The company will focus on virtualization and consolidation in storage to stake its claim in what will become a $14 billion data center market over the next five years, executives said during a press conference on Tuesday at the Cisco Partner Summit 2008 in Honolulu.
Much of the announcement centered on Cisco's new Nexus 5000, a 10 Gigabit Ethernet (GigE) switch that enables Fibre Channel over Ethernet. The goal is to allow enterprises to use their existing Fibre Channel storage area networks (SANs) to connect to 10 GigE switched networks, increasing speed without having to toss existing infrastructure.
New 10 Gigabit Ethernet switch picks up on FCoE trend
Likening the unification of Ethernet, Fibre Channel and high-performance computing technologies to the innovation in converged voice and data networks, Doug Gourlay, Cisco's senior director for data center products, pointed to the new data center strategy as a central focus for the company and said the approach solves a major network problem -- handling the disparate traffic and systems in data centers and networks -- while providing a great business opportunity.
Cisco announced its first data center switch, the Nexus 7000, in January. The Nexus 5000 is based on the same operating system and will interoperate with the 7000. The first switch in the series -- the Nexus 5020 -- is configured for 40 ports, each running on 10 Gigabit Ethernet, but can be expanded to 56 ports. It will be available in May at $900 per port.
Nexus 5000 was developed in collaboration with Nuova Systems, which Cisco announced Tuesday it will fully acquire. Cisco acquired 80% of Nuova for $70 million last year.
Execs spent much of Tuesday's press conference pitching the 10 Gigabit Ethernet switches to the channel. They stressed money-making services that would result from the offering, saying that 15% to 20% of revenue would come from long-term care under the new data center strategy.
"As the network becomes more relevant, partners become more relevant," said Edison Peres, Cisco's vice president of worldwide channels, adding that the company expected to double data center hardware sales in the coming years.
Cisco also said it will extend its Value Incentive Program (VIP) to cover data center products. The VIP program will offer 5% to 10% back-end rebates for growth in customers and sales. Until now, the VIP program covered security, wireless and unified communications products.
Cisco partners must be trained in the company's newly announced Data Center Network Infrastructure (DCNI) specialization in order to participate in the program. The in-depth training, which is available free on the Web, will school partners on data center technology.
Peres noted that partners with some background in data center networking and storage would be most successful, but, he said, the company is "trying to enable" all interested partners "to go down this path."
Partners that sign on could find themselves battling a whole new level of competition. At the conference, Cisco executives stressed that the company would depend on a series of alliances with an "ecosystem" of vendors -- noting Dell on the server side, EMC in storage and VMware in virtualization. Ironically, Cisco's latest stake in the data center market leads it to compete against these very companies, in addition to other longtime data center players like IBM and Hewlett-Packard (HP).
In general, partners may also be forced to fight macroeconomic trends and slacking IT sales, according to Wall Street analysts. In the past week, Cisco has been downgraded by UBS and J.P. Morgan Securities, which both predicted lower than expected sales due to a weakened economy.
Gourlay said at the conference that he doesn't expect the soft economy to affect data center sales. "Data center is not an area of discretionary spending," he said, adding that real challenges come from efficiency applications.