt, research vice president at Gartner. "Hyperscale data centres (eg Facebook, Google) grew and, at the same time, drove some significant server replacements. Enterprises grew at a lower rate as they continued to leverage server applications through virtualisation and in some cases, service providers in the cloud."

Adrian O'Connell, research director at Gartner added that demand has weakened across the board in EMEA, with revenues decreasing by 11.4% compared to the fourth quarter of 2015.

"The fourth quarter did not end the year on a high note, with declines in the second half being larger than those seen in the first half," he said. "Full year volumes for 2016 in EMEA fell by 4.2% and revenues fell by 8% compared to 2015."

Despite the decline, HPE managed to keep hold of its top position in the charts, reporting a revenue decrease of 10.6%, while IBM experienced the biggest drop, from a 20% decrease in the third quarter of 2016 to a whopping 34.7% in the fourth quarter.

"2016 was a challenging year for server vendors in EMEA, and the weakness does not show any signs of changing direction at this moment in time," O'Connell said.

"Levels of political and economic uncertainty in EMEA are not going to decrease in the short term and this combined with a very challenging competitive environment will make things increasingly tough for the market incumbents. Server vendors must excel on execution, and increasingly take risks to return to growth in EMEA."

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