Server Market Is Booming

There is no doubt whatsoever that the server market is actually booming. In
fiscal 2003-04, the total server market grew by a whooping 46% in unit terms and
21% in value terms. If you consider just the PC servers, then the growth topped
50% in units and 31%percent in value.

This performance looks even more sterling when you consider that the PC
market grew by just 22% in unit terms and 12% in value terms. According to the
Dataquest Top 20, just under 53,000 servers were sold in 2003-04 as compared to
around 35,000 sold in the previous year.

Now the question arises as to why are servers growing at such a scorching
pace? Especially in a year when the total IT market grew by 24%!

One big reason was the pent up demand, which was there as the previous year
(2002-03), the market was in a pretty bad shape. As a result, buying had taken a
nosedive. Corporates had made heavy cuts in their IT budgets.

But as the new year arrived, market sentiments improved considerably and at
the same time, corporates realized that by cutting spending on IT purchases,
they were compromising on their working efficiency, which they didn't want.

So, their entire pending purchases and also the fresh ones happened in rapid
succession. In addition to this, there was a booming demand from the telecom and
the BFSI sectors. These two sectors put together plus a good contribution from
the manufacturing segment served as the booster, which was responsible for
driving the server market at a fast pace.

In addition to BFSI and telecom, SMB is another segment, which is showing a
lot of promise. This market is poised to boom, as it is about to take off. Not
surprisingly, almost all the major vendors are scrambling to grab a major pie of
this cake, which promises to be huge.

However, the competition promises to be stiff in this segment due to the fact
that only PC servers will do here. Which effectively means ASV would be between
Rs 1.5 to Rs 2 lakh. At this price point, there are not only the top vendors but
also a host of smaller players-primarily the Intel Premier Providers (IPP)-who
will be jostling for their space in the sun.

In fact, these IPPs would be at an advantage as they already have a good
relationship and rapport with the SMBs, having sold them PCs and peripherals
earlier and also having provided post sales support. This is something, which
the larger established vendors cannot duplicate.

All signs point to an even better time in the current fiscal. The server
market should continue to sizzle. And whosoever focuses on this segment, would
undoubtedly come out with a good piece of the cake and at the same time better
margins.

Asim Raina