Cisco takes on IBM and HP with 'blade server' plans

Cisco Systems wants a bigger chunk of the corporate computing market, and plans to start selling servers in competition with old partners like Hewlett-Packard and IBM.

The servers are part of a package put together by Cisco and partners like BMC Software and VMware to harness the power of a recent technology called "virtualisation" that lets one computer act like several.

San Jose, California-based Cisco is the world's largest maker of computer networking gear, but the announcement greatly expands its ambitions in the corporate "data centre" market. It's moving from selling the switches that allow the computers to talk to each other to selling virtually entire data centres, in conjunction with its partners.

In a videoconference, Cisco Chief Executive John Chambers emphasised that its "Unified Computing System" is not an attempt to move into the commodity server market.

"We have very little interest in the product space," Chambers said. "We're after: 'How does it tie together?'"

Chambers called the unified computing product the biggest step for Cisco since it added switches to its original router products through the acquisition of Crescendo Communications in 1993.

Since then, the company has used the cash generated by its enormously successful computer networking gear - it had $29.5bn on hand in its last quarterly report - to buy up numerous companies, adding consumer gadgets and cable-TV equipment to its portfolio. This time, however, it's not diversifying through an acquisition, but by building its own products.

IDC analyst Michelle Bailey said Cisco isn't trying to take on HP and IBM in the broader market for servers, but rather is focusing on a certain set of very large customers. Their data centres, for instance, keep track of customer accounts, run large websites or deliver movies to PCs or cell phones. That's a $20bn business annually.

Through virtualisation, servers can quickly be shifted between different tasks, reducing the number that are needed. Cisco said the new system can reduce the capital cost of a data centre by 20 per cent, and operating expenses by 30 per cent.

"Every customer we're talking to around the world is looking to save money," said Rob Lloyd, Cisco's senior vice president for the US, Canada and Japan.

It's because Cisco wanted to make the most of virtualisation that it decided to produce its own servers, said Mario Mazzola, senior vice president of the server access and virtualisation business unit.

The announcement, though widely expected, was light on specifics, and Cisco didn't say when the new system would be available.

It is clear that the server will be "blades" - thin devices that will be powered by Intel's latest chips. HP dominates that market now, followed by IBM.

Other companies supporting the launch included software providers Microsoft, Red Hat, consultant Accenture and EMC, a maker of data storage systems and the majority owner of VMware.

HP, which not only makes servers but competes with Cisco in networking gear, said it's already providing its own equivalent of Unified Computing, which it calls Adaptive Infrastructure.

"The vision they paint for tomorrow is one we're already delivering for today," said Jim Ganthier, vice president of marketing for enterprise servers and storage at HP.

He also said that making servers isn't as easy as it seems, requiring a long-term commitment to development and continuous investment.

"It may have looked like a really great idea on paper, but as they start to wade into the water they may find out that there are some things in the water that they don't like," Ganthier said.