Server Operating System Market Share – Lies, Lies, And More Lies

I was pointed at an article on The Unofficial Apple Web Blog titled Xserve End Of Life: Some opinions and ideas about Apple’s server strategy. I read it, and the numbers didn’t make any sense, so I started looking. Steven Sande, writer of the TUAW article got his numbers from an article by Mary Jane Foley at ZDNet titled IDC: Windows Server still rules the server roost. Mary Jane, who should know better by now got her numbers from an IDC (International Data Corporation) Press Release.

Note the chain. Steve, to Mary Jane, to IDC.

OK, so let’s look at the numbers. IDC states that:

Quarterly revenue of $5.1 billion for Windows servers represented 48.9% of overall quarterly factory revenue. This is the highest percentage of server hardware revenue that Windows servers have ever represented.

48.9% of the market. Sounds impressive, doesn’t it? But hold on, didn’t Mary Jane say something else? Weren’t her numbers higher? Specifically she said:

In Q1 2010, Windows Server was installed on 75.3 percent of the servers sold worldwide. Linux was on 20.8 percent of the servers and Unix on only 3.6 percent. Both Windows Server and Linux grew in share from Q4 2009 to Q1 2010; Unix declined slightly.

Fascinating. She’s talking about the IDC Press Release, and she’s spouting off numbers that aren’t in it, as if no one will notice. And in fact a lot of people didn’t notice. A search using the url, conducted using both Google and Bing, shows that Mary Jane’s numbers have been uncritically (I checked a bunch of the articles, most repeat the numbers without questioning them) repeated all over cyberspace. Numbers that Mary Jane possibly invented, saw in a dream, or had given to her under the table by either IDC, Microsoft, or someone else who had access to the full report. Note that Mary Jane doesn’t state that she had access to the complete report, so my assumption is that she doesn’t.

Now when Joe Blow’s blog repeats the numbers, it doesn’t mean much. But when Wikipedia quotes them on the Usage share of operating systems entry, well, that’s another matter. A lot of people depend upon Wikipedia for information, but in this case Wikipedia is quoting data that has no provenance. It just appeared out of nowhere.

Now it’s quite possible that Windows does have 75.3% of units shipped, that IDC tracked. Most large servers need to be reliable, and therefore they wouldn’t run Windows. If Windows was the primary OS installed on cheap commodity hardware, then the numbers might make sense.

Curiously the IDC study doesn’t cover servers shipped without an installed Operating System. There are a lot of companies that have an OS that they’ve tuned specifically for their requirements, either on their own, or using a company like Red Hat or Novell. And that’s another issue. Red Hat and Novell are two of the largest Linux Server Operating System vendors. They aren’t mentioned in the report. Why not? A quick look at Red Hat’s latest 10K filing with the American Securities and Exchange Commission shows that Red Hat booked revenues of $748 Million American Dollars!

Now this really puts ia different spin on things. Total sales of servers with a Microsoft Windows Server variant were reported as $5.1 Billion for Q1-2010. The IDC report says that sales of servers with Microsoft Windows Servers installed for Q4-2009 were $5.4 Billion. Let’s make a rash assumption – sales of servers with Microsoft Windows Server installed came to about $22.0 Billion for a full year.

Let’s make another, rasher assumption, that we can compare that ‘year’ with Red Hat’s reporting year, which ended in February 2010. Yes, it’s not close, but close only counts in horseshoes, hand grenades, tactical nuclear weapons,  and Blog posts.

OK, so let’s take a battle axe to the numbers.

First off, let’s assume that Windows Server was installed on 75.3% of the servers in the IDC study. Due to it’s unreliability Windows tends to be used on cheap, commodity systems. Any server that’s carrying a heavy load would usually run either Linux or a Unix variant (BSD, Solaris, Aix, OS X Server, etc). So if the numbers Mary Jane reported are right, there’s a lot of cheap crap out there with Windows server installed, a smaller amount of higher performance servers running a ‘nix variant, and an unknown number of servers shipped with no operating system (see below).

And Servers do tend to be more expensive. Unlike consumer grade hardware (the stuff you can get at BestBuy, and lots of other stores) even the cheapest servers usually have upgraded components. Hard drives in particular are more expensive, but also a lot more reliable. One of the things that surprised people was finding out that Apple had included a server grade hard drive in their Time Capsule router/file server product. This was a very smart decision by Apple, in that their customers ended up with a really nice, but relatively inexpensive piece of kit. Seriously. $299.00 for a combination router/file server? It’s a hell of a lot cheaper than the home servers that Microsoft was trying to get the OEMS to push. And probably a hell of a lot more reliable with the drives Apple is fitting.

Since Servers are built using more expensive components, the operating system share of the sale price is lower. So how much did Microsoft make out of that $22.0 Billion in server sales? I don’t know for sure, but I spent some time checking pricing on the HP and Dell websites, and I suspect that Microsoft share was probably less than 5% of the sale price, or in simpler terms about $1.0 Billion dollars worth over the year. This would actually fit with the numbers reported in their year end SEC filing, where they report $14.8 Billion in revenues from the Servers and Tools Division. This division also sells Microsoft Exchange (Email server software), Microsoft Internet Information Server (website software), and Microsoft SQL Server (database software), all of which are very expensive. Microsoft also sells Client Access Licenses separately for all of their server software. A typical base package will include access licenses for five or ten users, and most operations will need more than that. A hundred user client access license package is far more expensive than the Windows Server 2008-R2 software it runs on.

OK, so let’s compare Red Hat to Microsoft. First off, Red Hat doesn’t sell Client Access Licenses. They don’t even really sell their software, they sell support contracts for it. So a direct comparison is hard to make, but Red Hat support for one year, with unlimited users, is less expensive than Microsoft Windows 2008R2 with only five users. And after the year is up, you can keep running your Red Hat system. Oh, Red Hat would rather that you continue to pay support, and using their support means you could probably employ a smaller IT staff, so it’s probably still less expensive to use Red Hat.

But Red Hat is probably installed on more systems than Microsoft Windows Server, based on the company’s own numbers.

Hold on – it get’s better still. Have you ever heard of CENT-OS (short for The Community ENTerprise Operating System)? CENT-OS is a totally open and free version of Red Hat. Yes, you heard me right. Free. As in Beer. No Cost. Estimates I have seen (which may or may not be accurate) say that CENT-OS is probably used on ten times as many servers as Red Hat!

So let’s see – someone is saying that Microsoft holds 75.3% of the server market by units shipped? How could this be?

Simple. IDC is only recording some of the data. Some of it, such as the number of White Box (generic hardware, assembled by smaller players in the server market) servers probably isn’t available to them. Some of it, they may be ignoring. It’s curious that all of the big server manufacturers offer bare servers (no operating system), but IDC didn’t provide any numbers for bare servers. IDC has been around a long time. They know about bare servers, so rather than curious I’d say that their ignoring them is down right suspicious.

Well no, actually it isn’t. Microsoft is one of IDC’s largest customers. Microsoft has no interest in letting the public know that servers are routinely shipped with no operating system. After all, that little fact might make them think of installing their own operating system, and that would hurt Microsoft’s profits. It would also cut into the sales of the computer OEMS, who make money off the software and/or support contact that they sell you.

IDC has always been careful in the past. Even when they are supplying bad news about Microsoft’s sales and/or market share, they always say positive things about Microsoft. You really don’t want to piss off one of your largest customers, after all, they could always take their business elsewhere.

And Mary Jane is also very careful about what she says. Based on some of her articles, she has really good inside sources there, so good that she often manages to break news before anyone else. Those sources could dry up if she slipped.

So what’s the conclusion? Simple. Someone is lying about the server operating system market share. Maybe they are leaving some of the information out. Maybe they are just fiddling the numbers. I don’t know. But I do know how to add, and things do not add up.

Regards

Wayne Borean

Saturday November 6, 2010

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