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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.

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