Cisco\u2019s jump into the server market has certainly put the spotlight on the battle for the data center and HP was the first competitor to respond by cutting prices 30 to 50 percent on its network equipment -- a shot across Cisco\u2019s bow.\u00a0 This is war, and IT departments will benefit from more options and\/or better prices.\u00a0 However, as I take a closer look, I\u2019m not even sure that Cisco and the traditional vendors in the data center space (HP, IBM, EMC and Juniper Networks) are fighting on the same battlefield. But one thing is certain: with $30 billion in the bank, Cisco is a force to be reckoned with and the other companies will have to get busy to refine their own go-to-market strategies. How, exactly, will the new Cisco server be differentiated? We\u2019ll know soon enough.\u00a0 Probably the most astounding aspect of this is how well Cisco has kept its real strategy and many of the important details out of the mainstream. The New York Times coverage last month only touches the surface: \u201cA Cisco-branded server with virtualization.\u201d\u00a0 Trust me, there\u2019s got to be much more to it than that because several questions immediately leap to mind: Will their servers be sufficiently differentiated to command a premium in the cutthroat server market?\u00a0 Will these systems be cheap enough to manufacture to be priced competitively against the incumbent vendors, who know all too well about the need for massive scalability and squeezing costs out at every opportunity?\u00a0 Except for its consumer-oriented acquisitions like Linksys, Cisco has never been known for its low cost of goods or optimized manufacturing. After all, with the 65 percent margins it\u2019s been able to maintain in its core networking business, it really hasn\u2019t had to think about that stuff.So, while I don\u2019t see this as a profitable move for Cisco in the short term, it\u2019s most certainly looking for a long-term payoff. After all, if there\u2019s one place Cisco should be able to succeed in the server market, it\u2019s with central IT, and the data center is a good place to start. This is where Cisco is strongest and expanding from a position of strength certainly makes sense.\u00a0 Now suppose Cisco succeeds in the server market.\u00a0 What will that mean?\u00a0 Its gross sales should increase but most likely its profit margin will go down.\u00a0 Maybe this is Cisco\u2019s tax shelter strategy for the next few years \u2026 make less money (which is probably not a bad idea based on the current administration\u2019s apparent plans for redistributing the wealth). If Cisco can remain strong in their core, this is probably the best time for it to expand into the server market.\u00a0 But grabbing a chunk of this market will not be quick and it will not be easy; it will be a long slog.The Empires Strike Back. Or Do They? Was it a knee-jerk response by HP to reduce its prices on network equipment that competes with Cisco\u2019s?\u00a0 Actually, this follows HPs encroachment on Cisco territory with the launch of the ProCurve line of switches. So this is not HP\u2019s first shot at attempting to take share away from Cisco, and I don\u2019t see this one succeeding either. It does have the potential, however, to chip away at Cisco\u2019s profit margins as the two companies compete on price.\u00a0 And this illustrates the clash of approach: Cisco wants the battle to be fought on features; HP wants to bring everything back to cost.So what about IBM, EMC and the other gorillas in the data center?\u00a0 I don\u2019t see any real advantage for IBM or EMC to join this battle. IBM would prefer to continue its march toward applications and services.\u00a0 EMC will hunker down in its sweet spots of storage, information management and virtualization.\u00a0 EMC\u2019s component approach to security (through the RSA division) will be unaffected by Cisco\u2019s initiative as IT department generally avoid \u201call in\u201d deployment strategies.\u00a0In fact, this is a huge hurdle for Cisco\u2019s main challenger in high-end networking, Juniper Networks, which is betting the market will buy into a centralized approach to security. This is not a good bet.\u00a0 If there\u2019s one place where compartmentalization, independent systems and overlap makes sense, it\u2019s in security.\u00a0 History has proven that no company can stay on top of the market across all security areas \u2013 firewalls, encryption, remote access, compliance, information security, etc.\u00a0 And even if one could, it would be a bad IT decision.\u00a0 Security professionals don\u2019t want one system for the bad guys to defeat; having many is better.\u00a0 And being committed to a sole source supplier also virtually assures that prices eventually will increase for a captive customer with no way out. This is one big concern for CIOs with the emerging Juniper approach.In the end, I\u2019ll wait to see whether Cisco can be a game changer in the server space.\u00a0 I am, however, convinced that Cisco ultimately will develop unique differentiation and that it hasn\u2019t played or revealed all its cards yet.\u00a0 Whether Cisco\u2019s servers end up delivering the necessary advances in performance, TCO or leapfrog benefits to take market share is the unanswerable question. But regardless of how it all plays out, more competition will translate into better value for CIOs, their IT departments and their enterprises. And if that isn\u2019t part of Cisco\u2019s strategy, then it really isn\u2019t worth bothering about.\u00a0As always, thank you for sending comments, tips and topic suggestions to me at CIOblog@TransitionalData.com._________________________________Michael Bullock is the founder and CEO of Transitional Data Services (TDS), a consulting firm helping clients implement energy saving green data center solutions, data center relocations, web based enterprise applications and 24\/7 technical operations.