A rapidly growing number of midmarket enterprises are virtualising for the first time, and have several strong alternatives from which to choose
BANGALORE, INDIA: Server virtualisation is well established and will continue to supersede most (but not all) use of non-virtualised technologies in the next two to five years, increasing density and modularity of servers. In 2015, Gartner estimates that 20 per cent of servers shipped will be running virtualisation, supporting 84 per cent of workloads.
It is obvious that the greatest opportunity for revenue growth for server providers is in virtualised environments. This is due not only to hardware configurations, but also to the attachment of associated software revenue, which may drive additional direct or indirect revenue.
In a non-virtualised server, the hardware is the main cost component of the server and operational server software stack. The adoption of server virtualisation has caused the spending balance to shift away from the hardware to the software, but the largest hardware growth opportunity is in virtualised environments, reflected by changes in system designs.
A rapidly growing number of midmarket enterprises are virtualising for the first time, and have several strong alternatives from which to choose. Virtual machine (VM) and operating system (OS) software container technologies are being used as the foundational elements for infrastructure-as-a-service (IaaS) cloud computing offerings and for private cloud deployments. x86 server virtualisation infrastructure is not a commodity market.
While migration from one technology to another is certainly possible, the earlier that choice is made, the better, in terms of cost, skills and processes. Although virtualisation can offer an immediate and tactical return on investment (ROI), virtualisation is an extremely strategic foundation for infrastructure modernisation, improving the speed and quality of IT services, and migrating to hybrid and public cloud computing.
For infrastructure modernisation, virtualisation is being used to improve resource utilisation, the speed of resource delivery and encapsulate workload images in a way that enables automation. Virtualisation is also being used as a basis for cloud computing — both private and public.
Towards the end of last year Gartner conducted a large enterprise survey, which showed that more than 40% of respondents give high priority to server virtualisation. We expect that the adoption rate will double over the next two years.
Server virtualisation continues to provide current levels of demand for mid-level to high-end x86 servers (four sockets or more), while lowering the demand for low-end servers, such as one-socket or two-socket servers, for server workloads that lend themselves to consolidation. Virtualisation using x86 servers is now a mature technology and widely adopted by enterprises.
Although virtualisation deployment enhances demand for midlevel to high-end x86 servers, it does have a negative effect on overall volume demand. By increasing server CPU utilisation rates, it lowers the need for low-end servers for certain individual server workloads that can be consolidated using virtualisation. Server virtualisation has also driven up average selling prices (ASPs) for servers used for consolidation because it is typically configured with greater amounts of memory to support greater numbers of virtual machines.
Despite growth in server ASPs for virtualised environments, virtualisation will still be attractive to end-user organisations as the total average cost of a virtualised server running 13 virtual servers in 2015 will be 24% of the total average cost of the equivalent 13 physical servers.
Server software and hardware vendors must continue to adapt in this rapidly evolving market, particularly due to the effects of x86 virtualisation adoption in the server market and technology transition in the software market. Server software providers will focus on IT operations management, while server hardware providers will focus on richer revenue via packaged, bundled and software-optimised systems and services.
Jennifer Wu is research vice president for Gartner, leading the global and Asia Pacific server market forecast program.