Jeffrey Hewitt, an analyst with Gartner, says virtually all major server vendors are increasing efforts to capture greater share in the blade-server market, a market that highlights major changes in the way servers are used and deployed. "This market represents a disruption cycle, and whenever you've got a cycle like this you've got an opportunity for a vendor to capitalize on it and capture market share," Hewitt says. "These vendors see this is an important area for the future, and there is still a lot of market share up for grabs."
Although total blade-server unit shipments in 2004 were slightly below the projections made when entering the year, total revenue from the market met or exceeded expectations. "Shipments in the first half of 2004 were certainly weaker than had been expected," says Jessica Yang, an analyst with IDC. "But volume started picking up in the third quarter and momentum was building."
According to Gartner, blade-server shipments grew from about 60,000 in the first quarter to 62,000 in the second quarter, 68,000 in the third quarter, and 107,000 in the fourth quarter, for a total of more than 298,000 shipments for the year.
IDC saw the market as slightly bigger, saying that 306,000 blade servers shipped in 2004. IDC projects blade-server shipments of 510,000 this year, growing to 2.8 million in 2009. Revenue from blade servers was $1.2 billion last year and is expected to grow to $2 billion this year and nearly $9 billion in 2009, IDC says.
Gartner sees blade-server shipments growing to 541,000 this year to 1.3 million by 2009. Revenue from blade servers is expected to top $1.6 billion this year and grow to more than $3 billion by 2009.
Early market projections may have been a little high in part because of anticipation of Dell re-entering the market, which didn't happen until the fourth quarter, Yang says.
Most encouraging for vendors, however, was the high level of revenue generated by blade servers as customers consistently chose to move to high-priced two-way and four-way blade-server implementations, instead of one-processor systems, Yang says. That happened in part because users have begun utilizing blades throughout the enterprise. "We are seeing people really moving to adopt blade servers for all types of server workloads," she says.
"Customers see blades as the infrastructure they want to align to for the future," says Mark Potter, director of BladeSystem for Hewlett-Packard. "They are seeing that blades have very good advantages in helping to address operational costs and getting a handle on how they manage their compute resources."
Tim Dougherty, director of BladeServer marketing for IBM, says the past year has seen the blade-server market "move from the bleeding-edge kind of customers over into the mainstream. Customers are getting much more comfortable with the concept of blades, and although the blade market may be young in years, when you compare its growth to that of rack-optimized servers, we're actually ahead of that pace."
Although the blade-server market is a "two-horse race" for leadership between IBM and HP, Gartner's Hewitt says Dell made significant inroads considering it had very limited product available during the bulk of the year.
According to Gartner, IBM led all vendors with shipments of 122,000 blades and revenue of $518 million in 2004, followed by HP with shipments of 106,000 blades and revenue of $437 million, Sun Microsystems with shipments of 17,000 blades and revenue of $114 million, and Dell with shipments of 13,000 blades and revenue of $33 million.
IDC recorded IBM with shipments of 125,000 blades and revenue of $514 million, HP with shipments of 98,000 and revenue of $399 million, Dell with shipments of 13,000 blades and revenue of $38 million, Fujitsu with shipments of 9,500 blades and revenue of $35 million, and Sun with shipments of 9,400 blades and revenue of $21 million.
The market in 2004 went through several vendor changes. The most significant was the decision by Dell to re-enter the market in November with a blade offering based on Xeon processors. Dell had previously participated in the blade-server market with an offering based on Pentium processors.
RLX Technologies Inc., which had been an early supplier of blade servers, decided late in the year to discontinue offering server hardware and concentrate on supplying management software for the market. Earlier this month, RLX received more than $9 million in venture-capital funding to help finance the transition.
Sun also disclosed last year that it plans to revamp its blade offering and bring a different product to market in 2006.
The blade-server market will remain important to vendors as it grows to become as large as traditional pedestal and rack systems over the next five to seven years, Hewitt says. "It's an exciting technology area and has that Dodge Viper effect," he says. "All the vendors will continue to have and sell their regular 'car and truck' lines, but they're going to increasingly have this 'Viper' they can show people to demonstrate their innovation and capabilities."