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January 29, 2009

Tabor Research: HPC Market Will Decline, Not Crash

Nicole Hemsoth

As the consequences of the recession start to be felt more generally in all IT sectors, Tabor Research has continued to track its effect on the HPC market. We asked Tabor Research General Manager Addison Snell to discuss what kind of HPC activity we can expect to see over the next couple of years.

HPCwire: Tabor Research recently sent new HPC figures out to its clients. What is Tabor Research’s outlook for HPC over the next few years?

Addison Snell: For HPC as a whole, the situation is not as bleak as you might fear from the economy. The market did begin to slow down in Q4, and traditional HPC servers — the high-performance computational systems used in science, engineering, and analytics applications — to be relatively flat from 2007 to 2008. Going forward, there will be a dip in traditional HPC server spending in 2009, primarily due to a lengthening of sales cycles and temporary budget freezes that will cause orders to slip from one year into the next. The good news is, when the economy eventually rebounds, there will be a corresponding positive blip as deals speed up again.

HPCwire: How did you derive your outlook?

Snell: Tabor Research surveys both the user and the vendor community in developing its total market models. We work with vendors to analyze their quarterly shipment and revenue numbers and the relationship between HPC and non-HPC business. From our user-based research, we gain broad knowledge of how users plan and divide their budgets, as well as outlooks on future budget growth. Beyond that, our analyst team has over 50 years of collective HPC experience.

HPCwire: How does HPC compare with what the rest of the industry is going through?

Snell: Investments in HPC won’t be scaled back as far as other IT segments will be, because HPC is frequently viewed as a strategic or revenue-generating activity. In times of crisis, organizations might shut down non-core activities, but they do so in order to focus more on the business at hand, whether that’s engineering new products or accelerating scientific discovery. HPC won’t be completely immune to economic downturns, but we expect HPC to take a much smaller hit than the overall IT market.

HPCwire: What will be the major consequences of this economic slowdown? Are there segments of the market that will be impacted more than others?

Snell: There will be loss of sales in some specific instances. The most negative impact is in the university sector, where we expect endowment-funded programs to suffer. Within industry, there is some client loss as companies merge or fail, and some companies will halt all IT spending. On the other hand, some companies are increasing their HPC-specific investments in attempts to get new products to market faster or to reduce development costs. Also, government investment could come in to kick-start investments in some areas.

From a product standpoint, servers will take the greatest hit, as users continue to shift greater portions of their budgets to software, storage and facilities. You should be careful not to equate system spending to the entire HPC market. Only about a third of an HPC user’s budget goes to servers, and this percentage is falling.

HPCwire: Do you expect government HPC spending to hold up during the recession — at least in the U.S.?

Snell: Government spending is about a third of the traditional HPC market, so changes here can have substantial impacts on the market overall. And although it is early to predict actual implementation, President Obama has frequently stated that the U.S. must lead in science, which could lead to increased research in both government and grant-funded academic research centers. Furthermore, he has promised civil infrastructure projects, such as bridge building, which imply some amount of engineering design. On the other hand, there may be some decrease in defense spending, especially as pertains to support of ongoing military campaigns. If troops pull back, there’s less to support. In total though, we expect an overall positive benefit to HPC as President Obama’s policies take shape.

HPCwire: What other factors could have an important effect on how the HPC market fares in the next 12 to 24 months?

Snell: Because we’re looking at the HPC market worldwide, it’s important to consider how other countries’ economies perform relative to the U.S. With favorable exchange rates and terms, organizations in some foreign countries might find the time is right to invest in relatively inexpensive HPC products and services from American companies. In 2008 the amount of foreign HPC spending went up versus U.S. spending, and that trend could certainly continue over the next two years.

HPCwire: What types of emerging technologies do you think will impact the HPC market?

Snell: Virtualization technologies, such as utility computing and cloud computing, will continue to evolve and see greater adoption, and cloud/utility will begin to be a viable alternative for smaller HPC users. Our data shows the start of this trend in 2008, and we don’t expect it to slow down in 2009. For middleware providers like Platform Computing or Univa UD, this could be a significant opportunity. Accelerator-based solutions — both FPGA and GPU — will also see ongoing development, although adoption will continue to be slow in ISV-dependent verticals.

HPCwire: Finally, what advice would you offer to HPC users and vendors to get through these tough times?

Snell: Users should take a look at their end-to-end HPC installations with an eye towards increasing productivity, not only for their researchers and engineers, but also for system administrators and application developer. Tabor Research offers a free, online HPC Productivity Analyzer that can provide an independent assessment, with peer comparisons and advice for increasing productivity.

Meanwhile, vendors across the HPC ecosystem — systems, storage, interconnect, software, components, and services — must describe their solutions in terms of what tangible gains they offer. In a bleak economy, it is tempting to position a product or service as cost-saving, but this is an invitation for the end user to save money by not purchasing it at all. Remember, the HPC budgets are out there. Help your users spend them by demonstrating what return they will get from their investments.