Global Economics

Can Cisco Expand Into Asian Data Centers?


Cisco's attempt is noteworthy, but it will take time to convince customers in Asia to change their habits, industry observers say

Geoff Johnson, research vice president of enterprise communications applications at Gartner, said in an e-mail interview that Cisco's Unified Computing System (UCS) signaled that it wanted to be more than just a "plumber installing hardware". Johnson, based in Brisbane, Australia, noted that Cisco has been at market leadership in many areas of networking such as LAN and telephony, but it has traditionally been less strong in, for example, contact centers.

Citing from a Gartner research note released last month, he told ZDNet Asia that although Cisco has a unique offering, displacing incumbents will not be an easy task. In addition, the region's data center operators have tried-and-tested approaches to running their facilities and may not be easily persuaded to rid their habits.

"Data center managers in Asia have a greater reliance on doing their own 'thing' by using internal staff to build and operate their networked IT infrastructure. Traditionally, that means sourcing the 'best of breed' parts and running the risk of integrating them," Johnson pointed out. "HP and IBM provide that systems integration function. They have done it for a long time and do it well. This habit will not change overnight.

"But, to the extent that Cisco offers integrated server blade and interconnect fabric management, this may over time become more compact and more attractive," he added. According to him, Asian data center operators "should evaluate their options" but that change is likely to take place as a result of specific business requirements.

Michael Warrilow, managing director of Hydrasight, pointed out that UCS is a "major disruption" to the enterprise server and infrastructure market.

However, he noted, Cisco, as with many global IT vendors, "does have challenges in executing and being in tune with the needs of Asian organizations".

"Cisco UCS is the first-to-market example of a new kind of IT infrastructure. By being the first, [it is] not only staying relevant but [also] indicating that [it] intends to expand—something Cisco has always done," he said in an e-mail.

"We believe [UCS] is the inevitable continuation of the trend towards consolidation of internal servers into network, storage and compute services. Such technology will become the basis of an 'on-premise' enterprise cloud within organizations in Asia before 2011," noted Warrilow. The "on-premise cloud" is described by Hydrasight as a new way of terming next-generation IT that is an "evolution of existing distributed and shared computing infrastructure or fabric".

According to Warrilow, a "key challenge" for Cisco in marketing UCS, is in "convincing IT organizations to adopt a new way of managing their infrastructure" as network, storage and server teams typically work separately. "A product like UCS will require these teams to work together much more than ever before," he explained.

"Also, enterprise customers will need to be convinced that UCS (and competitors' products) are sufficiently robust and enterprise-proven. This will take time," said Warrilow.

Adrian Dominic Ho, program manager for IDC's Asia-Pacific communications and services groups, also noted in an e-mail that "it will take a while" before Cisco is able to gain traction in the market. "There will be many challenges especially now that they are competing with some of their biggest partners, namely HP and IBM who are the leaders in the server market," he said.

An IDC commentary on Cisco's announcement, co-authored by Ho, Sandra Ng and Avneesh Saxena, noted that the market research firm's data showed data centers in the Asia-Pacific region face significant challenges. Ng is IDC's group vice president for Asia-Pacific communications, peripherals and services research, while Saxena is IDC's group vice president for Asia-Pacific systems, storage and software research.

"Most do not think they can continue for long without making changes to the design and equipment within the data center, which is not ideal for the new dynamic IT environment," the authors said. "In a recent IDC Asia-Pacific excluding Japan multi-client survey, 39 percent of respondents mentioned that they have concerns about the future operations of their data centers, 35 percent stated that their data center facilities are aging, and 31 percent are concerned that there would be insufficient floor space in the near future."

Data centers, the authors said, presented the single largest opportunity from a networking perspective, with the total addressable market in the Asia-Pacific excluding Japan region estimated to be at US$2.0 billion this year. "This explains why networking vendors have launched full-frontal attacks on this key market with numerous initiatives and strategies," they added, citing Juniper Networks, HP ProCurve, 3Com, Brocade-Foundry and F5 Networks as some examples.

UCS would appeal most to customers that are building data centers from scratch, said IDC.

However, the authors pointed out that the road to success is not guaranteed and there may be repercussions in other areas. "Cisco's new initiative will put a strain on some of its existing long-term partnerships in the industry.

"In the region, server stalwarts HP and IBM have been close and strategic Cisco partners for almost its entire portfolio of products [but] would initially most likely not be part of the UCS partner ecosystem," they explained. These relationships, which have contributed to Cisco's success in the region, would be tested and "irrevocable damage could result" from Cisco's entry into HP's and IBM's turf."

"In the region, IBM has already made its intention known that it will be reducing its reliance on Cisco [technology] and is looking for alternative solutions. HP, which has kept its networking arm ProCurve at arm's length in the past, has now brought it into its Technology Solutions Group, which consists of both its storage and server division," they noted. "However, having said that, the Cisco extensive and comprehensive channel ecosystem does deliver a wide variety of skill sets in the IT space including data center expertise."

Responding to Cisco's announcement, Tony Parkinson, Hewlett-Packard's vice president of enterprise storage and servers for Asia-Pacific and Japan, told ZDNet Asia in an e-mail that HP has been named by IDC as the market share leader for blade servers in various markets across the region. "HP knows data centers and is the one-stop vendor to provide servers, storage, infrastructure management software, services and facilities planning.

"Unlike Cisco's solution which is only for virtual environments, HP can help customers manage both virtual and physical environments in [a single management console]," Parkinson said. "Building on years of experience, HP is able to deliver [the] next-generation data center, based on our Adaptive Infrastructure model."

Cisco: Positive customer response

Andre Smit, Cisco's managing director for data center sales in the Asia-Pacific region, said in an e-mail interview that while customers can order the new servers only from the third week of April, Cisco has been demonstrating the offering via its customer briefing centers. "We have started to engage with key customers throughout the region and the response has been very positive," he noted.

The UCS, he added, is designed to meet the needs of midsize and large enterprises that are looking to manage their data centers differently. Smaller businesses, however, could still benefit through service providers that offer managed data center services.

"Adoption of virtualization varies across the Asia-Pacific. Countries such as Hong Kong, Singapore and Australia have established user bases implementing advanced features whereas China and India are now seeing rapid take-up on new projects," Smit pointed out. "Cisco's Unified Computing suits both audiences as a means to add additional capacity and as a flexible architecture optimized for virtualization with lower TCO (total cost of ownership)."

IDC's analysts concluded in their report: "UCS [is] a possible game changer, a bold and audacious move by Cisco that could possibly lead it into dominating the entire data center market, and not just the networking portion.

"It would be interesting to see the kind of partnerships and new alliances that could be formed in the next 24 months, as well as the existing strong relationships that could wither, and the possibilities of mergers that could open up."


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