Cisco takes on IBM, HP with servers
Network equipment maker Cisco has announced it will start selling its own data center servers. Will it be able to compete with rivals IBM and Hewlett-Packard? Mitchell Hartman reports.
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Kai Ryssdal: There's a case to be made that this is exactly the time that companies ought to be extending themselves. Seize on a moment of overall weakness, and get in position to capitalize when the economy recovers.
The big technology firm Cisco Systems is doing just that. The company said today it's going to start building its own servers. Those are the big computers that run corporate data centers all over the world. Up till now San Jose-based Cisco has left that side of the business to rivals like Hewlett-Packard and IBM as Marketplace's Mitchell Hartman reports.
MITCHELL HARTMAN: Just like every other part of the economy, business spending on IT is flagging. Forrester Research says it could be down 3 percent in 2009. Now all the big players are jostling for space in each others' sandboxes, says analyst Joe Skorupa of the Gartner Group.
JOE SKORUPA: As companies become increasingly larger and larger, it becomes very hard to continue to satisfy Wall Street's demands for growth. And as a result, they start looking for markets big enough to matter.
And the server business is big enough to matter as much as a hundred billion dollars this year alone. But Cisco's main business has been connecting computers together, rather than building them. Soni Jiandani works in marketing for Cisco. She says the company's networking smarts will give them an edge in the server business.
SONI JIANDANI: What we've done is introduced a unified system, which is like a nervous system, which integrates computing, networking, virtualization.
Virtualization means being able to do things like run Windows on my Mac laptop, but it has bigger applications, says analyst Zeus Kerravala of the Yankee Group.
ZEUS KERRAVALA: Typically what you see with virtualization is the technology allowing you to take one server and create many more virtual servers underneath it.
It's a model that could, in theory, save plenty of money on servers and the energy to run them. But Cisco's challenge isn't just making the technology work. It also has to compete now with behemoths like Hewlett-Packard and IBM. They used to be Cisco's partners, and they know the server business inside out.
I'm Mitchell Hartman for Marketplace.
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From Cypress, TX, 03/16/2009
What the analysts that Mitchell Hartman talked to don't seem to have noticed is that cisco has been feeling pressure in its core businesses for some time now. Pure virtualization vendors such as VMware and Citrix put a software network switch inside the server, while HP's and IBM's blade systems have a mini-network in the chassis that holds 30 or more servers that can themselves each be split up into many virtual servers. That's hundreds of network ports that cisco isn't selling equipment to connect any more. And then there's HP's ProCurve networking division that is second in market share, competing with cisco for all of the network in the heart of the data center. Cisco had to do something to avoid being pushed out of that space completely...
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