Cisco Steps Up Server War With Payouts For HP Trade-Ins

Cisco Systems this week at the Cisco Partner Summit in Boston spotlighted a new year-end competitive trade-in program that provides financial incentives for ousting Hewlett-Packard servers and replacing them with comparable gear from Cisco.

The new program, which launched last week and runs through Cisco's fourth fiscal quarter, ending July 27, provides credits for trading in certain HP BladeSystem servers, said John Growdon, senior director of data center sales, worldwide channels, at Cisco, San Jose, Calif., in an interview with CRN Wednesday shortly after presenting the program to partners during a session at the conference.

Cisco is offering up to $650 in trade-in credits on select HP blades and up to $1,600 in trade-in credits on select HP chassis toward comparable UCS configurations, Growdon said.

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The credits can be applied toward the purchase of comparable configurations of Cisco two-socket Unified Computing System (UCS) equipment, which incorporates servers, networking, storage and virtualization into a converged data center platform.

When asked about recent comments from CEO Meg Whitman that HP will get more aggressive in the server market, particularly on pricing, Growdon said, "We have never gone about selling server for server. That's a race to zero. We have some competitors that are very good at the race to zero. We work with partners to sell value and solve business problems. That conversation is completely different than commodity sales of servers. We should leave that to our competitors."

HP said it also offers trade-in programs for servers.

"One of the more challenging issues faced by customers is how to manage their old, outdated IT equipment. Some vendors are willing to help customers manage this problem selectively -- where a direct swap out allows them to sell in their own equipment. At HP, not only do we offer trade-in programs on both HP and non HP servers, we help customers with the larger and broader problem of retiring their old IT assets, even where there is not a direct swap out," said Jim O'Grady, Director, HP Financial Services Global Asset Management, for HP, Palo Alto, Calif., in a statement provided to CRN.

Cisco's focus on an architectural approach is a winning strategy, said Steven Reese, CTO at Sigmanet, a solution provider based in Ontario, Calif., that works with both Cisco and HP.

"Go back four years ago to Partner Summit in Boston; Cisco started talking about architectural plays, and I think the reason why Cisco is continuing to just explode is ... [because] consistency and sustainability is all built around their differentiation as a whole, and Cisco has the architectural play," Reese said. "They are telling the story well, and customers believe in it."

NEXT: Cisco Calls Out Rivals

Cisco executives at the conference this week were vocal about the company's competitors, with Chairman and CEO John Chambers going as far as to say competitors won't win against the networking giant.

"The message that we must give together to our competitors is, 'If you are going to compete against Cisco and its ecosystem, you are going to lose.' And history is littered with companies big and small that have learned this," Chambers told partners Tuesday during a keynote address.

"It's good to see Cisco acknowledging and dealing with the competition instead of just ignoring it," Sigmanet's Reese said. "Sometimes the bigger man is the one who can walk away, but sometimes the bigger man is the one who stands and defends himself, too. Cisco is defending itself."

The server market has become a hotly contested space, even as it continues to shrink. Recent server market share figures from Gartner show HP maintained the No. 1 spot in terms of unit shipments for the first quarter of 2013 but lost share to rivals, including No. 2 Dell and No. 5 Cisco.

Cisco does not have a trade-in program targeting Dell servers, Growdon said.

Kristin Bent contributed to this story

PUBLISHED JUNE 6, 2013