Appliance Servers Take on the Big Guys

Only two years after their debut, appliance servers are taking the server market by storm and threatening the space of multipurpose servers. According to International Data Corp. (IDC), more than 2 million appliance servers will ship by 2003, generating revenues of nearly $8 billion.

“Appliance servers’ ease of use, manageability, and better price/performance offerings are very attractive selling points,” said Vernon Turner, VP of IDC’s Commercial Systems and Servers research program. “This market could be a significant threat to the existing second tier or third tier vendors and kick off another wave of industry consolidation. After all, the smell of $8 billion of new revenue will attract just about everyone to the dance floor.”

Small offices, home-offices, medium-sized businesses, ISPs, and application service providers (ASPs) will turn to lower-end appliance servers instead of general-purpose servers because they can do the same work for less money and are more reliable, according to IDC’s report “Appliance Server Forecast: Get It or Get Out of the Way.” High-end appliance servers will be used by large companies to simplify their hardware structure and manageability requirements.

According to IDC, competition within the appliance server market will be fierce because of the diverse appliance server market, and no single company will dominate the overall market, just segments.

“Distribution and the right operating system fit will be critical for vendors in this market. The key will be finding the path that leads to ISPs and ASPs,” said IDC’s Amir Ahari. “Additionally, successful appliance servers should be operating system impartial.”

According to IDC’s report, Linux has a good chance of becoming the dominant appliance server OS because of its strength as a developer platform and lack of license fees.

IDC’s report also expects the appliance server market to have cannibalistic tendencies at first, meaning taking business away from the traditional server products. However, over the long run, appliance servers will become additive, and they will be complementary to traditional servers.