Cisco and HP Partners Pushed to Choose

By Chris Talbot  |  Posted 2010-04-28 Email Print this article Print
 
 
 
 
 
 
 

Cisco and HP's data center strategies have proven to be just the beginning of escalating competition between the two technology giants. With partner conferences both held this week, many partners feel they are being forced to choose. Partner loyalty is taking on a whole new meaning.

HP fired its latest shot against networking market leader Cisco Systems with its "Cisco-free data center" product, escalating a hot war that has been building up since the two companies stopped playing nice and launched products in the other's spaces (HP more strongly targeting the networking space and Cisco launching its own line of servers).

The fact that the vendors decided to schedule their partner conferences for the very same week just means that channel partners that play both sides of the fence are being forced to choose, said Charles King, president and principal analyst of Pund-IT, an IT industry analysis firm.

According to King, changes in the networking market – particularly HP's acquisition of 3Com – are muddying the boundaries between traditional systems vendors and speciality vendors.

"You might say it started when HP started pushing forward with its ProCurve line and very aggressively positioning those products against some of Cisco's traditional solutions," King said. "Then a few months after that, we had Cisco announcing their unified computing initiative and announcing they were going into the server business, which I think threw another curve at the market thinking that a networking provider could also be a server provider. This 3Com acquisition certainly upped the ante between HP and Cisco."

The move toward commodity-based servers has opened up opportunities for a number of vendors in the space, allowing them to expand their interests into different parts of the overall networking market, but it has left the channel at something of a disadvantage, he said.

"There are certainly many folks in the channel who have very friendly and successful relationships with both HP and Cisco, and in the case of both companies essentially invading each other's turf, it's left the channel considering whether to continue pursuing a relationship based on their former model or are they being pressured ... to expand the products they're purchasing there. It's very challenging. It's intriguing from a technological perspective, but I think it's pretty confusing for folks in the channel."

With the vendors' partner conferences going toe-to-toe and many partners having agreements with both companies, it only makes sense that some partners are being forced to choose between one or the other partner conference, King explained. Alternately, some may be sending one executive to HP and another to Cisco.

"I think that we're at a place in the IT business where most every vendor is looking for effective ways to expand beyond their base clientele. There is the sense that the conventional wisdom is if vendors aren't getting bigger then they're falling behind. I don't think that's typically correct, but it certainly is the conventional wisdom. Whenever a vendor expands into a new area outside of its normal comfort zone, there are some inherent challenges and risks."

For instance, Cisco's entrance into the server market was met with a great deal of skepticism, he said. In that respect, HP may be in better shape because of its acquisition of 3Com, which may not be the powerhouse it once was in the North American market but has a strong presence in China, he said. 3Com also has an existing track record, whereas Cisco designed its own servers with almost no experience in the space.

According to another long-time industry observer, the war between Cisco and HP has been heating up for about five years, but it's really in the past year that it's intensified.

"It has been heating up for about five years, I'd argue. It has certainly stepped up over the past year. It's intensified, I'd say. There's always been the competition and coopetition. That's always existed, but certainly in the past year it's intensified," said Michelle Warren, president of MW Research & Consulting, an IT industry research and consulting firm.

HP has stepped up its game in the networking space and Cisco has targeted the server market, and it's no surprise that the companies have targeted these markets, Warren said. Both tend to have high profit margins in hardware and services. Partners have been able to reap the rewards in both spaces.

The lines are drawn in the market; and in the channel, both have good ammunition for coming battles. Cisco has often been referred to as a pioneer in the channel programs space, and HP also has a solid channel presence. As competition between the two giants increases, Warren said product quality will go up as prices go down. That's a win for IT departments, but what about for the channel?

"It will lock the channel partners a little bit," she said. Partners will feel the pinch if prices do go down, and they'll have to look elsewhere for revenue to make up for that (which will likely be found in services).

Shrinking price points mean shrinking margins. However, if prices do get pushed down, partners are unlikely to see it immediately, she said.

HP networking products already come in at a lower price point than Cisco, but price isn't everything. Cisco has received a lot of accolades for its products and is a well-respected networking vendor. HP has fought over the No. 2 spot with fellow competitor Juniper Networks for the last few years. The 3Com acquisition has the ability to be a game changer in the market, Warren said.

The full integration of 3Com staff and products into HP isn't going to happen immediately, though, King said. He said he plans to keep a close eye on HP's networking sales over the next few quarters to see if the types of synergies HP executives have been intimating actually come to pass.

 

 
 
 
 
 
 
 
 
 
























 
 
 
 
 
 

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