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IT managers are increasingly replacing servers with SaaS

Cloud providers take on a bigger share of the servers as overall market starts declining

December 6, 2013 06:43 AM ET

Computerworld - IT managers want to cut the number of servers they manage, or at least slow the growth, and they may be succeeding, according to new data.

IDC expects that anywhere from 25% to 30% of all the servers shipped next year will be delivered to cloud services providers.

In three years, 2017, nearly 45% of all the servers leaving manufacturers will be bought by cloud providers.

"What that means is a lot of people are buying SaaS," said Frank Gens, referring to software-as-a-service. "A lot of capacity if shifting out of the enterprise into cloud service providers."

The increased use of SaaS is a major reason for the market shift, but so is virtualization to increase server capacity. Data center consolidations are eliminating servers as well, along with the purchase of denser servers capable of handling larger loads.

For sure, IT managers are going to be managing physical servers for years to come. But, the number will be declining, based on market direction and the experience of IT managers.

Two years ago, when Mark Endry became the CIO and SVP of U.S. operations for Arcadis, a global consulting, design and engineering company, the firm was running its IT in-house.

"We really put a stop to that," said Endry. Arcadis is moving to SaaS, either to add new services or substitute existing ones. An in-house system is no longer the default, he added.

"Our standard RFP for services says it must be SaaS,' said Endry.

Arcadis has added Workday, a SaaS-based HR management system, replaced an in-house training management system with a SaaS system, and an in-house ADP HR system was replaced with a service. The company is also planning a move to Office 365, and will stop running its in-house Exchange and SharePoint servers.

As a result, in the last two years, Endry has kept the server count steady at 1,006 spread through three data centers. He estimates that without the efforts at virtualization, SaaS and other consolidations, they would have more 200 more physical servers.

Endry would like to consolidate the three data centers into one, and continue shifting to SaaS to avoid future maintenance costs, and also the need to customize and maintain software. SaaS can't yet be used for everything, particularly ERP, but "my goal would be to really minimize the footprint of servers," he said.

Similarly, Gerry McCartney, CIO of Purdue University is working to cut server use and switch more to SaaS.

The university's West Lafayette, Ind., campus had some 65 data centers two years ago, many small. Data centers at Purdue are defined as any room with additional power and specialized heavy duty cooling equipment. They have closed at least 28 of them in the last 18 months.

The Purdue consolidation is the result of several broad directions: increased virtualization, use of higher density systems, and increase use of SaaS.

McCartney wants to limit the university's server management role. "The only things that we are going to retain on campus is research and strategic support," he said. That means that most, if not all, of the administrative functions may be moved off campus.

This shift to cloud-based providers is roiling the server market, and is expected to help send server revenue down 3.5% this year, according to IDC.

Gens says that one trend among users who buy servers is increasing interest in converged or integrated systems that combine server, storage, networking and software. They account now about for about 10% of the market, and are expected to make up 20% by 2020.

Meanwhile, the big cloud providers are heading in the opposite direction, and are increasingly looking for componentized systems they can assemble, Velcro-like, in their data centers. This has given rise to contract, or original design manufacturers (ODM), mostly overseas, who make these systems for cloud systems.

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at Twitter@DCgov, or subscribe to Patrick's RSS feed Thibodeau RSS. His email address is pthibodeau@computerworld.com.

Read more about Cloud Computing in Computerworld's Cloud Computing Topic Center.



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