What might it mean if Cisco Dumps HP As Certified Partner ?

An post as Silicon Angle claims that an internal memo is suggesting that Cisco is dumping HP as a partner. Bang Bang: Cisco Dumps HP As Certified Partner HP Returns Fire With Deal with Qlogic

We have no confirmation from Cisco, it could just be rumour but it sure sounds like it could be true and it makes sense. After all, HP and Cisco have been trading blows for the last two years and progressively escalating the war. Once the Acadia / VCE project was announced, it was clear where Cisco is planning to go.

It’s my opinion that HP started the fight about three or four years ago when they restarted their Procurve networking products.

ProCurve – why did HP start ProCurve ?

HP set out to make low cost Ethernet switches that directly connected to a core Cisco network. They even convinced Cisco to license their CDP technology which reassured the network engineers that somehow Cisco approved of this new equipment.

More recently the ProCurve product grew to include chassis based switches that had some serious routing capability. At that point, it was clear that HP means to take on Cisco. Cisco regards those core ethernet switches as their own market and no one else should be in that space.

HP bought 3Com

While HP only had switches, Cisco resellers could always position their “portfolio”. That is, not only does Cisco have switches, but routers, security appliances, management software, WAN equipment and the whole show.

But after HP integrates 3Com, they have the whole portfolio too. In fact, not a very good one since 3Com equipment is not exactly recognised as quality. Most importantly, the people who design networks and layout strategy remember being completely shafted by 3Com in the early 2000’s and they haven’t forgotten.

So, now HP has a complete portfolio. It needs money and time to build this portfolio into a quality product offering (because the current product isn’t ready for the big time e.g. here). The HP ProCurve has a solid reputation for cheap and cheerful (and NOT enterprise grade).

So Cisco did some servers

As part of the FCoE push, Cisco released a bunch of Intel servers. Ultimately, the actual servers are a me-too product with some cute finishing touches. That is, if you glue Intel chips to a motherboard, you don’t get a lot of profit margin, Intel does. And this isn’t a strategy that Cisco has done before.

Several people/pundits have queried whether Cisco has been forced into servers. I maintain that Cisco had to respond to HP entering the network space. They have added some Cisco sauce by applying a network technology to their platform disguised as FCoE. This means they have a good marketing strategy, a differentiator for the customer.

it’s possible that this was the intent all along. Ditch HP before their network strategy is mature and enter the server space with a strong offering. They’ve got EMC for storage, and partnerships with all the majors such as Intel, VMware, Microsoft etc.

What Level ?

The one partnership that matters between Cisco and HP is the “Gold Partner Status”. This entitles HP to preferential purchase price, deep technical support integration and many other benefits. If Cisco removes this partnership, then HP can no longer compete in the open market on price (unless they make a loss) or technical support.

But there are other partnership programs that have various names. Global partners, Corporate Partners, Strategy partners or whatever. They change quite often and they don’t have much impact at customer level. If Cisco is removing HP from one these programs, we won’t see much of a change.

Dell dumped too ?

Network World has reported that Cisco is planning to kill it’s partnership with Dell. Combine this with the HP termination and we might have a trend. John Chambers has been known to make big bets in the past, and this might be something they need to do.

Losing share in the telecomms area

Cisco has also been losing marketshare in the Telecomm / Service Provider space. This is where the really big money is, with millions spent on just a few projects. Juniper and Huawei are taking big chunks out of Cisco’s customer base. Does this leave Cisco with a revenue hole in a couple of years ?

“Forward Planning”

So, if it’s true, the Cisco is planning to move up the stack and sell Intel servers. Further, they mean to take HP head on in the existing customer base. It’s an aggressive move but a perfect time to do it.

First, HP ProCurve networking needs a couple of years to mature and stabilise. Second, HP Management is busy digesting their acquisition of EDS (which is having problems due to low profit margins in the EDS business) and may not be able to cope with a head on fight. Third, HP people are disorganised due to the number of re-organisations, cutbacks, and acquisitions.

As a customer, I’m delighted. I’m expecting to see price cuts and improved service. Cisco has been light on new features for the last couple of years and steadily increasing prices. HP has become fat and comfortable with it’s incumbent status.

Bring it on.

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  • Erik

    3Com was purchased for Asia customer base, technology was a bonus.
    ProCurve (which has been around, 4 years ago was the reboot) got support from HP, because Cisco was virtulizing services, and implementing Dell rebranded servers as appliances (instead of Compaq) and making CiscoWorks not need OpenView.

    P.S. – Before Telepresence there was HALO too.

    • http://etherealmind.com Greg Ferro

      Meh.

      3Com is popular in Asia because it’s cheap, a primary selection criteria for many companies there (and, yes, I worked there for fifteen years). HP will get access to those customers, but not for the right reasons. They have a big challenge to sell a high margin product in Asia, Huawei will beat them rotten at that game.

      HP got into ProCurve because it’s a highly profitable opportunity because Cisco profit margins are so high. Make no mistake about that. Given the number of OEM servers that Cisco would buy as appliances I don’t think that carries any weight, however, I suspect that HP wanted to charge more than Dell for the OEM kit and Cisco is ruthless about costs (thus maximising profit).

      Telepresence – hah. Who gives a toss about that executive toy ? No one is making any money out it.

      But thanks for giving us the HP view.

  • Shreedhar

    Real interesting to watch the BIG fight! Ultimately, the customer is the winner!

  • Ace

    Cisco is restructuring — causing headaches within. The HR department just got reorganized and is delaying almost everything. Managers have bounced around so much, that employees are surprised at the new reporting chains in “employee connection”. Engineers are sitting around doing nothing at some sites, and many are quitting with the recovering economy and fed up with all the cutbacks and red tape.

    • http://etherealmind.com Greg Ferro

      Cisco has it’s problem but HP has it worse. They have acquired EDS, 3Com, IBRIX, LeftHand and many more and these all need to be integrated and developed into a product strategy. But the people involved often do not know what’s happening.