Big server vendors losing market share to smaller, ‘white box’ suppliers

white box servers

Hewlett-Packard Enterprise is generally acknowledged to be the world’s largest server manufacturer, supplying more servers to more data centres and other customers than any other company. 

In second place is said to be Dell, then after that, companies such as Lenovo, IBM and Cisco.

All these names are well known and their equipment has formed the bulk of the infrastructure in almost every data centre for years and years.

But the price of these companies’ equipment is said to be higher than that of smaller companies you may never have heard of.

Companies like SuperMicro, Quanta, Wistron, and Inventec. In fact, according to Market Research Explore, these are the leading companies in this market, probably in particular order:

  • Quanta
  • Wistron
  • Inventec
  • Hon Hai
  • MiTAC
  • Celestica
  • Super Micro Computer
  • Compal Electronics
  • Pegatron
  • ZT Systems

These vendors are said to be able to supply servers at a lower price, and some of that is said to be because their brand names don’t have the prestige of an HPE or IBM.

Some people refer to these smaller suppliers as “white box” companies, or “commodity” equipment suppliers.

And there is an increasing number of them, newly empowered by the gradual move towards software-defined data centres and networks which rely more on open-source standards and less on specific, proprietary hardware-based systems.

Moreover, initiative such as the Open Compute Project, established by Facebook, which demonstrated an open-source data centre switch last year, also give such vendors more opportunities for gaining market share.

It wouldn’t be entirely accurate to say that these companies are not well known, since among them are names such as Foxconn, the Apple device manufacturer.

And in their own respective markets, of course, they would be familiar names.

Furthermore, collectively, these companies are now overtaking the big names, according to research company IDC.

Collectively, these smaller companies are called “original design manufacturers”, or ODMs, to differentiate them from the “brand names”, such as IBM, HPE and the other market leaders.

Another category name IDC uses is “others”, to denote less well known and smaller companies in the market.

And the table IDC has produced, showing worldwide server vendor revenues, it seems that ODMs now sell more than HPE, with others also selling approximately the same, as shown below.

Worldwide Server Vendor Revenue, Second Quarter of 2017

  1. HPE / New H3C Group – $3.3 billion
  2. Dell – $2.7 billion
  3. IBM – $1 billion
  4. Cisco – $875 million
  5. Lenovo – $834 million
  6. ODM – $3.5 billion
  7. Others – $3.2 billion

Also, the ODMs and others seem to be taking market share mainly from HPE, IBM and Lenovo.

Compared to the same quarter in 2016, HPE’s revenue was down more than 8 per cent, IBM’s was down 21 per cent, and Lenovo’s was down 14 per cent, according to IDC.

ODMs and other, meanwhile, saw revenues increase by almost 60 per cent across their two categories.

Total server shipments were valued at almost $16 billion in the second quarter of 2017, which is an increase of more than 6 per cent year on year.

This is probably seen as strong growth overall and IDC says it’s because of the new Intel Skylake processors.

Data centres – particularly hyperscale data centres – and cloud service providers were big buyers of the servers, while “many other areas of the server market are still stagnant”, says IDC.

Kuba Stolarski, research director, Computing Platforms at IDC, says: “Hyperscalers as a group made a large deployment push in the second quarter led by Amazon, which alone accounted for more than 10 per cent of server units shipped in the quarter.

“As hyperscalers tend to lead the market on most architectural updates, we expect the rest of the market to catch up over the next several quarters.

“As the market cycles through this refresh, we are seeing changes in vendor portfolios with new modular system designs and a greater focus on accelerator technologies, as well as the continued evolution of the role of cloud services in corporate IT.”