Vendor Consolidation Coming to Your Data Center?

The movement to combine server, storage, and network devices has the potential to cut costs for customers, which is a plus. However, as the dividing lines between different product categories fall, so might the vendors themselves. This change could benefit companies with the right equipment but create problems for those that have taken a best of breed approach with their data center product purchases.

Consolidation has been evident to varying degrees in the three main data center equipment market segments: servers, network equipment, and storage. In the server space, only a handful of companies; Dell, HP, IBM, and Oracle; remain as top suppliers. In the networking market, Cisco has been the top dog for many years, but recently, competitors have tried to bulk up to at least the $1 billion revenue mark in the hope of remaining viable in the long term. In the storage market, high growth rates have enabled a bevy of suppliers to remain in business, but that may change as growth rates have been slowing.

"With the dividing lines among the three market sectors disappearing, consolidation is expected," stated Galen Schreck, principal analyst at Forrester Research Inc.. Since this space emerged a few years, there has been widespread speculation that some of the key players, especially those working together, would merge. While the talk has been well ahead of the action to date, dramatic market changes would not be surprising.

In fact, there has been ongoing speculation that Cisco would buy EMC. The San Jose-company has saturated the networking market but has to keep growing in order to satisfy shareholders. EMC would appeal to Cisco - as well as other suppliers. With a majority stake in VMware and a dominant position in the storage space, what's not to like about EMC?

In addition, Cisco was an early VMware investor. And the vendors have spent time developing technology and forging a partnership that bundles Cisco's networking equipment and servers with EMC's storage and virtualization technology.At one time, IBM was a prime supplier of enterprise network equipment. The company opted out of that market more than a decade ago (in 1999), selling its Network Hardware Division to Cisco for $600 million. But now, IBM might want to get back into that space, and it would appear to have a couple of options.

The Behemoth has been working with Juniper Networks Inc. to integrate its network devices with IBM's converged switches. Although Juniper is probably best known as a service provider equipment vendor, it has become a noteworthy enterprise Ethernet switching and data center networking supplier during the last few years.

Brocade is another firm that has been linked to IBM. Brocade's first fully converged embedded 10 Gigabit Ethernet (GbE) switch module and first Converged Network Adapter (CNA) were designed specifically for IBM BladeCenter servers.

There are potential benefits for users if such changes took place. Currently, management is a challenge with the new integrated solutions. "Understanding how systems are functioning can be a challenge since data center products come from different suppliers, explained Scott Dennehy, a senior analyst at Technology Business Research (TBRI) Inc. If the products were part of a single entity, then the vendor could develop a more holistic solution, one with integrated management functions.

In addition, customers would have a single point of contact if problems arose. They could call one person for help rather than make a couple of calls and become involved in a game of finger pointing.However, there are also some potential downsides to these changes. A vendor may end up with overlapping products. One of those devices will eventually emerge as the company's key solution, and the other item will be phased out.
 
The customer's existing equipment may end up as a second fiddle. What if a Cisco customer had NetApp storage solutions rather than EMC systems? While the former would be supported in some form, chances are it would not offer as much integrated functionality as the latter. Many companies may find themselves in this position. Eventually, a couple or maybe a handful of top converged system suppliers will emerge, but in the network and storage markets, dozens of vendors are now vying for acceptance.

Vendor consolidation also creates personnel issues. As a supplier sorts through its options, personnel may become more focused on their own concerns than those of the customer.

In sum, the movement toward converged devices has the potential to dramatically change data center design as well as the market makeup. How it will effect customers will become clearer once the vendors ante up and begin the consolidation process.

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