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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

“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

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.