Does cloud commoditize Cisco, others?

Morningstar analysis see disruptive trend a headwind for hardware vendors

An insightful piece of analysis from Morningstar, the mutual fund ranking people, on the disruptive effects of cloud computing suggests hard times ahead for hardware. Enterprises looking to pay for compute cycles on an as needed basis will require less data center infrastructure -- that's a given.

But the companies actually building the cloud service provisioning data centers -- like Google and Amazon -- may follow the Google model and construct their own specialized environments from off-the-shelf hardware and open source software. Google develops its own servers, switches and storage from commodity hardware and internally developed software, Morningstar notes; others could do the same, which would put an added crimp on Cisco, IBM, HP, NetApp, EMC and the other hardware heavyweights banking on data centers for big bucks.

The secret sauce in vendor offerings however may be the virtualization element. Morningstar did not mention the impact of virtualization on the cloud computing hardware/infrastructure market, a glaring omission and one that could keep hardware in the game.

Open source software and off-the-shelf hardware are two elements to reducing capital costs when building out a data center. But virtualization helps reduce the operating cost by allowing compute resources to scale beyond physical boundaries. With hardware optimized for virtualization, vendors could head off commoditization from DIYers.

Security is also expected to be a big issue in cloud computing. Cisco CEO John Chambers even used the 'N' word when describing the challenge. Something tells us Cisco has a security plan for those intimidated by the cloud, and that plan includes lots of cloud-security optimized Cisco hardware...

It will be interesting to see which scenario plays out: the Morningstar vision or the virtualization-added vendor approach. We're betting that vendors have already prepared for the commodity disruption. Those who haven't, well... would you trust your data center to them?

More from Cisco Subnet:

 

• Cisco expected to be more aggressive after Q1 share losses
• Is Avaya about to distance itself from Cisco?
• 3Com bests Cisco in school upgrade
• Cisco rival Nortel liquidating assets
• Cisco selling refurbished Linksys directly to end users
• Security Updates plus 46 Security fixes - iPhone Is Enterprise Ready Now!?
• Does Cisco use its WAAS in its own network?

Win training and books from Cisco Subnet
Like e-mail? Subscribe to the Cisco Alert newsletter. Like RSS readers? Subscribe to the Cisco Subnet RSS feed

Follow Cisco Subnet on Twitter.

• Cisco
• cloud computing
• commodity
• data center