Unix Server Market Poised For Growth, Transitions4:00 PM EST Thu. Dec. 29, 2011
While the Unix server business has lost much of its glamour in the face of assaults from Windows, Linux, and the cloud, there is still plenty of life -- and growth -- in the business, although for the foreseeable future that growth will be enjoyed only by IBM.
The Unix operating system, and the servers which provide the base to run it, are still the heart of many of the world's mission-critical enterprise data center infrastructures. It provides a combination of performance and stability as yet unmatched by any other operating environments.
And, despite multiple predictions for years of its gradual fade away to obscurity as newer generations of companies and employees come to market with Windows or Linux experience, the Unix market is still growing.
Indeed, analyst firm Gartner in late November reported that, while the number of RISC processor-based servers, the platform on which Unix typically operates, dropped a slight 6.8 percent in the third quarter of 2011 compared to the same period a year ago, the revenue for those servers actually rose 3.5 percent.
That rise in Unix server revenue compared to the decline in volume is good news in that it shows a rise in average selling prices. This indicates that enterprises are purchasing increasingly powerful servers to run Unix applications, providing higher performance needed both for new and upgraded applications as well as for increasingly virtualized application environments.
Richard Fichera, vice president and principal analyst for the infrastructure and operations research team at Forrester, wrote in the Fall that Unix on proprietary RISC architecture will remain an important part of the enterprise for years for several reasons, including performance, the ability to run workloads on dynamically scalable and electrically isolated partitions, and the highest levels of reliability and availability outside of mainframe or fault tolerant environments.
Looking forward, Fichera said he expects Unix server vendors to improve the scalability of operating system scheduling to accommodate increasing numbers of threads and cores, improved online maintenance and availability, improve partitioning to better handle virtualized workloads, and improve system management tools.
Currently, three primary vendors, including IBM, Hewlett-Packard, and Oracle, account for about 97.2 percent of all RISC processor-based Unix servers shipped worldwide, or about 94.6 percent of the revenue for Unix servers, according to Gartner.
Those three vendors also provide their own versions of Unix, none of which are compatible with the other or with Linux, which was derived in part from Unix technology.
However, the three are taking different paths towards the future of the Unix server, a future which current trends seem to point towards success for IBM at the expense of its two rivals.
Oracle, which inherited the SPARC processor-based server line and the Solaris Unix operating system with its acquisition of Sun Microsystems, has since moved to eliminate its low-margin server business while focusing more on building hardware appliances that combine its server, storage, operating system, and middleware into complete, turnkey systems.
Those appliances include the Oracle Exadata Database Machine, a database appliance for high-performance data warehousing and online transaction processing workloads, and the Oracle Exalogic, an appliance for high-performance Java applications, Oracle applications, and other enterprise applications.
These appliances have for the most part gone through direct sales, although Oracle Senior Vice President Judson Althoff, who oversees the company's worldwide alliances, channels and embedded sales efforts, in November told CRN that the company is looking for indirect sales partners who can compete against federated hardware stacks from other vendors.
NEXT: Oracle's Server Business On The Decline
On the more traditional server side, Oracle in September introduced the SPARC SuperCluster. Based on the SPARC T4 processor, which features eight cores per socket and eight threads per core for a total of 64 threads per socket, the SPARC SuperCluster includes much of the same technology included in the Exadata and Exalogic appliances.
However, Oracle's server business is in a decline. The company in December reported its second fiscal quarter hardware systems sales fell 14 percent compared to last year, a fall the company blamed on customer indecision as the company transitioned to its new SPARC T4 microprocessors.
That corresponds with Gartner estimates that Oracle in the third calendar quarter sold 4.2 percent fewer servers, and suffered an 11.6 percent decline in server revenue, compared to the third quarter of 2010.
Oracle declined to comment on this article.
HP is also seeing its server business decline, in part because of a big dispute with Oracle.
Oracle and HP are locked in legal battles over Oracle's decision earlier this year to end development of its software for HP's Intel Itanium RISC processor-based Integrity Unix server line. That move, has sowed confusion among HP customers, who form the biggest installed base of Oracle software.
The results of the dispute are already starting to show. Gartner reported that HP shipped 12.8 percent fewer Unix servers in the third quarter of 2011 compared to the previous year, with Unix server revenue falling 18.5 percent during that period.
HP is continuing to develop its Unix server technology. The company is working with Intel on that company's upcoming Poulson Itanium processor, expected to be released sometime in 2013. HP, according to Forrester's Fichera, is also investing in porting its HP-UX Unix operating system to x86-based server platform, a possibility for which HP declines to comment.
HP in November unveiled "Odyssey," a mission-critical server strategy calling for the integration of x86 server blades into its Integrity Superdome 2 Itanium-based servers, the introduction of new scalable c-Class blade enclosures, and the porting of HP-UX Unix features to Windows and Linux.
The company expects Odyssey to provide Integrity Superdome 2 customers a way to gradually move their mission-critical workloads to Windows or Linux without disrupting existing investments in their Integrity architecture while laying the groundwork for the gradual unification of Unix and x86 architectures over the next couple of years.
Kate O'Neill, product marketing manager for HP's Business Critical Systems division, said Odyssey was not a reaction to the dispute with Oracle or to the drop in HP Unix server sales.
O'Neill also said there is no short-term pressure for customers to move from HP-UX. Oracle has promised to support its Oracle 11g software in Integrity platforms through 2018, and few are in a hurry to adopt Oracle 12, she said.
"Lots of customers are still running Oracle 8," she said. "Customers are not adopting new software as fast as its available. Customers are not pressured to move to Oracle 12."
NEXT: IBM Unix Servers Seeing Growth
Kevin Garrison, vice president of sales at Lilien Systems, a Larkspur, Calif.-based solution provider and long-term HP partner, said his company is seeing little to no interest in customers to move away from Oracle software running on HP-UX for now.
"The conversations we are having are [about] at what point in the future does the Oracle decision have an impact," Garrison said. "Our best answer is about five years from now. So it's not an issue for the next few years."
Some customers of Oracle and HP, however, have decided not to wait in the wake of the uncertainty, and are moving to IBM.
Migrating mission-critical operations from one flavor of Unix to another requires a significant investment not only in hardware and software, but also in retraining of staff and retooling of procedures. Yet several have decided the investment is worth it.
IBM in October said that it recorded over 250 competitive displacements worth a total of over $240 million in the Unix server market during its fiscal third quarter, with the displacements split evenly between HP and Oracle.
The prior quarter, IBM recorded 334 client displacements to its Power server line, which runs its AIX Unix operating system. That included 210 customers from Oracle and 110 from HP, said Steve Sibley, director of product management for IBM Power Systems. As a result, even though IBM's third quarter Unix server sales dropped 3.3 percent over last year, revenue for those sales bloomed 27.0 percent, according to Gartner.
Sibley said IBM saw in every quarter of 2011 a double-digit growth in revenue for its AIX Unix and Power server line.
"For the market as a whole, analyst firms like IDC essentially see sales as flat or slightly down in the last couple of quarters," he said. "We think the market will be slightly up in the fourth quarter, given our business and the new Oracle T4 server introduction."
For the Unix market as a whole, new customers are relatively rare when compared to other operating environments, Sibley said. "There are always some new clients growing from ground zero, or migrating from other platforms," he said. "There are few from non-Unix platforms. But we're seeing about 10 percent of new customers migrating up from x86, including those new to Power and those who already have Power elsewhere in their organizations."
IBM expects the Unix server business to grow, Sibley said.
"We clearly see continued growth in this space and for the Power platform for as long as we can see," he said. "We have continued growth built into our model. We don't see that changing in the foreseeable future."
Mark Teter, CTO of Advanced Systems Group, a Denver-based solution provider which works with all the top server vendors, said he is following a couple of trends which will impact Unix server sales into the future.
The first, Teter said, is Intel's new Westmere E7 line of processors which are comparable in performance to IBM's RISC-based Power7 processor in two-socket or four-socket servers.
"In larger servers, Power7 is better," he said. "But it's amazing the power of those Intel processors. And the design can handle up to 32 sockets."
In the past, to scale the number of sockets, Unix was the only choice, Teter said. "That's changing," he said. "But we have to wait a little bit for Microsoft and Linux to catch up. The operating system is a separate development."
NEXT: Unix Server Growth Depends On ISVs, Alternates
Beyond the server and Unix technology, however, looms a much larger factor, Teter said.
"The big driver for servers is the ISVs," he said. "All the big ISVs except Oracle are moving from Solaris and to Red Hat and Windows. ISVs are in the position to drive the future of Unix. IBM is doing a lot of software, so AIX will be doing well for years."
Oracle's acquisition of Sun is also driving some customers to IBM because of questions over the future of SPARC and Solaris, Teter said. However, despite the rhetoric between Oracle and HP, Oracle's latest T4 server launch was focused on IBM, not HP.
"I thought that was brilliant," he said. "Oracle was already kicking HP while it's down. Now it's starting to fire arrows at IBM. Brilliant."
Bret Osborn, president of Lilien Systems, said that customers looking for alternatives to Unix, particularly those worried about Oracle dropping software support for HP server platforms, have some options.
"Customers are entertaining Linux," Osborn said. "They can transfer their Unix skill set to Linux pretty easily. And HP's x86 servers are still seen as a viable option. We're seeing competition for IBM Power and Oracle SPARC with HP's x86 platform."
Lilien is also seeing virtualization vendor VMware getting into the fray, Osborn said. "We're seeing HP interested in partnering with VMware on opportunities to compete with Power and SPARC. The challenge is, not a lot of VMware is being used to run applications like ERP."
HP could help secure the future of its Unix server and operating system business with an acquisition of a software vendor like SAP, Osborn said.
"There has to be support for the players in this space," he said. "If HP is not supported by Oracle in the long term, they have to do something. If they buy SAP, with its relevant database and application offerings, it would be competitive with Oracle, and even more competitive with IBM. But that's a huge acquisition just to sell Itanium servers."