Cisco unified computing: Gold's gym for buff CIOs or an assisted living center for CIOs to be taken care of?

Yours truly believes the new Cisco unified computing system will offer CIOs either a Gold's gym to get buff or an assisted living center to be taken care of and quite possibly it could even switch back and forth between the two. However, most interesting to me is the viewpoint of Wall Street analyst - Mark Sue: "Cisco's Unified Computing System is set to ship in late CY2Q09 and numerous large customers have already signed for evaluations and trials. Cisco also announced managed services and hosting company SAVVIS, which has 29 sites (1.44M square feet of data center space), as a key customer. Cisco has yet to announce pricing for the system, which can scale from one to 320 physical blades. "Cisco's aggressive push into the data-center and now IBM's keen interest in Sun means changes to alliances as vendors try to increase share in the $85B data center opportunity Hardware ($38B), Software ($24B), IT services ($15B) and Networking ($8B). Cisco is currently addressing a market totaling $8B in networking and is hoping to grab a larger piece of the computing and service (estimated at $20B). Meaningful share gains may mean Cisco can add to its long-term growth revenues. As a point of reference, we're projecting a base revenue estimate of $34B in CY09 for Cisco. And despite margin concerns, the integration of the components may enable Cisco to avoid the pricing game. Cisco may increasingly find itself at odds with IBM and HP. In response to Cisco's UCS, others may provide a full-suite of products for large data centers. We believe Cisco's push into the data center is a good long-term strategy; the struggle should be to move legacy applications to the new environment. A crucial bridge to what Cisco is trying to push is to help nurture and sustain internal cloud initiatives. This is what EMC and VMW have focused on to drive the bridge to external cloud environments. A typical data center has storage, computing servers, virtualization software, switches and other equipment that is connected to networking infrastructure. Conventional architectures map web services to Ethernet VLANs and IP routers are used for traffic conveyance across VLANs while load balancers and application accelerators communicate requests within a VLAN across servers via hardware and software to optimally route traffic."

Sue continued, "Cisco's bigger push into the data center will not be without challenges. While an architectural bet means healthy margins and large deal sizes, it may also mean long sales cycles and evaluations. And in an economic down cycle where service providers are acutely mindful of their capex spend, Cisco's solution requires a high upfront cost. Cisco expects its UCS to help reduce customers' TCO by potentially reducing capex by up to 20% and opex by up to 30%. In one case involving 1,000 servers for a large financial company, Cisco's UCS investment totaled $3.2M vs. the traditional network, which required an investment of $7.4M. In a separate paid customer trial that involved a legacy data center, Cisco's UCS was able to reduce capex by 45% and opex by even more, and have a payback slightly over one year. There will be an installed base of customers who may continue to expand their storage requirements as before due to historical comfort levels. Cisco is taking a fresh look at today's networking and storage problem, and for large green-field opportunities, the company may over time gain the mind share and market share of customers looking at storage and networking holistically." Sue added, "IBM may expand its alliance with Juniper which has a full-suite of data networking switches (EX series). We're not expecting a sharp drop in Cisco's revenues at IBM near-term considering the installed base and customer's preference for Cisco's stable switches; longer-term we think things may change. IBM (cash $13B, debt $34B) may also add key enabling components like application acceleration and WAN optimization to its portfolio. HP has an expansive ProCurve switch line and may also look to add enabling elements. Incidentally HP (cash $11.3B, debt $20.5B) purchased Wireless vendor Colubris last year signaling its deeper push into networking. HP's recently announced ProCurve ONE, multi-vendor program features partners such as Microsoft, Avaya, McAfee, F5 and Riverbed. From our discussions, customers most often want best-of-breed partners though are willing to mix-and-match other components. We think HP's next acquisition may be geared towards the networking or storage markets, to offer a complete end-to-end solution to compete with Cisco or IBM." Sue concluded, "Cloud computing may further require tighter use of virtualization potentially drawing in higher requirement for connectivity gear such as Fibre Channel, assets which Brocade dominates yet Juniper lacks. Brocade continues to take an open approach and provides support for a wide range of storage and management technologies. Foundry's networking assets may help with long-term revenue synergies as FC and Ethernet come together. Related story: Cisco unified computing vs. a zero-capex world

What's your take, is Cisco UCS a Gold's gym or an assisted living center, perhaps both? BradReese.Com Cisco Refurbished Contact: Brad Reese Twitter: Call Toll Free 866-864-0506 or International 850-364-4115

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