Cisco challenges HP, IBM and others in server market

San Jose Mercury News (MCT) - At a time when tech giants have begun to compete more fiercely for lucrative market niches, Cisco Systems has put itself on a collision course with its longtime partners Hewlett-Packard and IBM.

On Monday, Cisco Chief Executive John Chambers unveiled plans to plunge into the market for servers _ the systems that power corporate data systems _ a move that is a direct challenge not only to HP and IBM but also Dell, Sun Microsystems and others.

"What we are really talking about here is catching the next market evolution," Chambers said as he announced the company's strategy at his San Jose headquarters, adding: "I don't focus on competitors."

Cisco, which has been aggressively expanding beyond its core business in routers and switches in recent years, began secretly working on its server strategy, dubbed "Project California," about three years ago after acquiring an 80 percent share in networking equipment maker Nuova Systems for $50 million.

Chambers directed the Nuova team to build a Cisco version of a blade server, the highly efficient, compact computers that are the building blocks of modern corporate data centers.

"At an industry level, what Cisco is doing is nothing less than saying, 'What's needed is a re-envisioning of the server,'" said Bryan Doerr, chief technology officer of Savvis, an information technology utility services provider that is testing Cisco's new server architecture.

While competitors in the server market were quick to discount Cisco's move, analysts say the company's virtualization architecture _ which knits together separate server, storage and network platforms _ poses a threat.

"It's a bold move by Cisco," said Forrester analyst James Staten, who equated the new initiative to the company's bet on Voice over Internet Protocol, or VoIP, several years ago. "This is war and a direct frontal assault on IBM and HP. But it's a logical move for Cisco. They can't count on their growth from the market, so they've got to take it out of someone else's hide."

Cisco's foray into the server market is part of a broader battle among tech giants to grab more of the data-center business.

Hewlett-Packard, for example, recently expanded its ProCurve line of switching equipment _ picking its own tech fight with Cisco _ after years in which it was largely content to sell servers and storage systems that worked alongside Cisco's switches and routers.

HP currently has 30 percent of the world's server market, only about two percentage points behind industry leader IBM, according to the IDC research firm, which estimates that HP sold $15.8 billion worth of servers last year.

The Palo Alto company was quick to verbally slap its erstwhile partner. HP executives said they already are selling virtualization products that perform similar functions to Cisco's and have broader experience in the complex process of integrating all the pieces of a data center.

Free Catholic PDF's - Home / Parish / School / Bulletin Inserts

"Would you rather have a plumber build your data center or an architect who knows how to make all the subcontractors work together?" said Jim Ganthier, a vice president for marketing in HP's Enterprise Systems and Storage division, in a trash-talking reference to Cisco's historic role as a supplier of Internet-connecting equipment.

He also contended that Cisco's virtualized systems may not be compatible with other servers and storage systems that customers are already using. Ganthier added that HP has more expertise and resources to develop new server technology. "You've got to be able to continuously invest and innovate," he said, adding, "Welcome to the deep end of the pool."

Cisco, though, is armed with about $30 billion in cash for future acquisitions and has lined up an impressive army of partners to plug technology into its new architecture and help customers fit everything together. Cisco said its unified computing system can save companies at least 30 percent in operating costs and 20 percent capital expenditures.

___

© 2009, San Jose Mercury News (San Jose, Calif.).