Commentary: What exactly is Cisco’s server share?

By Patrick Moorhead - June 7, 2014
AUSTIN, Texas -- I've spent nearly 25 years in high-tech products, marketing and strategy. So when I see claims about a major shift in market share rank, I take notice -- particularly when it involves enterprise tech giants like Cisco Systems, Hewlett Packard and Dell. When I heard Cisco's claim it is the No. 1 blade server in the Americas, I took notice and drilled down to investigate the facts. This would seem to be a big deal, considering Cisco's UCS product has been around just five years. What's really going on here and what's the significance of Cisco's announcements? First of all, there are two primary ways to measure market share, by revenue generated (revenue share) and the other is by units sold (unit share). When most of us hear the term "market share," we think it's the number of "widgets" sold. But Cisco isn't citing unit market share. It cites market researcher IDC's report on the revenue generated from the blade servers Cisco sold in the Americas. So who leads in blade server unit share for Q1 in the Americas? As reported by CRN's Kristin Bent, HP was the unit share leader, with 30%, or 8,000 more blade servers than Cisco. Cisco's share numbers in the Americas comprise Canada, the United States and South America. But what about the entire globe, including regions like Asia-Pacific, Europe, Middle East and Africa? Globally, HP holds nearly a 2x revenue blade server market share lead and an even larger unit share advantage over Cisco in blades. Americas is the largest IT market, but there are more servers sold outside the Americas than inside, and the growth rates definitely favor growing markets like China over a more mature U.S. market. There's one final thing you need to know about the server market: Blades are one of a myriad of different kind of server form factors. Servers aren't a homogeneous market. Blades are one kind of server, but they are a small percentage of the overall server market. IDC refers to the following server types: blades, non-rack optimized, rack optimized, tower and density optimized. So when you add up all of those different kinds of servers and look across the world, the unit market share picture looks very different. According to IDC reported by Enterprise Tech, in all of 2013, Cisco shipped 3% of the server units. HP led with 29%, followed by Dell at 23%. Just because HP and Dell sell significantly more server units globally than Cisco doesn't make recent Cisco's results completely insignificant. It shows Cisco is doing an increasingly better job getting enterprises to pay significantly more for their blade servers in the Americas. As blade servers are recognized as being the more proprietary systems, this fits right into Cisco's wheelhouse. Cisco has made a very decent living charging enterprises premium prices for networking equipment, and they are essentially extending this model to a specific sub-segment of the server market. The biggest question I have for Cisco's server future is how this model extends in a world dominated by open standards-based cloud technologies. Cloud providers don't buy blade servers today and I see no reason why they would start to in the future. I don't see why enterprises would use them en masse for private clouds, either.
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Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.