Cisco Gobbles Up Storage Networking Player

Cisco Systems on Tuesday announced an agreement to acquire privately held Andiamo Systems, which develops intelligent storage switching products for the storage area networking (SAN) market. The deal is the latest in a string of acquisitions by the networking giant, and it marks Cisco’s first foray into the high-growth SAN switching market.

Research firm Gartner has estimated this market will grow from about US$1.2 billion in 2002 to $4.3 billion in 2006.

Cisco initially secured the right to acquire Andiamo in 2001. Terms of the deal will not be determined until just before closing, but the sale could fetch as much as $2.5 billion.

The Technology

Company executives said the acquisition will allow Cisco to extend its data networking expertise into the SAN switching market. For example, with Andiamo’s technology, Cisco customers will be able to consolidate disparate storage networks into an integrated SAN infrastructure for the first time.

Cisco executives said the company also will introduce intelligent services that significantly reduce the costs of sharing and managing critical data across a company’s storage network, thereby reducing the total cost of ownership of SAN infrastructure.

“This acquisition supports Cisco’s strategy to enter into new growth markets, such as storage networking, where we believe we have the potential to be the number one or two player,” said John Chambers, Cisco president and CEO. “Andiamo’s technology blends the benefits of data networking and storage networking.”

The Competition

Cisco joins current market leaders Brocade and McData in the storage networking space. But analysts said the Andiamo acquisition gives Cisco some potent competitive firepower that could help the company attain the top spot.

“We think the Andiamo products are better than what Brocade and McData have and are going to cause some problems for the current storage equipment vendors,” Yankee Group analyst Zeus Kerravala told the E-Commerce Times.

Kerravala noted that if the Nortels and 3Coms of the technology world do not step up with their own storage networking products, Cisco could dominate storage as it does routing.

“The fact of the matter is that Cisco may stand alone at the end of the day,” he said.

The Challenges

That is not to say Cisco does not face hurdles in the SAN market. After all, Cisco is a networking company at heart, and analysts said it has historically been an enemy of traditional storage vendors.

“Cisco’s ability to ‘play nice’ with other areas of the infrastructure that have buying power will be a key for them,” Kerravala said.

Gartner analyst Mark Fabbi agreed, saying that the company’s success will depend on building credibility in the marketplace through interoperability, relationships with original equipment manufacturers and the right sales channels. But putting all these pieces in place will take some time.

“Cisco still has a lot of work to do in terms of building relationships in the storage business,” Fabbi told the E-Commerce Times, “because being part of storage bundles is a key aspect in ramping up sales.”

In connection with the acquisition, Cisco also announced it will launch a complete family of intelligent storage switches developed by Andiamo. The products are scheduled to become available during the fourth quarter of 2002.