Server Market Size, Share & Trends Analysis Report By Product (Rack, Open Compute Project), By Enterprise Size (Large, Medium), By Channel (Reseller, Direct), By Vertical, By Region, And Segment Forecasts, 2021 - 2028

Report Overview

The global server market size was valued at USD 83.66 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 7.8% from 2021 to 2028. A server is a physical and virtual centralized database used to store and share information across multiple computers connected across a network. The growing number of new data centers globally is one of the key factors expected to fuel market growth. Several cloud service providers and industries, such as IT and telecom, healthcare, BFSI, and government and defense, are engaged in upgrading their servers to manage the continuously rising volume of data. The upgradation of the IT infrastructure provides enhanced security, storage, and processing speeds for managing higher data volumes.

The COVID-19 pandemic has caused a minor dent in the sales of servers, thereby affecting the market growth. However, amid the lockdowns announced by several governments globally, numerous organizations have adopted the work-from-home model for their employees, as part of the efforts to arrest the spread of the disease.  The usage of OTT platforms and e-commerce websites also increased during the lockdown as people resorted to these channels for entertainment and shopping purposes. The proliferation of non-contact methods of transactions has resulted in a rise in the usage of payment wallets, creating avenues for industry growth. As the situation normalizes, these trends are expected to stay and grow further post the pandemic, fueling the demand for servers.

The Asia Pacific market witnessed significant growth in the fiscal year 2019 due to an upsurge in the sales of rack servers, primarily driven by the continued demand from hyperscalers. Rack servers are used in several applications because of their compact size and the possibility of easy replacement during a breakdown. In 2019, several companies such as Huawei Technologies Co. Ltd., Dell, and Hewlett Packard Enterprise Development LP witnessed a rise in sales due to the increased demand for high capacity servers. For instance, Dell’s Infrastructure Solutions Group recorded revenue growth of 28%, linked chiefly to the sales of its PowerEdge servers. The company claimed that the increased prices of high-end servers with higher memory and robust computing capacity were responsible for revenue growth.

Besides, the demand for high-performance computing servers has increased across applications supporting big data analytics, software-defined solutions, and hyperconverged infrastructure. Furthermore, the continued rollout of 5G networks technology and aggressive investments in the construction of hyperscale data centers by public cloud providers also favored the growth of the market in Asia Pacific in 2019.

Newer applications that demand specific configurations and high computing requirements from users and service providers are increasing the adoption of cloud servers for efficient functioning. Enterprises are adopting virtual or cloud servers to enhance their global networking capabilities and cut down on their IT infrastructure’s operational and maintenance costs. Additionally, cloud service providers have to invest significantly in the maintenance of cooling equipment as physical servers dissipate more heat. Due to this, provisions such as renting servers and virtualization have been gaining traction in recent years.

However, the increased demand for servers with customized configurations for several applications and the many challenges associated with selecting the suitable server are some factors expected to disrupt market growth in the near future. Furthermore, high installation and maintenance costs may pose a challenge to market growth over the forecast period. Nevertheless, the Bring Your Own Device Policy (BYOD) and the increasing need for centralized access systems are expected to help keep the demand up for servers over the forecast period.

Product Insights

The rack segment dominated the market and accounted for more than 35.0% share of the overall revenue in 2020. This can be attributed to the high rate of adoption of rack servers across diverse verticals. Rack servers are individually mounted in a rack and are configured to support a wide range of requirements. The design and construction of these servers make them suitable for low as well as high computing requirements. Besides, these servers can be easily scaled up, occupy less floor space, and be cooled instantly due to their rack design.

The Open Compute Project (OCP) segment accounted for the second-largest revenue share in 2020. Several small- and medium-sized enterprises are interested in replicating the efficient data center designs of giant cloud service providers. OCP servers are manufactured by Original Design Manufacturers (ODMs), owing to which the cost of these servers is low compared to OEM servers. Benefits such as low-cost installations and open-source ecosystems are expected to work well for the segment over the forecast period. Blade servers are expected to witness healthy growth over the forecast period owing to their compact size and high computing power. These servers are usually installed in large data centers to cater to HPC applications.

Enterprise Size Insights

Large enterprises accounted for the largest revenue share of over 65.0% in 2020 and are likely to maintain their lead over the forecast period. This can be attributed to the fact that large enterprises have the funds to spend significantly on their IT infrastructure. Meanwhile, large enterprises have several long-standing tie-ups with service providers, ensuring timely delivery and customization options among standard products. These factors are anticipated to influence the segment growth.

While it is easier to upgrade on-premise servers, micro and small enterprises may end up hosting a server on a cloud owing to cost benefits. Owning a physical server involves high initial investment and incurs high operational expenses over time. The cost involved in operating cooling systems, hardware replacement costs, security systems, high-speed network connections, and more supportive infrastructure for an in-house server may also discourage small enterprises from investing in one.

To cater to the increasing demand from small and mid-sized organizations, companies such as Hewlett Packard Enterprises, IBM, and Lenovo are introducing small enterprise servers, which are specially designed for the needs of small- and mid-sized businesses. For instance, Hewlett Packard Enterprises provides an HPE ProLiant MicroServer Gen10 Plus server for SMBs, which is compact and equipped with a 3.4-3.8 GHz processor to offer optimum performance. An increased number of product offerings by OEMs and lower-priced products by ODMs have prompted several SMBs to purchase servers, contributing to the promising growth prospects of the micro and small enterprise segments.

Channel Insights

The reseller segment held the largest revenue share of over 40.0% in 2020. The direct channel is expected to expand at the fastest revenue-based CAGR of 9.0% over the forecast period. The segment growth is attributed to the customized designs and competitive prices offered by server ODMs. Servers offered by ODMs are cheaper as ODMs do not have large sales forces and marketing campaigns. They sell the servers directly to the customer, which cuts down the promotional and intermediary costs.

Servers manufactured by OEMs are often sold to the customer through distributors and resellers, which adds to the final cost of these servers. Hence, small- and medium-sized enterprises prefer ODMs for their IT operations, thereby shifting the momentum from OEMs to ODMs. Major cloud service providers like Amazon Web Services also have tie-ups with several ODMs to fulfill their server demand, thus increasing the market share of the ODMs.

OEMs also supply their products to system integrators and value-added resellers. While system integrators offer severs as a part of turnkey projects, resellers sell the servers directly to the end-use industries. Resellers are connected to all types of industries, from small and medium enterprises to large enterprises, ensuring a strong hold on the market.

Vertical Insights

The IT and telecom segment accounted for the largest revenue share of over 38.0% in 2020. This can be attributed to the rise in network connections and the high penetration of smartphones globally. The anticipated rollout of 5G networks is also expected to help the segment maintain its lead over the forecast period. The demand for servers is expected to grow significantly in the BFSI sector owing to the increased need for making transactional processes fast and reliable. The demand for HPC servers in the BFSI sector has also increased over the last few years due to the rising usage of high-performance applications to handle large data volumes. The increase in the number of digitized transactions during the COVID-19 pandemic is also expected to drive the BFSI segment over the forecast period.

The government and defense sector is likely to expand at a promising pace over the forecast period. This can be attributed to an increase in government initiatives promoting the digitization of government services. The digitalization of government services is anticipated to create demand for data storage and analysis capabilities. These factors are expected to drive the demand for servers in the government sector over the forecast period.

Regional Insights

The North American market accounted for the largest revenue share of over 40.0% in 2020, followed by Asia Pacific. The presence of several data center and cloud service providers in the region has made North America the largest hosting market with numerous dedicated servers all over the region. North America is also home to major cloud service providers, such as Facebook, Amazon.com, and Google, Inc. These companies are investing significantly in the construction of mega data centers for high processing capabilities and additional data storage, thereby opening opportunities that may fuel the market growth. Furthermore, advancements in areas such as 5G, the Internet of Things (IoT), and edge computing are expected to drive the regional market over the forecast period.

The Asia Pacific market is expected to register the fastest growth rate in terms of revenue over the forecast period, with China and India remaining the leading contributors. Smart city initiatives undertaken by government bodies in these countries have led to the development of new data centers, thereby contributing to market growth. According to research conducted by CBRE, Inc., nearly 795 MW of new data center capacity is expected to be added to the Asia Pacific region between 2019 and 2021. The growing rate of high-frequency trading is also expected to drive the demand for HPC servers in the region. Besides, the significant use of digital wallets, social media platforms, and internet-based services is anticipated to generate demand for data storage, thereby contributing to market growth.

Key Companies & Market Share Insights

Favorable government initiatives to reduce barriers on IT companies to operate across the borders are yielding positive results for the network infrastructure ecosystem. As a result, companies such as Huawei Technologies Co. Ltd, AT&T, and Sky Telecom have been investing aggressively in emerging economies in Latin America, MEA, and other regions to expand their businesses. Key players such as Microsoft, Cisco, Dell Technologies, Hewlett Packard Enterprise, and FUJITSU are expanding their footprint in Asia Pacific to address the regional demand fueled by digital transformation.

Several market players are focusing on forming alliances to introduce new techniques to increase server capacities and speed. For instance, in December 2018, Hewlett Packard Enterprise Development LP announced the acquisition of BlueData, a provider of AI and big data analytics software. The acquisition helped Hewlett Packard Enterprise Development LP gain access to BlueData’s AI and ML solutions, which could be integrated and deployed in its Apollo servers to enhance their performance. Some prominent players in the global server market include:

• IBM

• Hewlett Packard Enterprise

• Dell

• Lenovo

• Fujitsu

• Inspur Technologies Co. Ltd.

• Huawei Technologies Co. Ltd.

Server Market Report Scope

Segments Covered in the Report

The report forecasts revenue and volume growth at the global, regional, and country levels and provides an analysis of the latest industry trends and opportunities in each of the sub-segments from 2016 to 2028. For the purpose of this study, Grand View Research has segmented the global server market report based on product, enterprise size, channel, vertical, and region:

• Product Outlook (Volume, Thousand Units; Revenue, USD Billion, 2016 - 2028)

  • Blade

  • Rack

  • Tower

  • Micro

  • Open Compute Project (OCP)

• Enterprise Size Outlook (Volume, Thousand Units; Revenue, USD Billion, 2016 - 2028)

  • Micro

  • Small

  • Medium

  • Large

• Channel Outlook (Volume, Thousand Units; Revenue, USD Billion, 2016 - 2028)

  • Reseller

  • Direct

  • Systems Integrator

  • Others

• Vertical Outlook (Revenue, USD Billion, 2016 - 2028)

  • IT & Telecom

  • BFSI

  • Government & Defense

  • Healthcare

  • Energy

  • Others

• Regional Outlook (Volume, Thousand Units; Revenue, USD Billion, 2016 - 2028)

  • North America

    • U.S.

    • Canada

  • Europe

    • U.K.

    • Germany

    • France

  • Asia Pacific

    • China

    • India

    • Japan

  • Latin America

    • Brazil

    • Mexico

  • Middle East & Africa