Cisco Expands Its Server Line and Channel Programs

| Jun 15, 2009 | Data Center | Competitive Intelligence Report

| Analyst: Steve Schuchart

Current Perspective: Positive
Vendor Importance: High
Market Impact: Moderate

Event Summary

June 3, 2009 -- Cisco has announced several channel programs designed to help partners gain new revenue opportunities and evolve their businesses toward a unified data center practice. To meet the growing need for IT skills Cisco introduced two new IT career certifications. Cisco also announced an expansion of the Unified Computing System Family with the new C-Series of Rack-Mount Servers. Slated to ship in Q4 2009, pricing for the C-Series is undisclosed.

Analytical Summary

• Current Perspective: Positive on Cisco’s release of the new C-Series Rack Mount Servers as well as new channel programs around the data center because these offerings expand Cisco’s reach into the general computing and server virtualization parts of the data center. The new C-Series and channel programs can be counted as part of Cisco’s initial surge into the general computing business, even though they both come after the company’s big Unified Computing announcement. Customers and competitors can be sure that Cisco is deadly serious about its server efforts.

• Vendor Importance: Very high to Cisco from both a product and from a channel program stance. From a product stance the UCS blade server is an impressive product, but could not account for all of the needs of customers in the data center. With the C-Series servers, Cisco will have lower-cost and smaller solutions for customers who simply do not need the scale of the UCS or require a rack-mount server for a one-off application. From a channel perspective, new programs will give partners the training and resources they need to sell Cisco’s server products against HP, IBM, Sun, and Dell.

• Market Impact: Moderate on the data center server market because Cisco’s expanded channel programs and server product line was expected and is not anywhere near as much of a market shock as the initial release of the UCS. That being said, competitors will need to prepare for the new Cisco products and Cisco’s further reach into the server market. With only the UCS, Cisco was limited in who it could offer machines to, but with the new C-Series, Cisco has a much more compelling portfolio that can be marketed more broadly.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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Recommended Competitor Actions

• HP, IBM, Dell, and Sun should attack Cisco from a pure cost standpoint first and second from a product diversity standpoint. Cisco has a reputation for high costs and HP, IBM, Dell and Sun are old hands at the low-margin market that the Cisco C-Series rack mount servers will be addressing.

• Competitors in the enterprise server market will need to keep close track of the specific details of the new Cisco C-Series Rack Mount Servers. Cisco has a lot going for it with extended memory and other features, but other manufacturers have hardware and software features that are at a maturity level that Cisco will unlikely to be able to match in this first iteration.

• Competitors in the enterprise server market will need to roll out new channel programs specifically designed to counter Cisco’s server initiatives. Many VARs are certified in Cisco’s networking gear and in server hardware from one of the Big Three server vendors. Incumbent server vendors can use these pre-existing associations and new channel incentives in order to keep VARs and other channel partners from defecting to Cisco for new accounts or large bids.

• While the point may appear obvious, it bears reiteration in light of the highly competitive nature of x86 server vendor that existing server vendors (e.g., IBM, HP, Dell, Sun, etc.) can use their vast experience in the server market against Cisco, which for all of its networking experience is a newcomer. Incumbent vendors should fight tooth and nail for every inch of data center space and show customers how their own approach is based on years of experience.

Recommended End User / Customer Actions

• Customers who dismissed Cisco’s UCS blade server solution as impractical or overkill for their data center environments will need to re-examine Cisco’s offerings to include the C-Series products that fulfill the needs of both smaller data center environments and branch offices.

• Customers who feel strongly that they need to standardize on one vendor for their server solutions can now look at Cisco with a fresh eye. Cisco’s expanded server offerings that now include 1u and 2u rack mount solutions make it much closer to being a full line x86 server vendor and there for a single-source solution.

• Customers will need to inquire about pricing from Cisco to ensure that the new C-Series rack mount solutions are in the ball-park when compared to solutions from competitors such as IBM, HP, Dell and Sun. Cisco will likely claim feature superiority, but in the smaller rack mount solution segment, features are often secondary to price due to volume buying. Customers should query Cisco for the actual specifications as well.

• Current customers of HP, IBM, Dell and Sun will need to do extensive cost-benefit analysis on any of Cisco’s server equipment in order determine of the costs associated with switching make Cisco’s solution worthwhile. This analysis has to take place in the light of improvements that competing vendors will no doubt make to better compete with Cisco.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Data Center | More information

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