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Stock Traders Daily

Stock Traders Daily (La Jolla, CA) The computer-server market is shaping up to be the next hotly contested battleground for blue-chip technology companies.

The loudest shot fired in recent weeks was the announcement by Cisco Systems (Nasdaq: CSCO) that it is going to start building its own servers. This strategic decision is a break from the company’s past of focusing on making switches and routers. The move is also likely to ruffle some feathers as Cisco’s blade server will now be putting the company on a collision course with its long-time partner in this space, Hewlett-Packard (NYSE: HPQ).

There’s been a lot in the different publications in the IT sector and the markets about competition in the industry, in a ‘crowded market place’. Let’s remember that there remains plenty of business, new engaging markets, selling servers as a stand alone business remains tough on a value/revenue proposition, but we see more and more the vendors improving their portfolio of services/products to the end user community and long may this continue.

With competition comes innovation in the market place, improve customer service and price competitiveness, with that arrive vendors targeted at specific markets or sectors, what’s changing is a mixture of things. The real dollar price of servers is falling, we’re moving to the virtual world where the significance of the ‘tin’ as my CIO friend calls it is dwindling but there remains a few issues:

• Brand loyalty/investment – I’ve been an IBM house for years, the perceived ‘conversion’ cost might seem higher than the amount of money saved by switching vendors.
• Purchase cycles tend to change every few years within different sectors as customers seek to ensure they achieve recognition and competitive deals. I might by one vendor for three years, then switch to another for a few years.
• The SME market is coming on stream, it needs and is more willing to buy servers, to invest in the infrastructure creating great opportunities for hardware and software vendors.
• As the cost of the server falls, do I not consider buying more hardware more regularly? Does that not increase my overall technology spend long term?
• Vendors are adopting improved management and virtualization offerings to distinguish their systems from others bringing innovation of the server platform and more choice to the end user.
• I wonder if we wont find this being the new age of vendor end user interaction, by that I mean the helpful vendors, the ones that go the extra mile might be the ones that gain more loyalty more revenue.
• Remember it’s cheaper to keep a customer than sign up a newer one and reducing your support costs might simply mean communicating with your customers more directly in a more structured and informal way.

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