IDC reports jump in server sales, decline in storage revenue

IDC released two surveys last week with seemingly contradictory results, but there is an underlying pattern: For now, on-premises hardware sales are dipping, while cloud sales are booming.

In its Worldwide Quarterly Server Tracker, vendor revenue in the global server market grew 19.8% year over year in the second calendar quarter of 2020 to $24.0 billion, while worldwide server shipments grew 18.4% to nearly 3.2 million units in the same time period.

In terms of server class, volume server revenue was up 22.1% to $18.7 billion; midrange server revenue declined 0.4% to about $3.3 billion; and high-end systems grew by 44.1% to $1.9 billion.

At the same time, IDC’s Worldwide Quarterly Enterprise Storage Systems Tracker found global market revenue for enterprise external OEM storage systems declined 5.0% year over year in the same time period to just under $6.3 billion.

This would seem contradictory, as servers and storage go hand in hand, and a customer of servers would need storage but not necessarily vice versa. The devil is in the details.

The top enterprise server vendors, HP Enterprise and Dell Technologies, saw declines as enterprise spending declined. HPE fell 1.8% year over year, while Dell dropped 12%. Lenovo, which does considerable sales in China, bucked the trend with 21% growth, and IBM rose 22% on the strength of new z Series mainframes.

The big growth came from off-brand vendors that sell to cloud providers and hyperscalers. Inspur rose 77%, and the ODM Direct category, which includes vendors like Supermicro and Wiwynn that sell almost exclusively to hyperscalers such as Amazon and Google, jumped 63.4%.

“We certainly see areas of reduced spending, but this was offset by investments made by large cloud builders and enterprises targeting solutions that support shifting infrastructure needs caused by the global pandemic,” said Paul Maguranis, IDC senior research analyst, infrastructure platforms and technologies, in a statement.

Revenue generated by the group of original design manufacturers (ODM) selling directly to hyperscale data centers grew 64.1% year over year to $7.0 billion in 2Q20, while the enterprise vendors saw declines. Dell Technologies’ sales fell 10.7% year over year, HPE dropped 15%, and NetApp dropped 10.4%. IBM, again buoyed by mainframe sales, rose 12.6%, and Huawei jumped 47.6% although it is well behind Dell and HPE in terms of dollars.

“Aside from China, the ODMs were once again a bright spot in the market as cloud builders and hyperscalers ramped up capacity during the quarter in order to support a strong demand environment from both corporate and consumer markets,” said Sebastian Lagana, IDC research manager, infrastructure platforms and technologies, in a statement.

This follows a pattern that has been set since the COVID-19 lockdown and work-from-home efforts. Cloud use is skyrocketing as people work from home, and enterprise sales are slowing because there’s no one in the office to use the equipment, or for that matter, even install it.

However, that pattern may start to shift. Wall Street giants JP Morgan and Goldman Sachs are bringing traders back to the office, and that may start some dominos to fall as other companies end work-from-home projects.