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ServerWatch: IDC Report Paints Conflicted Picture of Server Market, Circa 2004

Jul 24, 2000, 23:54 (13 Talkback[s])
(Other stories by Amy Newman)

By Amy Newman, ServerWatch

IDC today released a report indicating that solid shipment growth in the worldwide market for server operating environments will not translate into strong revenue growth.

The report, titled "Server Operating Environments Market Forecast and Analysis, 2000-2004," discusses how the research firm anticipates that shipments will increase at a compound annual growth rate (CAGR) of almost 17 percent from 1999 to 2004, while revenue will remain fairly flat with a CAGR of slightly more than 1 percent.

"Several factors will contribute to the disparity between revenue and shipment growth in the market for server operating environments," said Al Gillen, manager of IDC's Server Operating Environments and Software research. "One major factor will be the market's transition to lower-priced Microsoft and Linux products. Also, a surge of upgrades to the various server versions of Windows 2000 products will boost shipments while generating only upgrade revenue, lowering average per-product revenue."

The need to support Internet and e-commerce applications as well as traditional online transaction processing, database, file print, and application workloads will further drive demand for server operating environments.

Another major trend the report notes is a mushrooming in the number of shipments of Linux. In 1999, Linux overtook NetWare as the number-two server operating environment in terms of new license shipments.

IDC anticipates that Linux shipment growth will outpace all other server operating environments through 2004. The firm estimates that Linux server operating environment shipments will increase at a CAGR of more than 28 percent from 1.3 million in 1999 to 4.7 million in 2004. Linux revenue will also grow faster than the rest of the market, increasing at a CAGR of more than 23 percent.

Despite this high growth, Linux server operating environment revenues will barely exceed $85 million in 2004, and total Linux server shipments will remain a far second to Microsoft's Windows Server product family.

Dan Kusnetzky, vice president of System Software at IDC attempted to put Linux's penetration in perspective by comparing it to Microsoft's. "While there has been much hype about Linux, our research indicates the total market for Linux operating system software in 1999 was about $67 million -- or about the same amount of revenue that Microsoft's operating systems business generated by noon on the third working day of January 1999."

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