IDC Expects Appliance Server Market Explosion

The worldwide appliance server market is expanding at breakneck speed. A new report from IDC estimates that the worldwide appliance server market will develop into an $11 billion industry by 2004, from a market that was significantly under $1 billion in 1999.

Appliance servers will be adopted by both enterprises and small businesses, IDC says, but for different reasons. "Today's service providers and dotcoms are demanding reliable and scalable solutions to provide dedicated functions for their organizations. Alternatively, many small offices and businesses are looking for inexpensive, reliable ways to build a network and to get their business connected to the Internet," said Mark Melenovsky, research manager with IDC's Worldwide Commercial Systems and Servers research program.

IDC warns that the explosive growth of the appliance server space will come at a cost. According to IDC, portions of the appliance market will be highly cannibalistic of the traditional space - in other words, appliance servers will take market share from general-purpose servers. Additionally, general-purpose server vendors will begin customizing parts of their traditional server offering, effectively turning their machines into appliance servers as well.

IDC sees 2000 as a pivotal year for appliance servers. The analyst firm predicts that the market will become more diverse and that high-growth areas will focus on specific applications and specific end-user segments.

According to the IDC report, Solutions in a Box: Appliance Servers Shake Up the Server Community, network attached storage (NAS) will represent the largest opportunity for appliance servers, accounting for more than half the market's value through 2004. Revenues in the Web server segment, however, will increase the fastest. The compound annual growth rate (CAGR) in this segment will be more than 130 percent, compared with a 73 percent CAGR for the overall market.

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