Recently IDC reported that in 2002, worldwide server factory revenues declined 11.6%, while unit shipments increased 5%. We've been used to seeing revenue declines in the IT market, so that news comes as no surprise. But that got me wondering if we might continue to see server revenues decline for the next couple of years, even if total spending in the IT market increases.

That might be bad news for companies which get a lot of revenue from servers, but good news for network storage makers, and users.

In the past couple of years we've seen increasing adoption of the network storage model, and a recent IDC report quoted by EMC said that spending on SAN and NAS has now overtaken spending on DAS (directly attached storage). That means, when someone buys a server, a decreasing proportion of the storage cost associated with that server is now installed in the same box. The storage can sit anywhere on the network. It doesn't even have to be in the same building.

And, of course, it doesn't have to be from the same manufacturer.

The recent recession has speeded up the unbundling (or dismembering) of the server market. Users have less money to spend and so will pick and mix the bits they like. A server from company X, disk storage from company Y, and a tape library from company Z. It used to be technically difficult and risky for users to make these kind of choices. But not any more.

As long as you avoid some obvious pitfalls such as choosing Sun storage to go with a Dell server, then you're probably on safe ground. And there are plenty of VARs and systems integrators who have done it before and can reduce your risk and your cost.

If we extrapolate this trend, there's no good reason why a server should contain any disk storage at all. apart from what is needed to store the operating system.

Technologies like InfiniBand at the high end, Fibre-channel and NAS in the middle and Serial ATA at the entry level, will get sufficiently standardized so that anyone can connect a storage appliance to their server as simply as you connect a satellite connection to your TV. Choosing your favorite programs to watch, or setting up your backup & SRM software might take a little longer. But nothing's perfect.

Of course other factors will also contribute to making servers cheaper. Many users have found that rackmount server farms give them adequate peroformance at much lower cost that factory assembled mainframes. But a 64 processor mainframe still costs a lot more than 64 times the cost of a single server. Not for much longer. The increasing use of compact PCI blade servers, where multiple servers sit in the same high speed bus, will cut out the fat in the low end mainframe market, and that too will help to shed cost.

So we'll just get used to a new market in which the server is a decreasing part of the total IT budget. Bad news for server sales people. Good news for everyone else.

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