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Summary:

Less than three years in, that’s a very big number, especially since data center buyers tend to be a conservative bunch. Cisco’s Unified Computing Systems definitely has legs, but it still hasn’t cracked the top five server vendors. Rival HP still holds the top slot.

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Cisco Systems says it now has 10,000 Unified Computing Systems customers for its not-quite-three-year-old product. That’s up from 4,000 customers a year ago.

The March 2009 UCS announcement was the first shot fired in what became a raging battle by vendors to sell hardware that melded compute and networking in a single box, tightly integrated with storage.  Since then, HP and Oracle entered the fray. These converged infrastructure servers are pricier than the commodity boxes that power most webscale operations but are pitched as a way to consolidate workloads, cut wiring, and save power.

The 10,000-customer number is impressive, because these are the sort of IT buyers that are notoriously conservative, said Brian Modoff, analyst with Deutsche Bank.  The figure also represents growth off a very small base; Cisco still doesn’t crack the top five server vendors by unit market share.

As other evidence of UCS mojo, Cisco CEO John Chambers said on the company’s first quarter earnings call in November that UCS had hit a $1 billion annual run rate. It’s unclear how many UCS servers have sold altogether, since some customers have more than one. A spokeswoman said about one-third of those 10,000 customers are repeat buyers.

There’s anecdotal evidence from resellers to support Cisco’s momentum claims. One large Boston-area VAR that sells both HP and Cisco servers said he sees strong demand for UCS among large customers, many of which buy UCS as part of a VCE vBlock – a preconfigured bundle of UCS plus EMC storage — or FlexPod, a somewhat analogous offering with NetApp storage. At least some of those sales come at the expense of HP, which has seen upper management turmoil that caused some customers to worry about the company’s hardware strategy.

Modoff said UCS appeals to companies wanting to streamline their data center operations, because they pack in more virtual machines per blade.  And, “because you have more memory on the NIC cards you can actually virtualize things like SAP or Oracle databases that you could not do well before,” he said.

When Cisco announced plans to sell home-grown servers three years ago, it roiled the data center hardware world, alienating long-term server partner Hewlett-Packard. It caused no small consternation in the IT reseller channel, where many VARs made a good living selling Cisco routers and HP servers into joint accounts. Customers likewise saw stress. HP quickly announced its own converged data center hardware, and the battle took on an increasingly nasty tone.

There is demand for simplified, more integrated data center hardware, although not all businesses want to replace existing gear. For them, Egenera offers software that brings some of those converged data center benefits to existing servers from Dell, HP, Fujitsu and NEC. Egenera said revenue from that PAN Manager software rose a whopping 400 percent in 2011.

While Cisco’s momentum news is positive, the company has miles to go to catch HP. In the third quarter of 2011, HP accounted for 29.1 percent of all Intel-based servers shipped (despite a 3.1 percent decline for the quarter.) Dell was number two with 21.8 percent share, with IBM, Fujitsu, and Lenovo rounding out the top five. Cisco remains in the “other” category.

It seems clear more companies want to streamline their data center operations as they enter upgrade cycles, so the demand for more elegant, integrated data center hardware will grow. But so will the competition. As HP gets its house in order and is better focused on execution, watch for more battles in data center servers.

  1. Barb,

    While generally a very positive and accurate piece about the momentum UCS is enjoying in the market, there is a logical misstep that demonstrates a lack of understanding about server markets. Namely, dinging UCS for not cracking the top 5 in server unit shipments is a false argument for two reasons.

    First, the whole value proposition of UCS is that it consolidates more workloads on a single system, and therefore revenue is a much more accurate measure of market share than units. UCS collapses the amount of physical infrastructure necessary to support a workload, and that is a very good thing for customers. As Brian Madoff says in your article, “UCS appeals to companies wanting to streamline their data center operations because they pack in more virtual machines per blade. “

    Second, UCS never set out to compete in the low growth and low margin segment of the server business. When you look at the highest growth and highest margin segment of the server market (x86 blade servers) UCS has done fantastically well. In less than 3 years it has become #3 platform worldwide (#2 in the US) in x86 blade server market share — a truly remarkable accomplishment.

    I fear this lack of nuance is the unfortunate downside of writing a news articles based on a Gartner press release. Interviewing the analysts responsible for these market share stats would have led to a more accurate discussion of the market dynamics.

    For the sake of full disclosure I am a Cisco employee.

    — Jesse F.

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    1. Hi jesse… wasn’t meant as a ding — just some perspective. Cisco has momentum but it’s still relatively small player. To say that cisco is not going for market share (or top 5 or whatever) may be true, but it was Cisco who put out this news so clearly there is some desire to be a big server player, no?

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  2. I suppose UCS “consolidates more workloads on a single system” refers to the extended memory blades. In my opinion you can get a better CPU/memory ratio for virtualization with an AMD based rack server that offers 12 native DIMMs per processor against 6 DIMMs per processor for a standard blade.
    But I feel the main problem with Cisco UCS is the management stack. As we are 100% virtal we prefer not to have an extra management level and enjoy doing almost all the management in vCenter.

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    1. If anything the management stack for Cisco UCS is the strength of the platform.

      Specific integrations with management tools such as vCenter are already available –
      http://blogs.vmware.com/orchestrator/2011/03/vcenter-orchestrator-plug-in-for-cisco-ucs-manager-is-ga.html

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  3. Hi Barb,

    Point is Cisco has become a large player (again #3 worldwide and #2 in the US over established server vendors) in the market it targeted, which by the way happens to be fastest growing and highest value segment of the server market. Given that x86 blades are a roughly 8 billion dollar market, that’s quite impressive from a market share perspective. Your focus on unit shipments in the general server market (which includes a lot of legacy platforms — towers, anyone?) displays a lack on nuanced understanding about server market dynamics. While I applaud the overall perspective of the article, you would have been better served talking to the analysts that put together the market share rather than relying on a Gartner press release. But again thanks for the perspective; it is generally correct even if it could have been more grounded in the actual market. Just a little friendly feedback fwiw :-)

    Lexington, people love UCS Manager. Have you actually tried UCS? If so, you know that the stateless computing made possible by Service Profiles also helps facilitate system-wide consolidation. If not, happy to hook you up with a technical expert to help sort your individual issues.

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