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How Dell Will Respond to Cisco's Server Challenge

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Dell (s DELL), the world’s second-largest server maker, is responding to Cisco Systems (s CSCO) and its new blade servers by doing what it knows best: Taking a neutral stance and helping to sell devices to customers that want a more heterogeneous data center environment. That’s code for people who don’t want to get locked into a wholly Cisco-centric solution. And when that’s no longer enough, Dell will go out and acquire companies to combat its rival.

Cisco caused some tremors in the typically staid server industry earlier this week when it introduced a brand-new way of tackling the data center infrastructure, one that treats compute resources as mere elements of the network fabric. The company has dubbed this unique approach “Unified Computing.” With this move, Cisco is challenging traditional server makers, with Dell and Hewlett-Packard (s HPQ) in its crosshairs. Of the two, I think Dell is the most vulnerable.

Not so, according to Rick Becker, a V-P of software and solutions at Dell. In a conversation yesterday, he argued that Cisco’s way of doing things is not for everyone, that, “In many cases, blades are an overkill.” Dell, he said, is confident that it can keep customers happy by building the highest-performing, simplest-to-use servers that consume much less power that the new devices from Cisco.

To be sure, Cisco’s new proposed solution is good for those looking to solve problems involving large data sets in large data centers. Dell, on the other hand, makes servers for the broadest customer base possible. Or as Becker put it, “Dell has its own version of data center computing.” (Related post: An Inside Look at Dell’s Cloud Server Lab.)

Becker added that while Dell appreciates Cisco “evangelizing a new opportunity around virtualization,” the company has been down that path already. Dell, he said, will give customers “the same value in industry-standard equipment because customers want choice.” Which is a very polite way of saying that Cisco’s margins are going to be its undoing in these tough times.

What Dell has in its favor, according to Becker, is its ability to work with any and all comers to integrate best-of-breed solutions — including Nexus switches from Cisco itself. That is something that would work against, say, an HP, which makes multiple data center components.

When I asked Becker if Dell was willing to step up and acquire companies to take the battle into Cisco’s camp, he said that the company’s preference is to partner with others as that offers more choices (it’s close relationship with eGenera is one example), but that it was willing to acquire companies in order to grow. My advice to Michael Dell and his crew: Start buying, and fast. There are lots of good companies out there, starting with eGenera and Arista Networks. If Dell doesn’t open its wallet, we’re pretty sure HP will.

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