Rumors that Cisco was going to enter the blade server market have been swirling for a year now, and got some boost from being published in The New York Times this week. It appears from our sources that Cisco really is entering that market and will be making the announcement fairly soon.
The move is obviously a gutsy one. On one hand, Cisco seems to understand better than any of its competitors that if bits are commoditizing, you better be in a business that commoditized bits will stimulate if you’re going to keep pumping out bit-producing products.
The other side of the issue is that servers per se aren’t exactly an exploding market, and margins there are typically low. IBM and HP will really hate Cisco for competing and will likely counter-move. The risk for Cisco in being an ordinary IT server is so large it’s hard for us to believe the company would do it, and so we think Cisco may be trying something very smart, which would be to create specialized server appliances for feature hosting, linked intimately with Cisco switches and routers and creating a service ecosystem. Given Chambers’ announcement of service mashups or API harmonization at Cscape, this could get really interesting.