Traditional midrange Unix and proprietary platforms will remain the business critical computing workhorses for at least another two years to come, despite the rise of commodity Intel NT servers.
This is the conclusion of analyst group IDC in its annual review and trend analysis of the midrange market, a preliminary version of which came out this month.
The arrival of Intel's 64-bit Merced processor at the end of 1999 may be the inflection point for the purchase of large numbers of low priced NT servers to run the enterprise, but 1997 was a year where Unix continued to grow, S/390 mainframes confounded all obituary writers, and Numa parallel technology made a dazzling appearance.
Overall the market for all midrange servers priced between $100,000 and- $999,999, based on factory revenue, has shown a fairly flat one to two per cent annual growth over the past three years. IDC estimates total global revenues for 1997 to stand at $18.86 billion.
Within this total however, certain technologies and vendors forged ahead, while others faded or consolidated. Sequent was the only newcomer to the top 10 though others swapped places within it.
Top of the global pile was IBM, way ahead with $6.06 billion in revenues, a two per cent growth on 1996. This leaves it with 35 per cent of total vendor revenues.
Its RS/6000 Unix range saw eight per cent growth, thanks to a clustering software bundle, strong system storage sales, and the introduction of a 12-way version.
IDC admits that the downward estimates for IBM S/390 mainframe products were overstated in the past - in fact, unit shipments have started to grow strongly because of the introduction of Cmos processors and the certification of the MVS operating system to run the SAP business application, although price reductions will affect revenue.
"Companies can replace their bipolar systems on less than three years running costs [of Cmos models] depending upon depreciation and software costs. It is a no-brainer to replace ECL [the older chip technology] with Cmos," said Peter Norris, consultant at IBM's S/390 division.
However, Gartner Group extimates that the 30 per cent price fall year on year for Cmos systems will continue, meaning Cmos vendors will have to sell 30 per cent more systems just to stand still on revenue, which the analyst company warned could be a difficult challenge.
IBM is hoping it can push its AS/400 server line this year on the back of the e-business boom and the ever improving ability to link Web protocols to existing proprietary systems. IDC expects the company to integrate the previously autonomous server business units this year.
In the UK Unix system market, however, figures from other analysts show IBM's revenue falling, possibly reflecting a weaker overall performance from AS/400 models.
Retaining its number two slot was Hewlett-Packard, with 13 per cent of total server revenues. Its recently announced deal with Oracle and Cisco demonstrated its intention to improve its sales to customers requiring very high availability Unix systems, but products from this alliance are not likely to impact sales heavily until the later part of this year.
Overall HP's server sales grew six per cent, with stronger growth from its K-Class products. The introduction of the new V-class range late last year updated older technology and gives HP a more competitive Unix offering. It has noticeably returned focus to marketing Unix in recent months.
IDC points to HP's close relationships with the large independent software vendors as a strong reason for its current and continued success in this market, but it questions how well the company will handle multiple migration paths over the next two years as it integrates Intel's Merced processor.
Sun Microsystems' exclusive focus on its Solaris Unix operating system continues to pay off. Its E10000 Starfire servers offering up to 64 processors are making inroads into system sales above half a million dollars, while lower end products took advantage of faltering from other Unix vendors to grab increased market share.
"I do not think anybody's hardware scales as well as as our products do. You can use our Starfire products if you want scalability for high performance and if you want high availability you can cluster them," said Robert Youngjohns, UK managing director of Sun Microsystems.
Overall it had $1.408 billion in revenue, an eight per cent share that benefited from a 19 per cent growth rate. On the down side the roadmap for its clustering technology, codenamed Full Moon, leaves it behind competitors in high availability and failover functionality, according to analysts.
Sun also needs more services resources to support the high rate of growth in sales of high end Unix systems, something it could address this year through acquisition or strategic partnerships.
"Sun does not have anything like the services inhouse it will require. Ultimately they will be constrained on sales of hardware. It will have to make a decision quickly whether it is going to have a full services business or not go that route," said Jane Doorly, vice president and director of research at Dataquest.
Analyst's figures for the UK market for Unix systems in 1997 make good reading for Sun. Strong sales growth pushed it to level pegging on revenues with rival Hewlett-Packard and in revenue terms sharing half the UK market between them.
Despite its up and down financial year, Silicon Graphics performed strongly in the midrange market, growing revenue 31 per cent to $800 million and gaining a five per cent share of the total. SGI is just one of the vendors to benefit considerably from the early introduction of a Numa technology in its Origin server range.
Nominated by IDC at the beginning of the year as a likely takeover target - along with Data General and Digital - NCR, at number five in this chart, has struggled in its first year away from AT&T, experiencing a 30 per cent drop in server revenues to $755 million.
IDC expects it to turn the trend in 1998, benefiting from the new products in its Worldmark range and continued domination of the largest data warehouse projects through its Teradata database software. However not all industry experts are so convinced.
"NCR may well benefit from being taken over, but I am not so sure there is anyone out there who would want it," said one analyst.
Surging up 46 per cent in sales on the back of the widespread popularity of Numa technology was Sequent, the only new vendor in the top 10. Its older Symmetry SMP servers are now limited to replacement and system add-on sales.
"We have sold 120 Numa systems in the UK this year. People see a roadmap for the next decade in our architecture," said Paul Kelly, UK managing director of Sequent.
Sequent has also expanded its services capabilities significantly which should contribute strongly to company revenues, whilst its strategic partnership with EMC gives it a solid OEM storage technology, and cross-company sales leads.
The past is indeed a foreign country for two of our next chart toppers, Tandem and Digital. Their combined sales in this sector would instantly push them to number four, sitting below Sun with total joint revenue of $1.065 billion and a revenue share of six per cent.
Compaq has a number of issues to address in integrating these two vendors, not least in how to reduce the number of product and operating system offerings. Alpha's future also remains unclear, a doubt that already impacted end of year sales.
Digital also plans to work with Sequent in porting Digital Unix onto Intel's IA-64 architecture, which could be a positive sales move but further clouds a combined Compaq message. On the plus side, Digital's close relationship with Microsoft has helped drive hardware sales to run NT and Microsoft Exchange.
Siemens Nixdorf sits at seventh place between Compaq's two acquisitions. It is currently introducing two new mainframe models and a number of Unix servers. Sales of systems for SAP projects are strong but its strongest area remains retail and more recently in the growth of NT at the low end. It saw a five per cent growth in midrange revenue, rising to $524 million.
Propping up the top 10 is that 'household name' Fujitsu. Actually Fujitsu's global brand image is a major issue for the company, especially as its subsidiary Amdahl has a far more well known name in the US and Europe than does the parent.
Preliminary results early this month showed a staggering revision of expected profits for 1997, down to Yen10 illion from Yen46 billion. This poor performance is reflected in its midrange market where revenue fell 14 per cent to $475 million.
Its subsidiary Amdahl hopes to have a stronger year though, with all new product lines sourced from its parent and, like IBM, claiming it can take advantage of a demand for Cmos mainframes.
That was 1997 for the top 10. Other vendors contributed revenue of $3 billion to make a grand total in this market of $18. 86 billion, up two per cent on 1996.
For 1998 IDC's report predicts a strong push on eight-way Pentium Pro servers, to be replaced by versions using Intel's Deschutes processor later in the year.
Sun will continue to focus on driving server growth with more products given street prices, but IBM will also have a better year as it reorganises its business structure for servers. Storage will also be a key battle this year as vendors all seek high end storage offerings to push up the margins from system sales.
Other analysts point to Numa's continuing impact, especially as vendors such as IBM and Bull jointly, and Hewlett-Packard, launch their own versions. Cheap, application specific, operating system independent thin servers should also start to cut into sales of generic servers for specific tasks, particularly Internet-related.
Over the top of this however, all market commentators will tell you, lies the spectre of Year 2000. As the day approaches, buying patterns will increasingly become warped by the diversion of resources to that single problem.
"The popular myth is that the Year 2000 budget will be found as extra but we do not think that is true. Some companies will not upgrade systems because we don't believe they will have the budget to do it, particularly if they have legacy systems to deal with. The gravy train is not going to carry on," warned Dataquest's Doorly.
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