Cisco has a new data center product that could help it weather the tough storm ahead. In 2016, corporations are expected to significantly cut their spend on information technology products and services, according to research from International Data Corporation.
That cutback has already been felt from corporate tech giants like FireEye (FEYE), NetApp [fortune-symbol=”ntap”], and Cisco (CSCO), all of which recently reported sales slowdowns for their respective businesses.
For example, Cisco has acknowledged some of its customers have chosen to put off their routine technology upgrades because of turbulence in the global economy. That spending slowdown has eaten into the company’s revenues. Sales of Cisco’s core switching products dropped 4% year-over-year, and its data center business declined 3% year-over-year, according to the company’s latest earnings report.
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Still, CEO Chuck Robbins seemed confident during Cisco’s last earnings call that the networking giant can rebound, and he hinted that a new data center product might be what was needed to jumpstart sales.
Then on Tuesday, the company announced a new data center product line called HyperFlex Systems, which has been in development for the two and a half years, according to Soni Jiandani, a Cisco senior vice president of marketing.
The new product, which will be available in the third quarter, is what’s known as a “hyper-converged” data center appliance. These so-called hyper-converged appliances combine traditional data center management software and gear like storage, servers, and networking equipment into one package that’s typically smaller than the giant rack systems companies often use to house all their gear.
Cisco already has a similar product on the market called the Unified Computing System (UCS), but the new appliance contains software from data center startup and Cisco partner Springpath, said Jiandani. This software allows the machines to more efficiently work in conjunction with cloud computing infrastructures that customers may have purchased on demand from tech giants like Microsoft (MSFT) and Amazon (AMZN).
The product also contains software to help companies manage their containers, the trendy data center technology that companies like Uber and Yelp use to more efficiently build and operate their complex apps. Companies that use container technology from the hot startup Docker should be able to use it with the HyperFlex appliances, Cisco said.
Cisco is hoping that its roughly 50,000 current UCS customers will be wooed by the new features and upgrade their existing devices, despite a general slowdown in worldwide business technology purchases.
Additionally, the company wants to attract new customers who want the flexibility and features that they can get on demand from the big cloud providers, but want to maintain some gear in their internal data centers.
Still, the company faces some challenges from existing players in the space, including hot startups Nutanix and Simplivity. Both of those companies are unicorns, which is tech jargon that refers to startups privately valued at over a $1 billion, and have had similar products already available for a few years and have significant market share.
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Zeus Kerravala, the founder and principal analyst ZK Research, explained to Coins2Day that it’s been mostly small to medium sized businesses that have purchased these kinds of hyper-converged appliances. Cisco may be able to gain market share with mid-to-large size companies that are its “sweet spot,” he said in an email.
If so, it’s not just startups that Cisco will compete with. EMC (EMC) and VMware (VMW) also jointly recently released a similar product through EMC’s VCE business unit, of which Cisco is also a partner, and it’s likely that other big business technology companies will follow.
Another challenge facing Cisco is making sure its giant sales force can adequately push its new product without leaving behind other products in the company’s sprawling product line, explained Forrester vice president and principal analyst of infrastructure and operations Richard Fichera.
