Wikibon Blog

Check

When Dave Donatelli left  EMC last April to run HP’s infrastructure business I wrote at the time that this was another move on the chessboard– “there’s more to this match than storage; and HP just moved a pawn on the board. The question is what can the Rook now see that it couldn’t before?”   

At the time I wrote that the data center business has become an oligopoly where Cisco, HP, IBM, Intel, Microsoft and Oracle are $100B players (revenue and or market cap) and any move they make has an impact that ripples through the industry. I’m putting VMware and EMC in that mix too given the momentum that VMware has.   

You don’t have to squint too hard through the activities to see the impact that integration is having on this industry, particularly the intersection of compute, storage and networking. HP’s initial networking move with ProCurve, and Cisco’s subsequent aggressive entry into servers; along with the VCE announcement has created tremendous friction between two industry giants that came to another head yesterday.   

As far as I can tell, tech blog Silicon Angle broke the story that Cisco was dumping HP as a preferred partner. Cisco then was forced to respond by posting a blog on its web site confirming the story with a video of Keith Goodwin SVP of Cisco’s Partner Program laying the corporate speak on heavily with phrases like:   

“Change is the only constant in the IT industry.”   

As the industry moves toward “collaboration, virtualization and cloud-based services…”   

Cisco wants to “Align with partners who share our network-centric vision”   

“Evolution of our relationship with HP”   

“Top priority is our customers…amidst shifting industry dynamics”   

In the middle of this discussion, Goodwin indicated that Cisco was not renewing its integrator relationship with HP—the largest company in the industry and a huge reseller of Cisco gear. This on the heels of HP late last year, nixing its Cisco Alliance Managers—my understanding is dozens of individuals out of a job whose role was to push Cisco equipment.   

The other shoe to drop today was an OEM relationship between QLogic and HP where HP is private labeling QLogic stackable FC switches (which David Floyer wrote about last month). The word is HP is popping Cisco out as second source to Brocade and slotting in QLogic. QLogic? Yup – QLogic; which is very interesting that this adapter company is now in the middle of this rift. Supposedly Cisco wouldn’t agree to a private label deal with HP so HP said “forget-about-it” and brought in QLogic which is nowhere in the FC switch business and overnight got a ticket to the dance.     

So here’s the deal as I see it. This is a classic case of screw me? Screw you screw me! Two $100B children can’t find room in the IT sandbox so they’re declaring all out war through cliché’s and high fidelity corporate messaging. Internally I can only imagine the invectives that are floating in the hallways of these two companies.   

I’ve seen this go both ways…a company full of hubris shoots itself in the foot with a big partner. I’ve also seen a company back out of an OEM relationship and successfully leverage its channel to compete with the OEM (e.g. EMC/HP).  My guess is in the near term, Cisco will easily make up the couple of hundred million dollars in lost HP business but over time, HP will fine tune its model to compete with Cisco more effectively in networking.   

Meanwhile, HP is playing sugar daddy to QLogic to subsidize its entrance into the FC edge switch market—where there’s hardly any competition today. QLogic is a non-threat to HP and will happily do whatever its new benefactor demands as long as it helps the company grow.   

As the HP Cisco relationship unravels the race is on for Cisco to integrate its stack and maintain leverage while gaining a foothold in servers; while HP tries to integrate its compute, storage and network assets and keep the aggressive Cisco out of its server installed base. 

While these two giants battle it out, keep an eye on Chessmaster Ellison as overnight, Oracle has built one of the most robust stacks in the business and has huge disruptive potential.