SERVERS: Bouncing Back To Merry Growth

DQC News Bureau
Updated On
New Update

After two years of sliding downhill, the Indian server market is now zipping merrily with a growth rate between 30 to 40% (q-on-q). Vendors and partners are upbeat about business in Q3 2003 as the market indicates IT infrastructure spending to be on the rise.


The server business has been on an upswing, especially in the past eight months. IDC estimates that the Indian x86 server market alone generated revenues of Rs 193 crore in the second quarter of 2003 compared to Rs 126 crore million in the same period last year, registering a growth of 53%. The overall server market grew by 30% in JAS 2003-04 over the same period in the previous year.

The server business was at its peak during the first two quarters of the current fiscal. “The Indian market has seen a significant growth in revenue, especially from the Intel-based servers in the first half of 2003,” says Anil Kesavan, MD, Vertex Trading and Service. 

According to him, constrained budgets and the tough economic situation had squeezed the server market last year. “However, an increasing preference for mid-range servers brought in better revenue for vendors this year,” says he.


Market estimates indicate that the domestic server market revenue grew by 27% in Q1 2003 over the same period last fiscal, registering the highest growth in APac market. Gartner Inc says that revenue in the first quarter of the current year stood at Rs 331 crore compared to a revenue of Rs 262 crore in the previous fiscal’s corresponding quarter.

Vinod Nair, Industry Analyst for Hardware Platforms, Gartner India states, “Increased uptake of Intel-based servers and end-fiscal buying by the government and corporate sectors contributed to this growth.” The high growth in the Indian server market is also attributed to the lower-than-average performance in the same quarter last year. Finance and banking, besides telecom and government were the main buyers.

Arun Narayan, Product Manager, PCS Industries feels that the server market has witnessed a 30% to 40% growth during the past few quarters. “While we sell servers for HP, IBM and Acer as their channel partner, we also sell our own brand of servers. Both the businesses have witnessed a very good growth, not only on a quarter-to-quarter basis, but also on a yearly basis,” adds



Between Unix and Intel-based servers, it is the latter that rules as far as numbers are concerned. However, on value-front, it is the Unix servers, which bring in better revenues as well as margins. “Currently, the margins that we offer to our partners on an average range between 5 to 8%,” says Arun, adding, “The higher the value of servers, the better is the margin percentage for partners.”


According to a recent IDC report, the end of a nine-quarter decline in the worldwide server market indicates that IT infrastructure spending could be on the rise. According to the report, server unit shipments during JAS 2003 increased by 17.5% to over 1.2 million units.

“We are training partners to get into offering consultancy instead of mere box pushing, which leaves greater impact on clients than just promotions”
Swarup Choudhury, Country Manager - Systems Group, IBM India

The report states that IBM reclaimed the top spot in the worldwide server market with 30.4% marketshare and 10% year-on-year revenue growth. It is followed by HP, which continued to lead in the Linux-based server market segment. Sun and Dell were at the third and fourth spots, respectively.

According to market sources, this growth reflects continued momentum in small- and medium-sized business segments as well as demand and buying pattern in departmental and workgroup environments in larger enterprises. 

This could also reflect that the ‘slow but steady’ attitude of buyers during last year is replaced by a ‘need to buy’ attitude in the current fiscal. This ‘need to buy’ attitude was present in a big way among educational institutions besides the regular verticals. Many partners believe that BPO and the ‘expansion’ mode of several software companies is also contributing to this growth. 



Selling servers is no doubt a specialized business. And channels have played a very significant role in ensuring the growth rates that the server market is currently witnessing. Today, partners contribute to nearly 70 to 80% of the server implementation business in the country. Vendors expect this figure to grow further. They are looking for niche players with expertise in implementing solutions around servers.

P has been focusing at identifying top performers in its channel network to train them to become HP server specialists.

“The Indian market has seen significant growth in revenue, especially from the Intel-based servers in the first half of 2003”
Anil Kesavan, MD, Vertex Trading and Service


Vaibhav Phadnis, Country Manager, ISS, HP India states that the company has been running a special incentive scheme on its servers, for the reseller community. Based on a Formula 1 (F1) theme, prizes to be won include F1 merchandise and a free trip to the Malaysian Grand Prix in March 2004. 

Realizing the need to combat competition, several vendors in the Indian market are enabling partners to sell servers not just as products but as solutions. Stressing this point further, Swarup Choudhury, VP and Country Manager–Systems Group, IBM India, remarks, “We see opportunity in enterprise applications, e-business solutions and high-performance computing.” The company plans to work closely with channel partners to address these high-growth areas with IBM’s end-to-end server offerings.

“Server selling requires a certain amount of skill that all partners don’t have. We are training them to offer consultation, instead of box-pushing, which leaves a greater impact on clients than just promotions,” explains




HP’s Xtreme Value Program for SMBs continued to make headway in 2Q 2003 in entry-level servers as well as Evo notebooks and desktops. Having succeeded in its focus on entry-level x86 servers such as the ProLiant TC2110, ML310 and ML350, HP has plans to expand its focus in this market segment by recruiting specialized server sales representatives for its distributors.


(in terms of units) during Q2 2003 compared to Q2 2002

Increasing its focus on the x86 server segment, IBM conducted the xSeries Sales School Program for its partners in an effort to educate them about the products. Successful completion of the two-day basic program endowed each partner with an IBM Server Sales Specialist certificate (in addition to a 500-point credit towards the ongoing IBM Blue Warrior performance-based rewards program). Moreover, partners could also participate in a three-day advanced technical and support training program. 

“Server consolidation is happening across large enterprises and so the need for more reliable and high-end servers is also increasing”
Vinod G

, MD, Arcamax Computers

Several other vendors too are offering servers targeted at small user workgroups. For example, PCS is promoting Intel’s Real Server campaign, targeted at end-users, who have five to six nodes with one PC server. 

“We would be offering stand-alone Real Servers as well as servers with few nodes around them,” says Arun. This initiative will help channel partners to bring in value-addition to their business in terms of networking, maintenance and other services apart from focusing on SOHO and small enterprises.


It is evident that the servers are no more treated as stand-alone products. Partners and vendors are identifying a niche market by building solutions around the server. Since server consolidation is taking place across large enterprises, the need for more reliable and high-end servers is also increasing. “This is primarily the reason, we have seen a good movement on Sun servers, which are high-end as well as high-priced,” informs Vinod G Nair, MD, Arcamax Computers.

The growing need for storage is complimenting the growth of servers. Partners have done good business by selling storage solutions, which always incorporate servers. Network integrators and SIs have started identifying this opportunity and are working towards improving their bottomline through these solutions.

“We are focused at identifying top performers in our channel network to train them to become HP server specialists”

Country Manager, ISS, HP India 

While customers look for return on investments, partners have to constantly study the needs of verticals for solutions that help their customers in server consolidation. “Our business happens in most of the verticals, which, by and large, fall under the SME space. This is where the real buying is happening,” says Chetan Shah, MD, Xpress Computers. Like Chetan, many other partners are now identifying their client space, where they could offer an entire range of solution built around servers.


It is always a challenge for partners to identify various means and methods to bring value-add to their server business. But sometimes they tend to concentrate more on products and technology instead of focusing on well-designed solution to support client’s business objectives. B Shankar, VP–Sales and Marketing, Ashtech Infotech remarks, “Today, when we offer servers to our clients, it is very important for us to engage into consultancy.”

According to him, partners should competently meet the challenge of identifying and sizing of the servers along with a thorough understanding of the customer’s business requirements. This understanding alone can help partners to be competent in their business. 

Currently, the market is flooded with players who mostly try and win deals purely on the price factor. This is one of the major concerns for many players in the server business who find a lack of space to identify themselves as specialists. 


(in terms of end-user revenue) during Q2 2003 compared to Q2 2002

Rajesh Bakshi, CEO, Netlink Business Systems states, “The fact that there are now too many resellers selling servers with very little technical expertise is definitely putting genuine players and server specialists in bad light.” According to him, this leads to a state of confusion in the market as many channel partners want to get into the race for making a quick buck. 

However, vendors argue that the server market cannot be completely governed by price. They say that partners need to convince users on the efficacy of server-based solutions and how these can get the returns on their investment. 

So, vendors have been holding a lot of channel programs to educate partners on server-based solutions. They are also making efforts to have a deeper geographical reach because they see the growth coming in the server business in the coming days. 

SUNILA PAUL  in Bangalore with inputs from GOLDIE in Mumbai and ATANU KUMAR DAS in New Delhi