Recession Continues to Take Its Toll on the Market, Even Server Virtualization, Although There Are Signs of Recovery as Customer Adoption Expands, Acc

According to IDC's Worldwide Quarterly Server Virtualization Tracker, 16.5% of all new servers shipped in the second quarter of 2009 (2Q09) were virtualized, an increase from 14.5% in 2Q08. However, actual shipments decreased 21.0% year over year to 246,000 physical servers in 2Q09 as customers continue to limit spending on new server hardware relative to last year. Similarly, worldwide virtualization software revenue declined 18.7% year over year in 2Q09 to $344 million. Virtualization licenses did grow quarter over quarter in 2Q09. The server virtualization market continues to shift towards the use of paid hypervisors, with paid virtualization software now running on 60.8% of all new server hardware shipments virtualized in 2Q09, an increase over 57.2% in 2Q08.

"In the second quarter, IDC observed a number of signs indicating that stability is beginning to take hold in the worldwide server market," said Matt Eastwood, group vice president of Enterprise Platforms at IDC. "The worldwide server installed base has aged significantly and virtual machine densities on these systems have increased sharply over the past year. As a result, the market is poised for the beginning of a significant infrastructure refresh cycle in the months ahead. IDC believes that virtualization will be a cornerstone technology as medium and large enterprise organizations around the globe accelerate the need for more dynamic and converged infrastructure designed to support the business needs of the next economic cycle."

Server Virtualization Maturity Signals Changing Behaviors and Buying Intentions

“Server virtualization has forever changed how customers manage their datacenters,” said Michelle Bailey, research vice president of Datacenter Trends at IDC. “'Virtualization First’ is now the default approach for new server deployments at most enterprise IT organizations and is quickly becoming the foundational platform for cloud computing initiatives among service providers. Additionally, growth in emerging regions is accelerating as the economic downturn limits the ability of organizations to raise capital. The next phase in virtualization will require a reinvention of IT policies and procedures and continued adoption of automation tools will be key as virtual machine densities rise and customers find themselves facing virtual server sprawl issues.”

Overall New Server Shipments Virtualized Market Standings, by Vendor

Hewlett-Packard held onto the number 1 spot for worldwide new server shipments virtualized with 36% market share. HP's shipments declined 18% year over year in 2Q09 but grew 1% sequentially. These results were driven primarily by its x86 Proliant server business. Dell continues to distance itself from the remainder of the field as the number 2 vendor with its market share growing 9% over 1Q09. Dell’s relatively strong performance was driven by growth of Intel-based x86 servers in a weak market. IBM remained in the third position with 15% market share. IBM achieved 14% sequential growth driven by a solid performance from its converged System p and x86-based servers.

x86 Virtualization License Market Standings, by Virtualization Platform

VMware continues to hold the number 1 (VMware ESX) and number 2 (VMware Server) virtualization platforms despite revenues declining 22% year over year. This was slightly more than the decline of 21% in total x86 virtualization licenses. Microsoft saw its virtualization license shipments decline 16% year over year, due to the continued depreciation of Virtual Server 2005. However, Hyper-V showed a sharp increase of 54%, one year after its official launch and entrenching itself into 4th place while it cannibalizes itself into the number 3 position, past Virtual Server 2005. Parallels Virtuozzo rounds out the top 5 with license shipments declining 36% year over year. Citrix XenServer showed the largest increase, growing 108% year over year due to the company changing its business model and offering the product for free with certain management functionality. It’s a bold seeding strategy that will see market share gains, but will take some time, if ever, to monetize.

“Despite economic worries, we are seeing the continued increase of paid virtualization platforms, as it now accounts for more than 60% of all x86 virtualization license shipments,” said Brett Waldman, research analyst for System Software at IDC. “This is due to the maturation of virtualization deployments and the need for greater control with higher quality, fine grained management tools as IT departments continue to strive towards internal cloud computing environments.”

IDC's Server Virtualization Taxonomy

Virtualization licenses represents the amount of virtualization platform shipments for a given vendor in a given quarter. New server shipments virtualized maps the amount of virtualization platforms shipments that are sold directly by the hardware vendors. Virtualized server revenue represents the hardware revenue of new server shipments virtualized. Virtualization software revenue represents the software revenue associated with virtualization platform sales.

IDC's Worldwide Quarterly Server Virtualization Tracker is a quantitative tool for analyzing the global server market on a quarterly basis. The Tracker includes quarterly virtualization license shipments, new server shipments virtualized, virtualized server revenue and virtualization software revenue, segmented by region, cpu type, vendor, form factor, sockets, virtualization platform, and primary guest operating system. For more information, please contact Hoang Nguyen at 508-935-4718 or hnguyen@idc.com.