Market Trends: Integrated Systems, Worldwide, 2012

Key Findings

• The integrated systems market is growing strongly, with revenue increasing 53.7% year over year in 2Q12.
• The market is currently at a very nascent level, with overall revenue only around 4% of the data center hardware total.
• Large enterprises and service providers (xSPs) are currently the key target markets for integrated systems. The small and midsize business (SMB) segment is currently underserved.
• Storage is a key driver for current sales — many integrated systems sales are driven by the installed-base preferences for existing storage architectures.

Recommendations

• Recognize that innovation will come from multiple areas. A multiple-provider landscape will continue to be the norm.
• Users do not want to replace technology silos with provider silos. Successful providers will have integrated and integratable offerings.
• Drive independent software vendor (ISV) programs with a focus on tangible, mutual benefits at a local, as well as corporate, level. Encouraging ISVs to adapt code to a particular platform is likely to be self-limiting.
• The roles and relationships between hardware providers, ISVs and xSPs will evolve. In order to established effective routes to market for integrated systems, hardware vendors will need to have clearly defined roles and rules of engagement for each provider type.

This document was revised on 19 December 2012. The document you are viewing is the corrected version. For more information, see the Corrections page on gartner.com.

Gartner defines "integrated systems" as follows:

"Integrated systems are a class of data center systems that deliver a combination of server, shared-storage and network devices in a preintegrated stack."

This is a deliberately broad definition and one that's not overfocused on the technologies. As it is a nascent market, there are different options that different vendors are taking, so technology-based definitions can make consistency difficult. Also, due to the incipient nature of the market, technology-based definitions can quickly become obsolete.

There are several differences between various offerings, but the common denominator is the cross-technology-silo combination of these offerings in a preintegrated way.

Segmentation

Given the variety of vendor offerings, although it's a nascent market, it's helpful to distinguish between different segments.

We are using the following three segments to better describe this overall market category:

• Integrated infrastructure systems — Server, shared-storage and network hardware integrated to provide shared compute infrastructure
• Integrated workload systems — Integrated infrastructure systems that are preintegrated with database and/or application software to provide appliance, or appliancelike, functionality
• Integrated reference architectures — Products in which predefined, presized components are designated as options for an integrated system, whereby the user and/or channel can make configuration choices between the predefined options

In addition, from a revenue measurement perspective, we could consider an additional fourth segment, which would be an expansion of the "integrated workload systems" segment. This would be inclusive of both the hardware and full software (including database and application layer) revenues. As this first report is looking at the market opportunity exclusively from a hardware perspective, though, this fourth category is beyond the scope of this report.

A more detailed discussion of these definitions and segmentation can be found in the report, "Market Share Analysis: Data Center Hardware Integrated Systems, 1Q11-2Q12."

Table 1 contains several existing examples of integrated systems organized by segment.

Source: Gartner (December 2012)

Integrated systems represent a different customer value proposition from traditionally packaged systems. Integrated systems offer an attractive margin opportunity, greater influence, deeper relationships and potential long-term lock-in of customers.

However, there are also big implications for partnering and alliance activities — with ISVs, other hardware technology providers, routes to market and xSPs. This trend has the potential to dramatically impact many areas of the data center systems value chain.

The market for integrated systems has received a lot of industry attention, with products being introduced by a variety of providers, but it is still at a nascent stage. The combined revenue of server, storage and network products in 2011 was $83 billion. Integrated systems represented a little under $3 billion, or around 3.5% of the total.

It's important to see the trend toward integrated systems in the context of broader data center industry trends.

When we look at the IT stack and the value chain, from components to systems to applications, all of the traditional vendor roles are up for grabs. And this also extends into delivery models and routes to market, as well as who the customers of data center hardware are themselves.

The traditional role that a vendor has had in the value chain in the past isn't necessarily going to be a viable role in the future.

There are several shifts going on within the technology stack:

• Vendors are converging server, storage and network elements to deliver horizontal integration.
• Or they are delivering appliancelike functionality with vertically integrated elements of the software stack.
• But some customers just want a simpler, low-cost, best-fit hardware design that caters to their specific needs.

And recent years have seen a tremendous bout of acquisition activity or vendors moving into adjacent markets, such as HP acquiring EDS and 3Com, Oracle acquiring Sun, or Cisco moving into the server space with its Unified Computing System (UCS).

All of these competitive activities are driven by this disruption in the value chain — vendors are scared of commoditization, shrinking margins and a lack of account influence. So they're placing a stake in the ground as to where they think the most value and strategic influence will be in the future.

Cloud computing has been the subject of an awful lot of hype, but it's driving a lot of this change. It will continue to drive change in who the data center customers are, and what their hardware infrastructure requirements are. One of the things that cloud does is that it brings change to how IT is delivered and consumed. And with that evolution of delivery models comes an evolution in the technology providers behind that.

In many cases, vendors may be more focused on increasing their own margins, extending their wallet share or weakening a competitor — generally leading users in a direction that ultimately isn't helping them address their challenges.

Whether it's a broad-portfolio hardware provider, a specialist hardware provider, a component supplier, an original design manufacturer or another type of partner, all suppliers will be subject to shifts in the value chain here. And who the vendors partner with, and how they partner, is also going to become a more complex challenge as the value chain gets increasingly blurred.

So amid this backdrop of tremendous change, integrated systems promise several things:

• Increased revenue and margin opportunity
• Greater share of wallet and strategic influence in customer accounts
• Competitive attack opportunities

As the data center industry continues to go through a period of disruption, integrated systems will be a key weapon in the evolving vendor battles.

Data Center Market Segmentation

Although references are often made to "the data center market," the reality is that there is not one, single data center market. There are discrete customer segments where business drivers, IT challenges and architectural requirements may vary. Gartner's data center segmentation splits the market into four key customer segments:

• Small and midsize organizations that run on-premises infrastructure (which largely equates to what we normally think of in terms of SMBs).
• Large enterprises with on-premises infrastructure.
• xSPs — The Web hosters, data center outsourcers and communications service providers that host or provision services for some external user or organization.
• Hyperscale — This represents the category of companies, such as Google, Amazon and Facebook, that may be thought of as the Web 2.0 companies. They have very large data center infrastructure requirements, serving external users.

With the general exception of the hyperscale segment, integrated systems should be relevant to each of the other customer segments. But many of the offerings so far have been oriented toward large enterprises — with some offerings also catering to some xSP requirements. But there are currently many gaps, particularly for SMBs.

Large-Enterprise Summary

Providers positioning integrated systems in the large-enterprise segment will generally be in a competitive or defensive situation. There is not a lot of organic growth opportunity in the large-enterprise space. In fact there are a lot of constraints here — and the combined forces of economic and business inhibitors along with users looking at platform migrations and consolidation mean the overall new revenue opportunity here will remain constrained in terms of the hardware spending outlook.

The driver for integrated systems providers is to increase share of wallet or profit margin with integrated systems offerings in large enterprises. The challenge for providers is to ensure that an integrated system does achieve these targets rather than cannibalize the existing opportunity.

In the near term, there is an opportunity for integrated systems providers to position these systems as part of a legacy modernization initiative, or to divest risk in Unix investment by incorporating Unix-based elements as part of the integrated systems offering. For example, HP's CloudSystem and IBM's PureFlex both have the capability to mix Unix-based compute elements with x86.

xSP Summary

The xSP segment may represent more of an actual growth opportunity than large enterprise, because of the growth of various types of services, as well as many xSPs looking to build out utilitylike infrastructures. As the xSP segment increases as a proportion of data center hardware sales, it will be increasingly important for data center hardware suppliers to ensure that they have programs that specifically cater to their requirements. At worst, hardware providers will lose visibility to the actual end user of the service — so joint marketing and demand generation activities could be useful here. Also, with many hardware providers having their own service offerings, there is the inherent threat of conflict — so the roles and rules of engagement need to be clearly established. Integrated systems will be a good fit for many of the requirements of xSPs, but a successful offering will need to be a broad-based one that takes all of these factors into account.

SMB Summary

Like the xSP segment, SMBs could also provide more genuine growth, particularly when considering the growth of emerging markets. This segment also has the benefit of fewer cannibalization challenges from high-end, legacy platforms. Ironically, though, the segment is currently underserved by provider offerings around integrated systems. Given how the archetypal integrated system, the AS/400, (now known as IBM i), was strongly positioned toward this segment's requirements, there is clearly a good fit here. And yet it is a gap that providers haven't been rushing to fill so far.

Technology Trends

As the market for integrated systems evolves and matures, providers will need to ensure that they recognize the divergent needs of different types of customers.

Figure 1 shows a positioning matrix for system types against user priorities.

Source: Gartner (December 2012)

We've mapped the types of integrated systems on the y-axis, and three, broad groups of user priorities on the x-axis. The three groups of user priorities are:

• Performance — Where the primary benefits of integration to the user are in optimizing the component parts to deliver the best levels of performance for a particular task.
• Agility and automation — Where the primary benefits are around operational activities and removing the general management overhead — so users may see benefits in terms of time to deploy or redeploy. As an example, in an environment such as operators of mobile services, this may translate into a direct benefit, such as shortening the time to recognize revenue on a new service.
• Simplicity — Where the primary benefit is around making the overall IT capability easier for the user. This could be in several areas — technology ones such as ease of use but also broader areas, such as simplifying the sourcing or support processes, too.

The reality is that there will be more than nine types of positioning options across the data center space, but this serves as a helpful means of framing and summarizing the issues.

In Figure 1, the three dark blue boxes represent the areas where we see the main positioning today. This isn't to say that some systems don't offer several potential benefits, but we see them as being predominantly oriented toward these particular areas.

So, as an example, an Exadata from Oracle may be primarily viewed by users as a good solution for delivering performance returns for their Oracle DBMS environments. A CloudSystem from HP may be a good fit for delivering agility and automation improvements for other customers, while a vStart from Dell may be a good fit for other customers in simplifying their approach to deploying virtual machines.

Although we'd recognize there is a degree of overlap in terms of the benefits that today's offerings can provide, this figure is meant to highlight the gaps in the market from a user perspective.

The positioning matrix could be viewed from the perspective of customer segments, equating performance to large enterprise, agility/automation to xSP and simplicity to SMB, but that would be oversimplifying the issue.

User Requirements

Within any particular customer segment, there will be a variety of requirements. Considering Gartner's IT maturity model — just within the large-enterprise segment there will be users ranging from highly sophisticated, early adopters to technology laggards. What is needed is a broader array of integrated systems choices that cater to this variety of needs.

Some users will want integrated applications but will want this to simplify their operations rather than for performance. Other users will want an integrated platform with cloudlike management capabilities but will demand maximum performance just as much as agility and automation. One size does not fit all, and there is a need for providers to continue to expand their offerings to properly address this variety of needs.

Drivers

There are drivers on both the provider and the user side for integrated systems. Users want a variety of things:

• Better performance
• More optimized systems
• More automation
• Lower cost of IT operations
• To move from IT maintenance to IT innovation
• To lower the overall costs (or total cost of ownership)

Integrated systems have the potential to directly address these factors.

Data center hardware providers have both defensive and attacking reasons for moving toward integrated systems. The threat of commoditization is the key defensive reason why many providers are exploring this. If providers can lock users into their "stack," then they potentially offset the threat of commoditization via a broader portfolio sale. Providers also have attacking reasons though, and the promise of increased wallet share and, for some, higher margins, mean that this area will be a high priority for most providers.

Inhibitors

A survey conducted at the end of 2011 included a question asking respondents: "What is preventing your organization from considering the implementation of each of the following technologies?"

Focusing on the two areas most directly related to integrated systems (converged infrastructure and vertically integrated systems) — the results may be slightly worrying for providers.

"Unclear value proposition" was the main factor — which indicates users aren't convinced about the benefits that integration brings in many cases. Of more concern is the third-ranked response — "virtualization has resulted in not needing this." Integrated systems offer more than just a virtualized environment — and if users are perceiving having been through some virtualization exercises as negating the need for integrated systems, then there's clearly a need for providers to do a lot more market education activities.

Interestingly, the issues of "concerns around increased provider lock-in" didn't come out too highly — it's clearly a factor but not quite as high as it may have been expected. Although providers may look at this and be inclined to say that the lock-in concern isn't as much of a factor as some claim, we'd point to the relatively nascent stage of the market — early adopters will always be less concerned about lock-in factors than the mainstream.

Partner Challenges

Independent Software Vendors

There are three key elements to consider when creating an ISV partner strategy for integrated infrastructure:

• Is the ultimate goal for users to reach the highest levels of integration?
• What are some of the implications of increasing levels of hardware and software integration on the ecosystem and partnering landscape?
• What are some of the important factors to consider beyond the technology issues?

To help illustrate this analysis, Figure 2 highlights several integration offerings, measured by relevance to the customer and market potential to the provider.

Note: Size of bubble represents effort to manage.

Source: Gartner (December 2012)

There often tends to be an assumption among providers that users strive for more integration. But as we've seen at various points in the past, that's not always the case. Around the peak of the dot-com bubble, we saw several server appliance offerings in the market — some of which were successful, some of which were less so. But, even in cases where there appeared to be some customer benefit, there were still many cases where appliance offerings were simply too constrained for many users. Users wanted more flexibility in various configuration or component or deployment options. Additionally, price became a major inhibitor; do-it-yourself was typically lower-cost than the server appliances, or offered the required configuration flexibility users desired.

So it's important that providers recognize that integrating the hardware and software just to be part of this market is not going to necessarily result in improved business. Therefore, providers need to be able to offer at least one of the following features to improve the possibility of being successful with integrated offerings:

• Integrated workloads that have a clear performance benefit will be an advantage in some cases.
• Integrated workloads in which the time to provision and reprovision improves will be an advantage in others.
• Providers need to be careful to avoid limiting customer choice or making their offerings too locked-down and inflexible.

Partnering Challenges

There are several implications on the ecosystem and partnering landscape in terms of ownership of the IT stack, or IT land grab. Some providers have their own in-house application software capabilities, and others don't. Therefore, some providers have a distinct advantage (for example Oracle's ownership of software and hardware). Additionally, there is also the issue of whether providers will want to encourage ISVs to optimize their applications for a particular provider's integrated systems platform.

When considering whether the industry is swinging back to a more one-stop-shop approach, it is important to look at the dynamics that have driven the market over the last several years. The most "open" platforms with the broadest ecosystem, the widest choice of suppliers and the most flexibility have had the most success in the market — for example, the growth of Windows and, more recently Linux, on x86 platforms in the data center over the last two decades. We have seen numerous other platforms fall by the wayside.

The trend toward integrated systems isn't going to be able to stop that broader trend. So providers that overemphasize their own platforms and don't participate in and encourage a thriving ecosystem will face challenges in the longer term. Innovation will continue to come from several places, not just a handful of "megavendors," so providers of integrated systems, whether they have their own software capabilities or not, will need to ensure that they provide a strong partnering environment for other ISVs.

When considering some of the important factors beyond the technology issues, it isn't sufficient just to put programs in place at a corporate level for appliance configurations, reference templates or co-marketing activities. The most successful programs will be those where the partnering activities extend down from the corporate level to a local, country level. And be one where there is a mutual benefit to both parties, and strong relationships, at that local level. This is also something that takes time to achieve — so putting a new program in place won't necessarily deliver spectacular results the following quarter. But a long-term program, where a trusted relationship can build up over time, at that local level will drive results.

So the goal for integrated systems providers should be:

• To focus on driving a strong ecosystem
• To look at real partnering activities, focusing on local implementation
• Ultimately to become that partner, and reference platform, of choice

The three, broad approaches that providers of integrated systems can take with their hardware strategies are:

• Homogeneous, or the one-stop-shop approach
• Vertical integration, combining the hardware and software elements
• Best of breed, where a provider will partner with others to complement their own technology offerings.

Each approach has its own advantages and disadvantages. The homogeneous approach gives potential advantages around integration and economies of scale, for example. The vertical approach may give optimization advantages and promises strong software margins. The best-of-breed approach may offer more flexibility to align with industry growth areas and not be restricted by legacy platforms.

Although users want optimization, performance and operational improvements, users don't want to trade islands of different technology silos for islands of different provider stacks: It is just as important that integrated systems are integratable.

There is a huge opportunity for a provider — or providers — to leverage the trend toward integrated systems to become the "partner of choice." The reality in the industry is that innovation will continue to come from multiple areas. The most successful providers will be those that can be the hub for that innovation — to be a valuable partner for ISVs, other hardware providers, xSPs and resellers.

Essentially, there is a huge opportunity for providers to leverage the integrated systems trend to become the trusted point for delivering the performance, the agility and the simplicity that users need — and to do so in the most flexible and agnostic way.

It is Gartner's view that the integrated systems market will continue to grow at a steady pace, incrementally as more customers are exposed to provider marketing and as channel partners get certified in order to take these products to market. There are two additional futures for the integrated systems market, which deserve analysis.

The Integrated Systems Market Fails

This option may come true for several reasons. The most obvious is that most customers cannot achieve the benefits associated with investment, such as lower cost of operations or ease of automation. We're not suggesting here that the tools provided don't match up to expectations; rather, there are external factors that affect the success, or increase the management overhead for IT.

A good example of IT's misconceptions about project success is x86 server virtualization. In many cases, IT organizations invested in virtualization only for the project to rapidly get out of control. The main issue was virtual-machine sprawl, in which the ease of creating a virtual machine and the low or zero costs associated with it resulted in massive increases in the number of commission requests. The main cause of virtual-machine sprawl wasn't a technology issue, but rather inappropriate or nonexistent IT policies to manage virtual-machine requests. Additionally, as virtualization providers added more tools and capabilities to manage the sprawl, customers used increasing amounts of tools in order to regain control, in many cases suffering from the effects of too many tools, such as overload of administrator alerts or complexity of implementing policy due too many modifiable elements.

IT operations maturity is a must for users wishing to adopt integrated systems; therefore, providers need to ensure there is an appropriate support function and channel to support customers to ensure successful deployments.

Providers may find that the cost of development is unsustainably high. The cost of optimization or integration of existing owned technologies may be bearable, but the cost of sustaining acquisition of new companies to benefit the provider's product or to obstruct competition may prove too taxing, particularly in an economically constrained, inflated market. This scenario may not be the segment's undoing, though, despite the significant costs associated with building out a fully owned integrated stack, as providers may seek in the future to increase strategic partnership activities, which has proven a successful strategy for many years prior to the rapid recent rise in popularity of multibillion dollar acquisitions.

Additionally, integrated systems may remain niche as they lack broader appeal for mainstream customers for a variety of reasons, such as upfront cost or fears over provider lock-in. Nevertheless, a market based on IT companies that eagerly adopt new technology is still significant.

Integrated Systems Sales Are Greater Than Discrete Systems Sales

Conversely, the success of integrated systems could be greater than our current expectations. For this contrarian view to come true, however, several elements within the current ecosystem need to change.

The server appliance market, which saw mixed success after the dot-com bust, did have elements that could have been successful. The market was largely made up of small business server appliances, Web server appliances and caching appliances. The main issues that led to the segment's demise were around pricing and interoperability with other systems. If integrated systems this time around were to overcome these challenges, as well as providing a performance advantage, then we believe integrated systems — specifically integrated application systems — could become more mainstream.

When considering the widespread success of integrated systems, it's hard to ignore the significance of the IBM AS/400. Of course, it offered a unique technology capability, much of which has been leveraged from the platform over time, but further to this, the system was aimed largely at the SMB segment. This element is an important factor. Today most integrated products are aimed at large enterprises and xSPs. For the market to be vastly more successful, credible systems need to be positioned to SMBs — and not just a downsizing of existing offerings. The solution needs to be custom-designed for SMB requirements, as the AS/400 was.

With any success story, in the data center industry, channel support needs to be part of it. Therefore, to support the possibility of a mainstream integrated systems market, the partner channel needs to be a strategic element for breadth of distribution, but also to share service and customization responsibilities. Of course, we are not encouraging broad channel support for integrated systems, qualification and tiering of channel partners is still required.

Our position though, is that demand will be strong for integrated systems and represent a middle ground between these two scenarios. A more detailed forecast will be published shortly.

Cisco

Cisco has been a key driver of the trend toward integrated systems as part of the VCE joint venture and by providing the server and network elements of the FlexPod. Cisco's integrated design, combining compute, networking and storage access, provides customers key operational advantages. Bare-metal resources are delivered with comparable speed and agility as virtual machines. The result is seamless physical and virtual capabilities that lower operational cost and simplify data center operations. These capabilities have led to significant market momentum. VCE and FlexPod combined account for about 45% of total revenue for integrated systems (including reference architectures) in 2011.

Cisco's UCS has given it a strong presence in the server market following its introduction in 2009, complementing Cisco's already very strong position in the networking market. A common challenge for new entrants into the system market is in establishing their credentials and establishing trust for customers when considering deployments in key business-critical areas at the heart of data center environments. Cisco's heritage in the networking market played a part in Cisco's growth, but the technology alliances with the likes of VCE and NetApp have enabled it to establish a solid presence in such environments. With the high-end positioning of these systems, not only do the vendors enjoy strong selling prices and margins, but there's the additional benefit of establishing a "sticky" presence in accounts, which makes users less likely to quickly chop and change between suppliers.

Cisco's existing alliances have been further expanded by the announcements of Hitachi Data Systems in the second half of 2012, when it announced its own reference architecture offerings to expand its Unified Compute Platform, of which Cisco would be a key technology partner.

NetApp

Along with Cisco, NetApp has been driving the FlexPod reference architecture initiative. In contrast to many other vendors in the market, NetApp enables a channel partner (or even potentially the end user) to perform the actual integration of the system. This approach potentially allows greater flexibility for the user, since the system can be built from best-of-breed components rather than having all the elements sourced from a single vendor. Using its channel partners to service the midmarket and low-end enterprise client bases is an integral part of NetApp's strategy.

FlexPod has driven positive results since its launch in 2010 and continues to grow strongly. NetApp has expanded its offerings with increasing systems aimed at giving greater penetration of the SMB space. This will be a good opportunity, particularly in regions outside of the U.S., where SMBs are typically a significant part of the market.

The reference architecture approach is becoming more competitive though, with EMC, VCE and Hitachi Data Systems all announcing similar offerings. Beyond the technology capabilities, the strengths of demand generation activities among end users and the strengths of channel programs will be the keys to success in the increasingly competitive environment.

Dell

Dell might not be the first provider that some people think of when it comes to integrated systems, but the company has been going through its own transformation in recent years and in particular, acquisitions such as Equalogic and Compellent in the storage space, Force10 in the network space, and software companies Scalent and Boomi mean its capabilities are rapidly evolving. The vStart platform is one of the few that addresses the midmarket, and we expect Dell to continue to build upon this start.

It needs to expand its portfolio, though, and to leverage those various acquired assets. And one of the big challenges for Dell remains one of customer perception. With integrated systems being a much different value proposition to traditional x86 servers, at much higher ticket prices and with different sales cycles, this is an important area for Dell to continue to address. Dell, whose vStart system started shipping only in the second half of 2011, currently has a share of only 1%. Although momentum here should increase with the focus the company has on this segment, as well as a full year comparison in 2012, these are relatively low-end systems in comparison with the likes of an Exadata or a Vblock. vStart has expanded into the broader Active Infrastructure offering for Dell — the umbrella brand for its integrated systems offerings, which were expanded with the Active System 800 in November of 2012.

Also, the formation of Dell's Enterprise Systems and Solutions group has the aim of developing integrated systems that align to specific customer pain points and will be key in Dell's future success in this segment.

HP

HP has done well in building out a broad portfolio with its CloudSystem, AppSystems and VirtualSystem offerings — its converged infrastructure strategy has been in place for some time, and it has been consistently building on these capabilities. Another, often understated strength of HP is in its broad partner framework — which is of real importance in terms of bringing this portfolio to the widest addressable market possible.

One of the challenges for HP, though, is to continue to refine its "better together" message — and make it clearer to users why they should invest a bigger share of their resources with HP. To be fair, this is something that all providers struggle with, but there's real opportunity for whoever can get this message across the best.

Given its strength in x86, HP is also in a position to use its integrated systems strategy to put real pressure on competitors that are highly reliant on their own high-end, high-margin business areas. In first position in revenue terms in 2011, HP will need to continue to enhance its portfolio and market coverage if it is to sustain its early market strength as competitors increase their focus in this area.

IBM

IBM has a very strong position in the overall data center hardware market, but was not one of the first vendors to drive the trend for integrated systems. Nonetheless, previous experience with systems such as AS/400 and IBM's vast technology heritage and capabilities position the company with a lot of potential.

The strategy around PureSystems is relatively nascent and will take time to fully develop. Critical for IBM, though, will be the marketing and business issues rather than technology ones. IBM has always had a broad portfolio, and while that's not bad in itself (in many ways it's a big positive), there will be questions around how aggressively IBM will market its integrated systems at the expense of its other platforms. The dilemma for IBM is: Does it cannibalize its own business or risk someone else doing so? IBM's 2011 share was in the low single digits as the product range was limited to offerings like Netezza in 2011. With the launch of the PureSystems strategy at the start of 2012, IBM is likely to gain a much higher share in the future.

Oracle

Oracle has driven a lot of attention around the whole notion of integration with Exadata and, more recently, the Exalogic and SPARC SuperCluster systems. While the environment for traditional Sun hardware has remained challenging, Oracle has done a good job generating demand for performance-oriented users within its installed base — as well as using the new, integrated systems to start to extend beyond that to reach new customers.

The real challenges, though, are leveraging that success so far into other areas — broader market segments, as well as more competitive takeouts. With our view of the Unix market — Sun's traditional stronghold — being one that faces a lot of difficulties, it's critical for Oracle that it's able to use platforms like Exadata as a beachhead for new business growth. Oracle ranked first in terms of overall revenue for integrated workload systems in the second quarter of 2012.

VCE

VCE is a joint venture between Cisco, EMC and VMware that sells integrated systems.

Although formed only in late 2009 (as Acadia), VCE has gained a strong position in the integrated systems market, and led the integrated infrastructure segment in terms of revenue for 2011. Crucially, Vblock systems from VCE are positioned at the highest end of the market, with average selling prices typically in the $2 million range.

With strong management capabilities via VMware and partners such as BMC Software and CA Technologies, VCE has a strong position in the integrated infrastructure and integrated platform segments, but is not currently a force in the integrated workload segment. This is an area where Cisco, which contributes the server and network element, does not have the same degree of experience as the traditional system providers have in partnering activities with ISVs. Although Cisco has been putting various partnerships in place, this will continue to be a key area where it needs to focus to enhance its already strong position.

Other Notable Vendors

There are several other notable vendors playing a role in the emergence of the integrated systems market.

On the integrated infrastructure side, Hitachi Data Systems has established a solid footing with its Unified Compute Platform. Although Hitachi Data Systems is traditionally much stronger as a storage company than a server company, the Unified Compute Platform strategy may help it gain a larger share of the overall data center systems market.

On the integrated application side, there are offerings such as Teradata and EMC's GreenPlum, which are important competitors here. The area of business analytics is currently the main driver for this category, and competition will only increase as more vendors introduce rival platforms.

As previously mentioned, EMC is an increasingly notable vendor in this space, as, alongside the recently introduced VSPEX reference architecture and the GreenPlum appliances, it is one of the foundational elements of VCE.