IDC Forecasts Worldwide Appliance Server Market Will Surge Past $11 Billion in 2004

FRAMINGHAM, MASS., MARCH 20, 2000 – For server vendors, appliance servers are too hot not to touch. IDC estimates this quickly emerging market will develop into a $11 billion-plus opportunity worldwide by 2004 – this from a market that was significantly under $1 billion in 1999.

Appliance servers will be quickly adopted by both enterprises and small businesses, but for different reasons. "Today's service providers and dot-coms are demanding reliable and scalable solutions to provide dedicated functions for their organizations. Alternatively, many small offices and businesses are looking for inexpensive, reliable ways to build a network and to get their business connected to the Internet," said Mark Melenovsky, research manager with IDC's Worldwide Commercial Systems and Servers research program. "IDC believes that appliance servers will find growing acceptance as solutions in both of these market segments."

This growth, however, will not come without a cost. According to IDC, portions of the appliance market will be highly cannibalistic of the traditional space — that is, appliance servers will take away market share from general-purpose servers. Moreover, general-purpose server vendors are expected to customize pieces of their traditional server offering, turning these machines into appliance servers as well — further fueling the cannibalistic characteristics this market will demonstrate. IDC sees 2000 as a pivotal year for appliance servers.

"We expect major server vendors will enter the appliance market this year, and some serious changes in the marketplace will occur," said John Humphreys, an analyst in IDC's Worldwide Commercial Systems and Servers research program.

IDC believes this emerging market will become more diverse and that high-growth areas will focus on specific applications and specific end-user segments. "Vendors should carefully assess the opportunities and threats appliance servers bring to their businesses before addressing this space," Melenovsky warned.

According to IDC, network attached storage will represent the largest opportunity for appliance servers, accounting for more than half the market's value through 2004. Revenues in the Web server segment, however, will increase the fastest. The compound annual growth rate (CAGR) in this segment will be more than 130%, compared with a 73% CAGR for the overall market.

"Appliance servers will not only occupy a prominent position in the server market, they will also drive specialization at the low end, bringing some of the reliability, accessibility, and scalability features of midrange servers to the small business segment," said Vernon Turner, vice president of IDC's Worldwide Commercial Systems and Servers research program.

IDC's bulletin Solutions in a Box: Appliance Servers Shake Up the Server Community (IDC #B21941) provides analysis on the development of the appliance server market and how these solutions will impact the server market. The bulletin defines appliance servers and discusses the trends affecting multifunction and dedicated appliance servers. IDC further divides the dedicated appliance server market into six segments based on functionality: Web server, proxy/caching/security, collaborative, network attached storage, file/print, and other. The bulletin distinguishes between the segment's target markets and channels. It analyzes the segments and briefly profiles the vendors competing in each. A unit and revenue forecast through 2004 is presented for the overall market as well as for each of the segments. The bulletin ends with IDC's view of how the market will evolve and challenges that it faces. To order a copy of the bulletin, contact Patrick Steeves at 1-800-343-4952, ext. 6787 or at psteeves@idc.com.

About IDC

IDC delivers dependable, relevant, and high-impact data and insight on information technology to help organizations make sound business and technology decisions. IDC forecasts worldwide IT markets and technology trends and analyzes IT products and vendors, using a combination of rigorous primary research and in-depth competitive analysis. IDC is committed to providing global research with local content through more than 500 analysts in 43 countries worldwide. IDC's customers comprise the world's leading IT suppliers, IT organizations, and the financial community. Additional information can be found at http://www.idc.com.

IDC is a division of International Data Group, the world's leading IT media, research, and exposition company.

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