Gartner: Virtualization, U.S. Recovery Drive Strong 2Q Server Sales

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Strong U.S. sales and an increase in the use of virtualization drove strong server shipment and revenue growth for the second quarter of 2010, according to a new report from Gartner.

Gartner on Wednesday said a total of 2.1 million servers were shipped in the second quarter, a healthy 27.1 percent increase over the 1.7 million servers shipped during the second quarter of 2009.

The total factory revenue from all those servers hit $11.1 billion, up 14.3 percent over last year's $9.7 billion in server revenue.

Jeffrey Hewitt, research vice president at Gartner, said a surprisingly strong U.S. market led the robust server growth. The number of servers shipped in the U.S. grew 38.9 percent, while the revenue from those servers grew 23.3 percent, over last year. Only the much smaller Eastern European market saw stronger growth, Hewitt said.

He cited the economic recovery, the growing strength of service providers, and pent-up demand as factors leading the U.S. growth.

Another factor contributing to the server growth appears to be the increased adoption of virtualization technology despite the fact that multiple virtual servers are run on individual physical servers, Hewitt said.

"I have a hypothesis, and it's a hypothesis only, that adoption of virtualization drives server purchases," he said. "Virtualization makes rolling out and deploying things like disaster recovery and cloud computing easier. And servers in many of those areas may not be easy to consolidate."

About 10 virtual servers are deployed on the average physical server which is used for hosting virtual servers, Hewitt said. Some customers are pushing 15 to 20 virtual servers on a host in production environments, and up to 40 in test-and-development environments, he said.

However, that number will fall now that the consolidation phase of virtualization is over and customers look to do more with virtualization, Hewitt said.

For example, a customer who has 10 virtual servers on a physical server who is looking to add disaster recovery might deploy a second server in stand-by mode at a remote site to host those virtual servers in the event of a disaster. In this case, instead of 10 virtual servers per host, the average is not five virtual servers per host, he said.

While growth in server shipments and revenue was strong in the second quarter of 2010, they are still off their peaks, Hewitt said.

Next: How The Vendors Did

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