Contemplating IT

I've been pondering Cisco and their Unified Computing System (UCS) and decided to finally blog on it. I participated in a InfoSmack podcast that included a brief discussion on UCS and recently talked to Cisco's Jesse Freund - who manages analysts relations for the Cisco UCS.

My first reaction when Cisco announced getting into the server business was - well let's just say I was a bit skeptical. First , Cisco UCS upsets the IT ecosystem, which is not necessarily a bad thing but it does have ramifications that need to be considered in terms of go-to-market, the impact to Cisco's channels and alliances, and of course it creates natural enemies that are big and powerful enough that even Cisco needs to be mindful of them - including Dell, HP and IBM. Certainly all three are already competitors on various levels but they also have alliances and must live together in the data center. But now Cisco is going after their bread and butter server business, which is a whole new ball game.

The second major reason to be skeptical is that the core competencies needed to sell and support servers is different than supporting networking devices. Cisco doesn't have the operations, sales, marketing, support, on and on and on. Third, server margins are not nearly as healthy as typical Cisco products. Do you want to focus your time and resources making 60 or 70 cents per dollar or 20 or 30 cents per dollar? The math is pretty simple. Related to that the server market is boring - it is declining and not growing.

Now this is a big deal to Cisco. Clearly a lot of thought went into this. And there are some really smart people that work there. So what is the business case that makes UCS compelling and strategic? Now maybe everyone reading this is already way ahead of me and get why this is important but I haven't read or seen anything concerning UCS that really focuses on my hypothesis and why this matters:

Cisco isn't really going after the server market per se but rather it wants to own the core of the data center. It wants to own the infrastructure that runs applications that run the business. At the heart - at the very core of the data center are compute resources - CPU and memory. "Owning" the core of the data center - can make you strategic, valuable and essential.

But it will take a lot more than just providing commodity CPUs and memory to own the core of the data center. Server virtualization by its very nature enables you to move from one CPU to another transparently. That is why if you want to own the core of the data center you need to really consider the value add provided in addition to the compute resources. And that value add has to be very, very sticky. Additionally, it should be something you are already really, really good at. For Cisco the first step in the value add strategy is a natural and obvious - go to where you are strongest - and with Cisco that is networking.

Therefore the other part of the UCS strategy is focused on converged networks, everything over Ethernet including the last big hold out, Fibre Channel. Fibre Channel over Ethernet (FCoE) becomes very important to them especially since networked storage is a critical part of the data center. A converged network using Cisco infrastructure including LAN, backup, management, VOIP and all storage protocols including iSCS, CIFS, NFS and FCoE results in lower cost, less support, and the reduction of cable spaghetti. The Cisco vision is to have all roads lead to Cisco UCS via a converged Cisco network.

By binding the core of the data center to the network - the arena that Cisco owns - gives them a major advantage and allows them to leverage their core competencies. And they can add more value - easier management, consolidated infrastructure, more efficient controls between the core of the data center and all the roads that lead to it. Additionally - you need the network in order to have a more efficient virtual server environment for mobility, availability, reliability and disaster recovery.

Cisco doesn't own the server virtualization software, the network storage, the applications - but they provide a platform to bring all of these things together. And they have the leverage - based on economics - to have everyone want to be their partner, even some of their major competitors - co-opetetion - because again of the economics involved. That is another essential part of Cisco's value add strategy, get all the partners to integrate and optimize around the UCS platform as evidenced by the VMware, EMC, NetApp, Cisco alliances. This intelligent and important move brought them closer together with the biggest players that provide the other essential aspects of the virtual data center - server virtualization and storage.

I am not convinced that Cisco is going to rule the universe with this strategy but it certainly poises them for owning more strategic footprint within their customer base (which is pretty much everyone). And I am just talking about strategy and vision - it is the go-to-market execution that will matter here and there are still a number of challenges facing them.. Dell, HP and IBM will not sit idly by and watch Cisco run rampant over them. Keep in mind that while Dell, HP and IBM servers are in a lot of places, they do not enjoy the same ubiquity as Cisco networking solutions. On the other hand these leading server companies are ready and willing to move money around to make deals. Cisco will have to perform a tough balancing act. They cannot win this game by matching hard dollar savings versus soft dollar esoterica and cost saving rhetoric. At the same time they can't allow themselves to lose sight of the bigger vision and driving customers viscerally towards it.

Integrating compute resources with networking solutions makes a ton of sense if you are Cisco. UCS enables Cisco to be the core of the data center with all roads leading to that core provided by Cisco's converged networking solutions. It is a strategy of Core + Access. For years Cisco has struggled to be more than IT "plumbing" - to be more strategic to IT, let alone the actual business units. By running business applications on Cisco equipment they are far better positioned to achieve this objective. By elevating themselves through providing solutions where business applications "live" is strategic and could be landscape changing.