A Cisco Server: Sheer Brilliance or Act of Desperation?

By Sharon Linsenbach  |  Posted 2009-01-30 Email Print this article Print
 
 
 
 
 
 
 

Cisco is breaking new ground by launching a line of servers to compete against friendly rivals HP, IBM and Dell. While the expansion could open new opportunities for Cisco and its partners, some say the networking giant’s actions are a response to growing indifference toward it by customers.

Cisco Systems’ announcement that it will launch a line of servers is drawing mixed reactions from solution providers, as they wait to see how the networking giant’s move affects the overall data center market.

For years, Cisco has dominated the data networking market, making nearly $40 billion a year in revenue mostly from the sale of routers and switches. Recently, however, virtualization technology has disrupted a historically staid market, and has opened up new avenues for companies such as Cisco and virtualization pioneer VMware to allow for a completely new vision for companies’ data centers.

Gary Middleton, director of performance optimization and data center networking, Dimension Data Worldwide, is excited by Cisco’s plans to expand its data center portfolio. Cisco’s already had a compelling data center portfolio, he says, and adding the server hardware will make the vendor's solutions much more attractive for his customers.
 
"It doesn’t surprise me that Cisco’s aiming at capturing as much of this space as possible," Middleton says.

In a recent interview with Channel Insider, Cisco’s director of operations Denny Trevett says virtualization is the linchpin of Cisco’s strategy going forward, and the networking giant had "aggressive plans" to increase customers' investments in the data center technologies, including WANs, wireless networking and security.

"Virtualization can allow companies to get a lot more ROI out of the infrastructure and investments they’ve already got," he said, and also provide technology tie-ins to data center, WAN and wireless technologies as well as security.

Steve Fazio, CFO of Torrey Point, a solution provider that works with both Cisco and Juniper Networks, says Cisco is capitalizing on the growth of the virtualization market to make further inroads into the data center space, where customers are looking to manage their data centers as a single entity. In the data center, virtualization is a major tool for solution providers to create efficiencies and cut physical and personnel costs for their customers.

But whether Cisco’s server will land the vendor a wider customer base and greater market share is anybody’s guess. Fazio says even before Cisco’s announcement, customers were demanding solutions from alternative vendors and moving away from Cisco.

"There has been a tremendous increase in demand from the Fortune 100 space where Juniper hasn’t seen it before," Fazio says. He says while cost is one of the reasons end users are looking to alternative solutions, more important is the increased shift towards open-standards networks and data center technology that allows for a number of vendors’ products to work seamlessly together.

"The economy is so bad and the market has become so commoditized that pricing pressures start to come into play," Fazio says. "Cisco realized it’s at a point where it has to force upgrades to their networking equipment to keep customers moving on from their legacy infrastructure," he says.

For end customers, that pressure towards a single-vendor, proprietary systems doesn’t make much sense. Fazio says many customers want to save money and increase functionality by moving to a vendor-neutral protocol that can accommodate solutions from any networking vendor, including Nortel, Alcatel, Juniper and Cisco.

"Instead of moving toward open standards, Cisco is moving away from them and trying to lock out the competition," Fazio says. Doing so has allowed Cisco to do a great job of protecting their brand and their status as a leader in the networking market, Fazio says, but can cause problems with organizations’ upper management.

"At the CFO level, they don’t feel like going 'all Cisco’ gives them any price protection, and at the CTO- and CIO level, they see this kind of proprietary focus as Cisco telling them how to run their business and how to develop their infrastructure," Fazio says. While in some cases this can simplify procurement, operations and management, Fazio says many Torrey Point customers are moving toward alternative solutions.

"We’re seeing a lot of groundswell toward vendors like Juniper who are proponents of open standards, and who aren’t seen as telling customers how to architect their networks," he says.

Could Cisco’s move into the server space be an attempt by the vendor to compensate for slowing growth in the routing and switching market it dominates? Fazio says he believes that could be one reason. He says that Cisco has to expand beyond its traditional strengths to keep an edge over its competitors.

"They’re making a lot of acquisitions to add products and services that are only peripherally related to the network," Fazio says. "They know they own routing and switching, so now they have to move up the food chain."

In December, Cisco’s Doug Gourlay, director of data center solution marketing for Cisco, told Channel Insider the networking giant was focused on a long-term "unified fabric" theory for bringing together customers’ existing infrastructure, networking and data center technologies. The goal, Gourlay said, was to imitate Cisco’s "The Network is the Platform" strategy for consolidating disparate networks.

"We’ve taken storage networks and server networks and pulled them together into a unified fabric. Then we made the network virtual-machine aware. So now we have to bring all those together into a unified compute platform," Gourlay says.

Cisco’s CTO Padma Warrior, in a blog about the server product announcement on Jan. 19, says Cisco "is innovating around an architectural approach we call 'Unified Computing’ … in which the compute and storage platform is architecturally 'unified'
with the network and the virtualization platform."

Warrior goes on to say that this unification eliminates the need for manual integration of these systems in favor of an integrated architecture that breaks down the silos between compute, virtualization and connect.

Clearly, this announcement has major competitive implications for large vendors such as Dell, Hewlett-Packard and IBM which, in the past, partnered with Cisco to provide servers, storage and other hardware that coexisted with the networking vendor’s routers and switches.

The other major hardware vendors, including HP, IBM and Dell, haven’t traditionally been seen as competitors to Cisco, whose networking gear is often complementary to their personal computers, servers, storage solutions and software.

Now, however, it appears Cisco is moving into those partners’ territory, though it’s unclear how they will react.

"Cisco’s success has always been driven by investments in market adjacencies during times that may cause other companies to blink," Warrior says in her blog. She also downplays the potential for conflict between Cisco and other large server vendors.

"Yes, there are markets where Cisco will compete with a few of our current partners. Cooperation among competitors in the tech industry is nothing new.  Our responsibility as leaders of the technology industry is to constantly pioneer new ways to enhance our customers’ IT needs. This new environment will require even greater cooperation among major industry players. Our customers expect that and we are committed to them," she says.

Middleton, of Dimension Data Worldwide, says while he is sure Cisco’s move will create conflict, he’s not sure how it will affect the overall market.

"This will create some conflict, sure, but exactly how that conflict will take shape and what effects we’ll see on competitors like HP, Dell and IBM – I don’t know," Middleton says. "The news is so fresh right now that I think everyone in the market is still trying to digest it," he says.

"HP and IBM now see a competitor in Cisco where before they saw a strategic partner," says Fazio. "We’re definitely seeing it, and it’s helping our business, because our customers are seeing it, too," he says.

Cisco could unveil the first of its new server systems as early as March, according to sources familiar with the company’s product plans, though no mention was made of exact product specifications. From Cisco blogs, it appears the server will cater only to virtualized applications, and will feature sophisticated software from VMware. Cisco owns a 2 percent stake of VMware, according to analysts.

As to the long-term prospects for Cisco’s server and the company’s expansion strategy, that, too, is unclear.

"It might work, but it will also alienate a lot of customers and definitely a lot of technology partners," says Fazio.

 
 
 
 
Sharon Linsenbach Sharon Linsenbach is a staff writer for eWEEK and eWEEK Channel Insider. Prior to joining Ziff Davis, Sharon was Assistant Managing Editor for CRN, a weekly magazine for PC and technology resellers. Before joining CRN, Sharon was an Acquisitions Editor for The Coriolis Group and later, Editorial Director with Paraglyph Press, both in Scottsdale, AZ. She holds a BA in English from Drew University and lives in the Philadelphia suburbs with her significant other and two neurotic cats. When she's not reading or writing about technology, Sharon enjoys yoga, knitting, traveling and live music. Sharon can be reached at Sharon.Linsenbach@ziffdavisenterprise.com.
 
 
 
 
 
























 
 
 
 
 
 

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