If Cisco thinks it will call the shots in the data center over Hewlett-Packard and IBM, it has misjudged IBM. With its reported talks to buy Sun, IBM is essentially elevating the fight to a level it likes--namely, software and services, not plumbing. If it acquires Sun, it will be all about software architectures and open source and the future of application delivery. Sun's depressed stock price lets IBM wrest control of Java and MySQL while looking past a portfolio of hardware that it doesn't need and probably doesn't want. An IBM-Sun merger also would take a good deal of wind out of Cisco's sails.

It's not that Cisco's move into servers isn't an important one; it undoubtedly is. Its notion that servers should be less about a pile of sheet metal housing processors, memory, storage and expansion slots, and more about tightly packed processors and memory with a big fat pipe that readily connects to similar servers, is right on the money. Fully embracing virtualization and building servers that work best in a virtualized environment is a game where Cisco can compete. But it's just not as important as driving a software infrastructure that can support applications running securely and reliably anywhere and on any platform.

The transition to the data center that Cisco imagines will happen, but it's not a rip-and-replace imperative. As servers and networking gear reach amortization, smart data center architects will buy new stuff that will look more like what Cisco described last week, but whether they buy it from Cisco is another matter. IBM and other server vendors are used to dealing in the razor-thin margins that Cisco has never tolerated, and not even Cisco would create an environment that works well only with its own switches and servers.

The software transition on which IBM wants to capitalize already is well under way. If any organization once thought it could depend on a monolithic user application delivery environment (Windows everywhere), it's long moved on. Now it's all about Web services, and IBM wants the next generation of applications to be built on Linux and Java. On both the server and user device, Java is now more pervasive than Windows. In particular, Java sits at the heart of the BlackBerry, Symbian, and Android platforms, and IBM would like to see even greater adoption: netbooks for everyone, let 'em hook up to the in-house data center or apps in the cloud. That will be just fine with the new IBM.

This move also is a good sign for economy watchers. IBM reportedly is discussing paying a healthy premium for Sun, implying that it thinks Sun is worth far more than its market cap would suggest. As other tech companies with cash on hand start to feel comfortable that they know the scope of the recession, it's likely we'll see a lot more consolidation, a sign we've found a market bottom. If there's bad news for anyone in last week's moves, it's for Brocade and anyone else betting on the long-term viability of native Fibre Channel. Unless someone like EMC ponies up for Brocade, you can bet that native Fibre Channel will be just a memory in five years.

Art Wittmann is director of InformationWeek Analytics, a portfolio of decision-support tools and analyst reports. You can write to him at awittmann@techweb.com.

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