Enterprise adoption of Linux (news - web sites) has been increasing for the last few years, but the fourth quarter of 2003 appears to have been its breakout period, according to research firm IDC.
Revenue from Linux server sales in that quarter leapt 63 percent higher than the same period a year earlier, says IDC. Furthermore, research firm Gartner, which just released its 2003 year-end server figures, reported that the Linux market grew a whopping 90 percent last year.
Still, compared to Windows, Linux remains an upstart in terms of total sales, having generated revenue of US$950 million in 2003's fourth quarter, compared with $3.9 billion for Windows servers, according to IDC.
But Linux's growth rate of 16 percent, based on IDC's numbers, suggests that the open-source OS will present a far greater challenge to Windows in the years ahead. Though Linux server sales have increased for the last seven quarters sequentially, Q4 2003's growth was the fastest yet. "It's taking off," IDC analyst Lloyd Cohen told NewsFactor. "If you graphed it, it would not be a slow slope."
Ready for Prime Time
Supporting the notion that Linux will continue to grow in the years ahead is IDC's research about the OS's more frequent use in higher-end applications.
Linux found a toehold in the corporate data center, handling basic tasks on Web and print servers and low-level network functions. But IDC reported that Linux revenue growth outstripped unit shipments in year-over-year fourth-quarter figures by approximately 20 percent, meaning that the price of the average Linux server is rising.
This runs counter to the prevailing trend in the server industry. Tight competition in a lackluster market has lead to falling prices. Due to discounting, unit shipments have grown faster then revenue in the overall server market.
"Linux has moved out of the back room," Cohen said. "If you went back a couple of years and asked the CIO if he was running Linux, he'd say, 'No' -- but the developers were using it in the back room. Now, it's being using in general workloads -- it's prime time."
Hewlett-Packard led the Linux server-vendor pack in the fourth quarter, commanding 27.5 percent of the market. Following was IBM (NYSE: IBM - news) with 21.1 percent, and Dell (Nasdaq: DELL - news) with 18.2 percent, according to IDC.
The Comfort Factor
Linux's dramatic sales growth must be viewed against its smaller base, Gartner analyst David Smith cautioned, noting that when a market sector has a lower base, it is easier for its growth rates to appear dramatic.
However, "The growth of Linux is absolutely eating into the opportunity that Window has as a server," he acknowledged. "A lot of growth that Microsoft (Nasdaq: MSFT - news) was counting on for Windows Server [2003] is at risk because of the popularity of Linux."
The reason for Linux's dramatic growth, relative to Windows, is that companies "are comfortable with what Linux offers -- and when they look at Windows, they may be comfortable with it, but there are concerns about security and about being beholden to one vendor, especially Microsoft," Smith explained. This is particularly true in countries outside the U.S., he noted.
Bigger Picture
Overall server-market sales in 2003 were healthy, if not robust, Gartner reported, with server revenue growth at 5 percent last year, compared with 2002. The market leader was IBM, whose revenue growth outpaced the market, increasing 10 percent to $14.8 billion.
Second-ranked Hewlett-Packard saw a 5 percent increase to $12.5 billion. Sun Microsystems (Nasdaq: SUNW - news) earned the No. 3 spot with $5.4 billion -- but that number was a 15 percent decrease from 2002 revenue, and the company lost 2.8 percent of market share, IDC says. Dell, though fourth-ranked, was the fastest-growing server vendor with a 22 percent increase to $4 billion.
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