Enterprise Hardware Sales Picking up Steam

For an industry that weathered the recent recession better than most, you would think that enterprise hardware would see a lukewarm recovery at best. After all, if you haven’t really gone without, there’s not much pent up demand waiting to break through when budgets finally come through.

But you would be wrong. The latest economic reports indicate a white hot enterprise hardware industry despite nearly all of the latest technological trends stressing infrastructure and resource consolidation.

Nowhere is this more evident than the server. Worldwide sales hit three-year highs at the end of 2010, according to IDC, surging more than 15 percent in the fourth quarter to hit $15 billion. The largest was spread across the board with IBM, HP and Dell — the top three performers — seeing sales gains of 21.9 percent, 13.2 percent and 26.8 percent, respectively. Note that hardware sales continued to increase despite the fact that upwards of 30 percent of servers are virtualized. Once that level reaches 50 percent, however, expect to see server sales start to contract.

Advanced networking is also seeing big gains, with both IDC and Dell’Oro Group showing substantial year-on-year gains. IDC saw worldwide Ethernet sales jump more than 28 percent, accompanied by a 17.8 percent gain for routers. Much of the gains are attributed to growth in the service provider segment, which accounted for more than three quarters of all router sales in the fourth quarter. Meanwhile, Dell’Oro reported a 30 percent jump in L2 and L3 switching in 2010, bringing in almost $20 billion in revenue. Gains were recorded in the 1 GbE and 10 GbE segments, although the company predicts most of the future growth will come from 10 GbE deployments in rack, blade and modular packages.

Still, there is one segment of enterprise hardware that is showing warning flags. It seems the trusted desktop PC is about to lose its domination of workers’ eyeballs to the growing legion of mobile devices hitting the channel. Independent analyst Chetan Sharma says tablets, e-readers and other connected devices are on the verge of eclipsing PCs in both revenue and shipments. Many of the recent gains have taken place in the United States, which is on pace to knock Sweden off its perch as the largest consumer of mobile data.

Economics being what they are, there’s no guarantee that the good times will continue. However, there is comfort (for some) in knowing that data loads continue to increase regardless of revenue streams. The demand will have to be met either through advancing hardware or innovative new architectures. Either way, the overall IT market has shown that it is a lot more resilient than most when it comes to economic downturns.

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