Server makers to cut out middle men

server-racksA report from Gartner today suggested that original design manufacturers (ODMs) are set to cut out brand vendors in the global X86 server market.

It estimates that sales of servers by ODMs directly to customers will be worth $4.6 billion by 2018, representing 16 percent or so of the market.

The traditional route to market had OEMs hiring ODMs and selling branded goods. But Gartner reckons that the manufacturers are changing their business models to directly target “hyperscale” customers, that is to say to data centres.

Data centre operators prefer ODM supplied kit because the machines are cheaper and they can customise systems.

Naveen Mishra, a research director at Gartner, said: “Direct engagement with hyperscale data centres is the biggest contributor to ODM growth.”   He said that ODM success is right now restricted to server but he thinks that similar technologies, such as storage, will follow suit.

The ODMs are largely based in China and Taiwan so can make cost efficiencies that can’t be replicated in other geographies.  They are also aggressive on pricing.