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Volume 5, Number 10 -- March 11, 2008

HPC Sales Account for Most of 2007's Server Sales Growth

Published: March 11, 2008

by Timothy Prickett Morgan

The appetite for high performance server clusters, vector supercomputers, and a few exotic hybrid machines continued to outpace the growth rate in the overall server space in 2007, according to market research just completed by IDC. The so-called HPC market, which most of us old hands still think of as supercomputers, has always been on the cutting edge of technology, but in recent years, it has been one of the key drivers of the server market as supercomputing has become more mainstream.

In addition to the casing of HPC server sales, IDC has also worked with the supercomputer industry--all seven members of it (that was a joke, vendors, so relax)--to come up with a new segmentation of the supercomputer market. The preliminary figures that IDC announced recently were based on data from the first three quarters of the year and preliminary estimates for fourth quarter sales, which are subject to being updated at some point in the next few months. (But possibly not.)

The overall HPC server market grew by 15.5 percent in 2007 to reach $11.6 billion in sales, according to IDC, which also announced a few weeks ago that estimated overall server sales, including mainframes, midrange and high-end Unix gear, and the same kinds of boxes that go into HPC machinery but are used for general purpose computing, rose by only 3.6 percent to $54.4 billion. Those numbers tell you two things. First, the HPC market accounted for 21.3 percent of all server sales last year, and that the HPC slice of the server space grew in excess of four times as fast as the overall server space. Said another way, the general purpose server space outside of the HPC space accounted for $42.8 billion in sales in 2007, up by only eight-tenths of a percent compared to sales of similar gear in 2006.

Basically, if you take HPC server sales out of the equation, then general purpose server sales were essentially flat in 2007. And as I have said for a long time now, the reason they are flat is because server virtualization and consolidation are starting to have an impact on sales. HPC customers, as a rule, do not use virtualization because of the overhead this software imposes. HPC workloads are more driven by memory bandwidth, I/O bandwidth, and clock cycles than the typical infrastructure workloads out there in the data center and are therefore not as readily virtualizable.

The growth in the HPC space has been remarkable in the past few years. IDC reckons that in the five years between 2002 and 2007, HPC server sales more than doubled from just under $5 billion to hit $11.6 billion in 2007; that's a compound annual growth rate of 18.8 percent over those five years, and that was despite a single-digit 9.2 percent growth rate in the HPC space in 2006. IDC is projecting slower sales growth between now and 2011, when it expects sales to only grow by 29 percent to around $15 billion. I will be interested to see how revenues in the non-HPC part of the market fare in the next couple of years, as hardware-assisted virtualization gains momentum in the X64 base, which accounts for most of the volumes in the server racket.

For now, HPC sales are holding up because they are generally not boxes bought by big banks, mortgage companies, and other financial services firms that spend a lot more of their budgets on more traditional transaction processing gear. (That's not to say that financial and real estate firms don't have supercomputers; it is just a smaller piece of their budgets.)

"There was no discernible evidence of the general economic slowdown reflected in 2007 HPC system sales," explains Steve Conway, IDC's research vice president for high performance computing. "Several factors likely helped insulate the HPC market: the length of HPC budgeting cycles, the global nature of the HPC market, HPC's relatively small presence in the financial sector, and HPC's essential role in government, academic research, and industry. IDC will closely monitor 2008 quarterly revenue data for any evidence of economic impact."

As we all know, Linux-based clusters have basically taken over the HPC space, and in 2007, such clusters accounted for 65 percent of sales, or about $7.5 billion. There's still a fairly strong contingent of high-end Unix boxes in the HPC space, as well as a smattering of Windows (but growing fast), and a number of hybrid boxes that support more than one operating system.

By HPC platform type, IDC believes that the workgroup segment, which is comprised of machines that cost under $100,000, had sales of $2.7 billion last year, declining by 3.3 percent. There was a 21 percent surge in departmental machines (which sell for between $100,000 and $250,000) to $4.1 billion; this is now the largest part of the market. Divisional HPC machines, which as the name suggests are more powerful and expensive boxes meant to be shared by many departments, saw their sales rise by 19 percent to $1.7 billion. Divisional class HPC machines cost between $250,000 and $500,000. The top-end segment, which is called supercomputers by the new IDC classification, cost more than $500,000; this segment accounted for $3.2 billion in sales in 2007, up 24 percent.


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