The financial turbulence of the last five years has affected nearly every area of the international business world as the liquidity of bank reserves dried up and many companies struggled to stay on top of their bank balances.
It is not unsurprising that the market related to high cost; high performance business hardware also took a substantial hit as many businesses decided to scale back on large scale purchases. The last few years have been dominated by fevered exultations about cloud computing, BYOD, horizontal scalability and a whole host of things that don’t involve putting all of your business eggs in one expensive, high performance basket.
But the last year has seen more and more businesses beginning to invest in serious pieces of business hardware, and the market for High Performance Computing (HPC) servers has experienced remarkable growth.
Is this indicative of a global economic recovery that is beginning to pick up steam or does it reflect the actual HPC products that are available?
Why are HPC servers on the rise?
The HPC Server market is experiencing growth
The last few months have been filled with magazine articles, blog posts and news stories concerning the growth in the HPC server market and whether it represents a temporary aberration or are part of a longer term trend.
During the first half of 2013, the HPC server market grew by an impressive 6.2%, which represented a 26% increase in unit shipments on the same period last year. Within this was a second quarter growth of 7.9% which boosted the profitability of the entire sector to $2.6 billion. The bulk of this increase in sales comes from hardware that costs less than $100,000, also known as “workgroup computers”, which rose by more than 45%.
Within the context of a worldwide server market that saw its total revenue decline by 0.6% in 2012, this growth is likely to be very welcome.
What is driving this rise?
The factors that are driving in this rise in sales are likely to be important factors in the future decisions of businesses and HPC server providers. Is it just a temporary blimp based on a number of transient factors, or does it show a broader return to health of the wider business environment.
There are a number of potential factors at play here.
External market factors
The HPC server market was hit particularly hard by the financial downturn five years ago, with many business decided to hold off big hardware purchases or to cancel expected purchases altogether. The pickup in sales of workgroup HPC servers seems to indicate that businesses are beginning to recover enough in terms of liquidity and expendable capital in order to begin focusing again on the kind of business purchases based around the expansion of their internal IT architecture.
There is still a huge debate raging about whether we have truly entered a period of economic recovery in which the largest economies are spluttering back to life. In many ways the focus of the economic storm has turned away from the financial and tech sectors which were first affected and has seeped into the wider economy. This means that while companies who have $100,000 worth of capital to second on a HPC server are beginning to do so, the wider business server market is continuing to experience volatility, with revenue dropping by 6.2% in the second quarter of 2013.
So clearly a broad, economic recovery based explanation for the pickup in HPC server sales is only going us part of the answer we are looking for. There must be some other factors that are influencing the market here.
Internal market factors
HPC servers potentially allow companies to gain a computing and economic edge in a world where the phrase ‘big data’ is coming to epitomise the IT challenges of companies. Leading the way in the growth of the HPC server market are the kind of super computers that are closely associated with scientific advances and industrial innovation, which means that companies and institutions that are looking to quickly gain a competitive edge over their rivals as the wider economy is seen to begin to recover can see a benefit in taking a risk and spending a lot of capital on a HPC server. In fact, in 2011, the sale of HPTC servers associated with scientific research accounted for a whopping 68% of the global HPC market, with business purchases accounting for the remaining 32%. If this trend is one that is persistent and growing it would mean that the renewed health of the market is not really based on a huge upturn of business health at all.
It is still unclear what internal market factors are driving the rise of the HPC server market- whether it is companies looking to get ahead in the age of big data- or their increased need in scientific research, but the increase in sales is likely to be done to both these reasons.
Is this growth going to continue?
Whether or not this market growth is indicative of a longer term trend is also hard to pin down. If the last five years have taught us anything it is that the global economy is capable of taking many previously unseen and unaccounted for twists and turns.
For some, the whole server market is in a period of deep upheaval whereby all players are likely to take a hit as the majority of customers begin to move away from purchasing hardware and move towards the cloud. For others though, the HPC market is going to continue to expand, reaching around $15 billion in 2017 by some estimates and $39.9 by others (see the intersect study above), while ranges like the HP Proliant, which are among the most common servers used for HPC, move from strength to strength. It is clear that while smaller businesses are going to continue to move towards the cloud and cheaper network and IT solutions, medium to larger seized businesses are still going to require high powered and high performance pieces of hardware to accommodate for their day to day operations.
So the rise in the HPC server market is a complex phenomenon that defies easy explanations, seeming to encompasses wider macroeconomic factors as well as micro-sector specific ones. We will have to let the rest of 2013-14 play itself out before we can say for certain what the underlying processes at work are. HP's project Dragonhawk certainly looks like it will lead to some seismic changes in the industry, with Intel's x86 architecture gaining a toehold in yet another niche.
What do you think the main driver behind the rise in the HPC server market is?