Cisco -- that's right, Cisco -- soars in server sales

Cisco's success in blade server market may be as much about savvy marketing and good customer outreach as it is about technology

The biggest surprise found in IDC Worldwide's Quarterly Server Tracker numbers, released yesterday, isn't that big names like IBM and Dell are hurting. It's that Cisco, a vendor not normally associated with servers, has remained in the ranks of the top five with 35.4 percent growth after cracking the list last year.

A closer look shows that not only has Cisco's server success story been in the making for some time, but how it got here is worth investigating as well.

The numbers first: Out of the top five vendors in the worldwide server systems market -- HP, Dell, IBM, Oracle, and Cisco -- IBM crashed the hardest in terms of revenue, losing 10.2 percent of its growth and 3.4 percent of its market share for Q2 2014, compared to last year. HP enjoyed the largest overall amount of revenue -- $3.19 billion -- and a tidy if unspectacular 4 percent growth. But Cisco took in the biggest growth in terms of percentage, with its $537 million in second-quarter sales from last year turning to $737 million this time around.

What's behind Cisco's leaping sales? From the look of it, several things in combination. The first is the Cisco Unified Computing System (UCS), an infrastructure for managing blade servers in highly virtualized environments.

InfoWorld looked at UCS back in 2009 and found to be quite impressive. By 2011, UCS-based blade servers were third in the overall market for blade devices, behind HP and IBM, with a little less than 10 percent of the market share. Cisco has wisely kept the technology up to date with trends, updating UCS late last year to interoperate with OpenStack.

But one other likely explanation for Cisco's success in the space is good marketing strategy. This tactic was highlighted by IDC research manger Kuba Stolarski back in June when he told Computer Reseller News that Cisco's existing customer relationships -- and its strategies of bundling networking and server products together -- have been key at given Cisco a leg up. (Cisco adds 1,000 new customers to the UCS user base each month, according to that piece.)

Another aspect of the marketing that might help is who Cisco chooses as its customers. When Timothy Prickett Morgan of EnterpriseTech examined Cisco earlier this year, after its sales hit a speed bump in Q4 2013, he noted Cisco is "focused on the enterprise and doesn't chase deals among supercomputing centers or hyperscale data center operators. Those customers simply will not pay the premium that Cisco charges for servers and switches." Said outfits seem to be preferring the white-box products -- what IDC labels as "ODM Direct" or "Others" in its survey -- that make up a combined total of around 22.7 percent of the market share and $2.8 billion in revenue for 2Q 2014.

Given the year-over-year growth for those numbers, it's generic hardware that poses the biggest threat in the long run to everyone in the top five. That includes not just white-box makers, but folks like the Open Compute Project, with its commodity designs for servers, data centers, rack-top switches, and just about everything else in the data center. Such work isn't likely to completely squeeze out the kinds of proprietary innovations Cisco and its industry cohorts can devise, but it gives everyone from Cisco on across the board a good reason to not rely on technology alone to drive sales.

This story, "Cisco -- that's right, Cisco -- soars in server sales," was originally published at InfoWorld.com. Get the first word on what the important tech news really means with the InfoWorld Tech Watch blog. For the latest developments in business technology news, follow InfoWorld.com on Twitter.

Mobile Security Insider: iOS vs. Android vs. BlackBerry vs. Windows Phone
Recommended
Join the discussion
Be the first to comment on this article. Our Commenting Policies