In the short term, Cisco is trying to make the case for offloading specific server functionality to network devices. Its progress has been slow so far, but a partnership with SAP promises to move some SOA functions on to Cisco blades by the end of this year. The theory is that because SOA breaks applications into smaller components, they can more easily be spread across different devices. 3Com has gone even further, running VMware on its routers. That theoretically lets it replace any Windows or Linux server.
This kind of offload obviously makes sense for networking vendors, but what does it mean for customers who buy into it? Right now, little change as far data center design and network architecture are concerned: So far, it's only high-end core switches and routers that can handle applications, so Cisco and 3Com are just competing with IBM and HP for data center real estate.
It won't stay that way forever. The main sales pitch for moving things inside the network is flexibility, which necessarily means some functionality now found within the data center will move elsewhere. So if you buy into the networking vendors' vision, start planning for a smaller data center. If they get their way, it will gradually shrink it in favor of branch-office boxes (think souped-up Riverbed and Silver Peak) or software as a service.