Dear Cisco, why are you moving into the server market?
Posted in General, IT News on March 20th, 2009 by nathanh
In a bold and very aggressive move, Cisco this week announced its new line of commercial servers that specialize in virtualization.
I don’t know about you all, but I find this interesting, yet puzzling.
First off, this will be Cisco’s debut into an already competitive market. You wouldn’t imagine there would be much of a customer pool left when competing with giants such as Dell, HP and IBM, but Cisco seems to think so.
Of course, Cisco is no small player either boasting annual revenue $40 billion and 65% gross profits in the networking market.
However, the puzzling part is why it would want to start fresh in this fierce market where vendors generally only make a 25% profit margin anyway? Also, what kind of impact will this have on Cisco’s relationships/partnerships with companies like IBM, Dell and HP? I wouldn’t imagine there are a lot of fuzzy, good feelings about this.
I found a New York Times blog dedicated to Cisco’s announcement and it has a nice quote from James Staten, an analyst at Forrester Research who attended Cisco’s launch.
He said, “This is war and a direct frontal assault on IBM and HP.”
On top of that comment, HP also had some strong statements of its own regarding this launch: “It’s appropriate that Cisco launched their server in a museum.” taking jabs at the concept design of these servers.
Going in for the kill, HP added: “Would you let a plumber build your house?”
Ouch.
Personally, I don’t care about Cisco making servers. However, this manuever could have a significant impact on the networking market as we know it.
HP has already responded to Cisco’s announcement by increasing its investment in networking equipment. I don’t know what HP has planned, but I bet “hell hath no fury like a vendor scorned!”
But it does makes me wonder what HP has planned for its already affordable ProCurve line.
But what about vendors like Dell and IBM that have only a small presence in the networking field? I wonder if they will be so quick to advertise Cisco routers/switches along with their products?
I speculate that we may start seeing increased sales from networking companies like Juniper, Enterasys and Riverbed.
But I guess only time with tell.
What do you all think? Feel free to post a comment to this blog.
Related read: How open is Cisco Unified Computer System?
-Nate
Nate,
Interesting article. I’ve been having conversations with vendors about this subject recently, and they are telling me many other vendors are finding a foothold in the networking market because customers are looking for more cost effective solutions without being forced to pay ridiculously high costs for support contracts from Cisco.
Vendors like 3Com are coming back into the mix with products that can hold their own against some of the smaller markets that Cisco is trying to dominate (Linksys). They admit that they have been fighting against their own failures of previous products, but feel confident that they have a solid spot to build on. Many other vendors feel the same way.
I think of Cisco’s original Wireless solution that came out 3-4 years ago, and how horrible it was. We were duped into thinking that it was going to be the best thing since sliced bread, and jumped on the Cisco Wireless bandwagon. What we learned was that Cisco had no idea how to achieve what they had envisioned, but were presented with the perfect solution…buy another company that did. Immediately all of our Wireless LAN Solution Engine (WLSE) boxes became useless and could no longer be updated. We had to choose to keep all of our Access Points at the software version they were if we wanted to continue using the WLSE for management, or opt to update the devices and add the WLSE to the stack of old servers. We chose option 2, and now the WLSE (a Dell blade server) is being used as a test box in our lab…actually I think I installed a Check Point demo on it.
The point is that if Cisco wants to try their hand in a new market, the other vendors should be careful…because Cisco has the capability to either create their own ‘end all’ solution, or if that doesn’t work they can always buy someone else’s…
I guess we’ll see.
William
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