Fri, Oct 31, 2003 page10

• Server market will grow 20% in next four years, IDC says

  MATURE MARKETS As the need for data storage and Internet-based customer service grows, Taiwanese companies will have to spend heavily

  • By Bill Heaney / STAFF REPORTER
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  Taiwan's server market is set to grow over 20 percent from around US$500 million this year to over US$605 million by 2007 as the need for data storage and Internet-based customer service grows, US-based technology research company International Data Corp (IDC) said at a seminar in Taipei yesterday.

  "Taiwan is among the most mature server markets," said Avneesh Saxena, analyst and IDC vice president for computing systems in the Asia-Pacific region. "It is more mature than China in the way it buys servers."

  This year, China is expected to spend US$2.5 billion on new servers, mostly to improve its computer infrastructure to catch up with industrialized nations, whereas Taiwan is spending on new systems to service its huge export markets overseas and manage manufacturing facilities in China, Saxena said.

  But the market is becoming increasingly squeezed as corporate budgets for new equipment are frozen or cut due to economic uncertainties and changing perceptions about information technology (IT) inside companies.

  "Budgets are not increasing and that's a big challenge," Saxena said.

  In May this year, two leading international publications cast doubt on the policy of throwing money at new IT equipment in the belief that more money means more competitive advantages for businesses.

  Computer World claimed US$200 billion, or 20 percent of all IT expenditure, is wasted every year, while business consultant Nicholas Carr wrote in an article entitled "IT doesn't matter" in the Harvard Business Review that higher corporate IT expenditure rarely produce better financial results. Carr also claimed that the importance of IT has diminished as its power and ubiquity have grown.

  This has added to the burden of IT managers in companies.

  "If you have a data center, your chief operating officer is going to ask you to run it as a profit center not a cost center," said Vernon Turner, another IDC vice president. "Charging for certain services will become an issue."

  Despite cost concerns, the server market is expected to grow from between 1 and 1.5 million units this year to over 7 million by the year 2007, Turner said yesterday.

  Taiwan is manufacturing an increasing number of those servers, the semi-official Market Intelligence Center (市場情報中心) reported last week. In the third quarter of this year, local producers shipped 445,000 units, or an increase of over 21 percent on the same period last year.

  The value of servers shipped climbed less -- 18 percent on last year -- in the same period to US$381 million, as average prices have dropped, the MIC report said.

  MIC predicted more growth this quarter.

  "Possessing formidable competitive advantages in rapid design and delivery times, Taiwanese makers have been the direct beneficiaries of outsourcing strategies, and the scale of the Taiwanese server industry's OEM/ODM business has continually risen," the report said.

  "In the fourth quarter, with sustained improvement in the global economy and increasing willingness among corporations to procure servers, a greater share of outsourcing by international vendors is expected to drive growth to a new high in shipment volume," the report said.
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