IDC Predicts Moderate Growth for Server Market in Western Europe

London, August 3, 1999 – According to recent research from International Data Corporation (IDC), the European server market is expected to increase at a compound annual growth rate of 6.2% from $18.0 billion in 1998 to $24.4 billion in 2003 in terms of customer spending.

Expectations Down for IA64, NetWare, and Midrange NT and 1999 Sales

Windows NT will continue its extremely successful low-end drive, pushing back sales of servers based on Novell's NetWare as a result. However, IDC believes that NT/Windows 2000 will be prevented from moving into more profitable midrange markets by its newness and relatively poor reliability in comparison with Reduced Instruction Set Computing (RISC) Unix machines.

IDC has also cut back on its expectations for Intel's IA64, following Intel's delayed road map and the belief that initial chips (code-named Merced) will under-perform RISC chips, when first shipped. This is despite strong theoretical advantages that IA64's Explicit Parallel Instruction Set Computing (EPIC) architecture has over super-scalar RISC designs.

The overall market in 1999 is expected to slow significantly as European businesses defer purchasing, deployment, and even evaluation in the run up to the year 2000. "If they've already tested and certified their systems as compatible, many won't want to buy again until after the new year," said Martin Hingley, senior research director in charge of IDC's European Commercial Systems and Servers program. "However, clever server vendors will be pushing them hard to steal a march on their rivals by creating next-millennium solutions."

Expectations up for Appliance Servers, Linux, and Information Utilities

IDC expects a number of new areas to drive server sales over the next few years, in particular:

— Appliance servers will offer an alternative type of server for small businesses that want dedicated boxes for Web serving, file serving, firewalls, and the like. Likely to be based on operating systems such as Linux, they will probably compete with general-purpose servers for customer euros.

— Linux is expected to become a viable alternative to current operating systems in many user environments. Even if it is not yet fully standardized and represents only a small proportion of server sales, its positioning as a free source code product heralds a whole new business model for the server market. "It appears that everyone who was loyal during NT?s onslaught on Unix is now covering his or her bets by supporting Linux in one way or another," said Vernon Turner, vice president for IDC's Worldwide Commercial Systems and Servers program. "The more companies like Red Hat become public, and therefore create a broader awareness by just being known in the marketplace, the more pressure Linux may assert on the low-end server market."

— Information utilities are likely to take a growing proportion of server sales – their success can already be seen in the expansion of server sales to telco and business services sectors. Increasingly, the provision of processing services will take over from hardware sales, exploiting the lower prices and shorter life cycles and giving customers the choice to "in source" specific applications. "In-sourced applications expected to drive the creation of information utilities are asynchronous ones," Hingley said. "Companies will want to take advantage of a common Web infrastructure to place email, ticketing, accounting, personnel, and the like in the hands of contractors."

A Great, Profitable Market, but Changing Fast Overall, IDC believes the server market remains a mainstay of revenue generation within the computer industry and one in which profits are typically higher than in other segments. However, for vendors, the pace of change is accelerating, throwing into consideration a number of new issues, business models, and product types that need to be addressed in order not to fall behind. IDC continues to address these fully in order to provide the best forecasts in this area.

IDC's Western European Server Forecast 1996-2003 bulletin (IDC#BG46F) contains a summary of findings from the forthcoming report Server Market Forecast 1998-2003

— This report will detail market forecasts and data projections for 16 European countries. The report and electronic data file give shipment units, factory revenues, customer revenues, and installed base units by country, segmenting the market by server class, server price band, operating system, architecture, CPU type, shipment type, and distribution channel. The bulletin is available for purchase from your local IDC office.

About IDC

International Data Corporation delivers accurate, 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 adoption 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 more than 40 countries worldwide. IDC's customers comprise the world's leading IT suppliers, IT organizations, and the financial community. Additional information on IDC can be found on its Web site at http://www.idc.com.

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