Cisco's planned server play sets up vendor cage match

Cisco Systems will tread on partner turf when it enters the server market with a product aimed at virtualized data centers.

Cisco Systems' relationship with partners Hewlett-Packard, IBM and Dell is about to get ugly, with the networking company moving on to their turf with its own line of x86 servers sometime this year.

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Until now, Cisco Systems Inc. has scratched the backs of companies like HP by selling networking gear that works with these companies' servers and storage systems, and vice versa. But now, the company plans to compete with these vendors with its own virtualization-friendly servers in a bid to increase revenue and evolve, according to a Cisco blog post.

"The market is getting very interesting," said Ideas International Inc. analyst Jim Burton. "Everyone's sales are starting to go down, so the vendor space is starting to look like a cage of lions; loyalties are going out the door when there is money to be made, because their survival is at risk. If a company has to chop off a partner or two to put a lot more money in their pocket, they will."

Cisco denied a request for briefing about its server plans because the company isn't ready to divulge details but deferred to a recent blog that touches on its strategy.

Becoming reliable, differentiating
According to the post, Cisco views the current recession as the ideal time to branch out. "We view periods of economic uncertainty as the perfect time to challenge the status quo and evolve our business to deliver customer and shareholder value."

Loyalties are going out the door when there is money to be made.
Jim Burton,
analystIdeas International Inc.

"Cisco is innovating around an architectural approach we call Unified Computing, [which is] the advancement toward the next-generation data center that links all resources together in a common architecture to reduce the barrier to entry for data center virtualization," the Cisco blogger wrote. "In other words, the compute and storage platform is architecturally 'unified with the network and the virtualization platform," "Unified Computing eliminates this manual integration in favor of an integrated architecture and breaks down the silos between compute, virtualization, and connect."

Cisco has to devise a unique approach to compete against the likes of HP and Dell in the commodity server market. To accomplish this, Cisco needs "a lot of engineering in their servers, a lot of value, and the rock solid reliability that users demand," Burton said.

"If Cisco comes out with a carbon copy that is just as good but cheaper [than HP, Dell, or IBM servers], it won't be competitive," Burton said. "They have to change the rules and pull a Sun Microsystems by creating a brand-new concept, instead of just competing with the exiting servers; they have to come out with something that is really unique in the commodity market."

Another key consideration will be the system management software on the servers, Burton said. "HP has a hold on the market because of their systems management software, as does IBM. Somehow, Cisco has to come up with a systems management solution of its own," he said. "It is a wait and see situation, but Cisco will have to play some very good cards."

Cisco's mutiny bound to cause tension
The San Jose, Calif.-based networking giant will also have to tread lightly around partners to ease the inevitable friction. "If I were Cisco, I wouldn't just launch the product and then call HP and ask what they think. They have to do their best not to start a war over this," Burton said.

HP declined to comment on Cisco's server play. Cisco's blog acknowledged the inevitable tensions but also dismissed them as just part of the game. "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."

Cisco may have a point there; it isn't like HP and IBM don't compete with Cisco in the networking arena. "HP resells Cisco routers and other gear, but under CEO Mark Hurd, HP made its homegrown ProCurve networking gear a crucial piece of its growth strategy and prides itself on undercutting Cisco's prices," reported Pund-IT Inc. analyst Charles King. "While IBM works closely with Cisco, it also supports Brocade's storage networking products and is developing its own networking hardware equipment."

Co-opetition is alive and well in IT, and has been for years. For instance, "EMC and Microsoft work closely together across a wide range of storage and platform solutions, even though Microsoft is competing with EMC-owned VMware Inc. with its Hyper-V virtualization product.

VMware has no qualms about crossing onto its partners' turf, either; the company has been known for developing on the toes of its partners and is now working on virtual machine (VM) chargeback and capacity-planning tools that will compete directly with the offerings of partners such as vKernel.

"Cisco sees an opportunity, and they are going after it, just like any company would," said VMware's senior director of product marketing, Bogomil Balkansky. "When we see opportunities, we go after them; our partners expect that, and they do the same thing."

Ultimately, the decision to develop a product instead of using a partners' technology boils down to customer demand, Balkansky said. "There are many companies that sell tools that work with VMware … so we tread with caution when it comes to building new software. What it really comes down to is what problems our customers want us to solve and which problems we can leave to others," Balkansky said. "Often times, customers just want one throat to choke when there is a problem."

In the case of Cisco, friction is probable because it intends to move outside its niche. "Where sparks are most apt to fly is when a vendor dares to venture into a market outside its traditional areas of expertise, attempting to occupy territory currently inhabited by its partners. Almost by definition, this IT equivalent of a WWE [World Wrestling Entertainment] cage match is bound to draw crowds and excite the attention of even those outside the market," King said.

Hard feelings aside, Cisco's Unified Computing concept has potential, especially in the cloud-computing market, King said. "Integrated, optimized virtualization is, after all, what underlies robust cloud computing performance. While there is no reason that conventional x86 and x64 servers can not be used to populate cloud data centers the greater memory and networking capabilities of servers designed for virtualization makes them a better choice," King said.

Let us know what you think about the story; email Bridget Botelho, News Writer. And check out our data center blogs: Server Farming, Mainframe Propellerhead, and Data Center Facilities Pro.

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