Hewlett-Packard and Dell, two of the biggest server and PC companies –as well as two long-time rivals – have turned their attention away from their established sector, a low-margin market that is seeing steadily declining demand caused by users’ shift to mobile devices. HP is even thinking about selling off its $41 billion PC business, but now the server industry is experiencing something that may have a similar affect on the long run.

In contrast to PCs, the demand for HP, Dell and IBM servers is growing as companies move into the cloud.  It’s also a fairly profitable market for these providers (at least when compared to the consumer PC business), but the broader picture is a bit different.  Server vendors are innovating, but not fast enough to keep up with the demand from companies such as Facebook and Google, that need solutions to sustain their tremendous growth rates.  This is why they stopped turning to server makers and started building their own servers, a trend that is quickly becoming widespread.

“Hewlett-Packard, Dell and companies that sell the computers off the shelf are losing sales in a key market because Facebook and larger rival Google Inc. are leading a switch among Internet companies to do-it-yourself servers,” reports Bloomberg.  “These customized machines now account for 20 percent of the U.S. market for servers, which generated $31.9 billion globally in last year…”

Furthermore, the emphasis is on affordability. Facebook’s efficient cooling and Google’s hardware optimization for smaller workloads translate into cheaper servers, meaning less profit from machines built on custom designs.

Hardware vendors are already seeing a slowdown in two major markets, but they’re still looking to hold on to their footholds. Hewlett-Packard even launched a $99 all-in-one desktop in hopes of sustaining a portion of the PC space.