What Customers Can Expect from Cisco, HP Breakup

By Chris Preimesberger  |  Posted 2010-02-19

What Customers Can Expect from Cisco, HP Breakup

Cisco Systems and Hewlett-Packard, once the best of friends in selling each other's IT software and hardware into large data centers and distributed IT systems, corporately called it quits on Feb. 18. Their channel partner, systems integration and global service contracts end on April 30 and will not be renewed, Cisco has proclaimed.

Reasons for this long-simmering unease can be found in this eWEEK article. Naturally, this corporate clash of IT titans raises a number of concerns. Among them: What does this separation mean for the two companies' many thousands of shared customers? How does this affect their channel sales partners and VARs? How much of an opening will it give to other systems integrators, now that HP has been fired by Cisco in this area?

Perhaps the most important question is this: How do two companies like these go on working together with common customers and providing innovative products when they cannot share proprietary information?

For insight on these and other questions in this winter of corporate discontent, eWEEK sought opinions from several industry thought leaders.

Analyst Bob Laliberte of Enterprise Strategy Group said he thinks that, realistically, the two companies cannot go on working together.

"Basically they don't [work together anymore]. There may be some type of basic reseller agreement put in place, and they will figure out a way to support existing customers, but moving forward, the lines have been drawn and they will be competing against each other for business," Laliberte told eWEEK.

"The cutting-edge solutions will be either all HP or all Cisco (and Cisco partners). For example, in the Cisco camp is the Vblock technology utilizing VMware, Cisco's UCS, and EMC storage and management software. For HP, that may be HP-branded QLogic SN6000 FC switches integrated with HP servers and storage and controlled by the Simple SAN connection manager."

James Staten, a principal analyst with Forrester, predicts "degrees of partnership" in whatever relationship HP and Cisco have in the future.

"Each of these companies has been a reseller of each other's solutions in a way that they were jointly developing solutions that required access to road maps and NDA info that simply doesn't make sense to share anymore," Staten told eWEEK.

"So they will simply move down to a lower level of partnership where this isn't necessary. It still means they will jointly work [with publicly available info] to ensure their solutions integrate. To your point in your question, they have to."

Alliances Must Be Evaluated Constantly

Art Canter, president and executive director of the Association of Strategic Alliance Professionals, told eWEEK that in many cases like this, "particulars of proprietary information and processes for working with common customers are negotiated up front" when the alliance is first negotiated.

"Strong, alliance-minded companies-of which HP and Cisco are prime examples-examine, re-evaluate and alter these details throughout the lifespan of a partnership to ensure the alliance meets changing market dynamics," Canter said. "In general, companies that perform the due diligence both up front in the negotiation stage as well as on an ongoing basis should be able to work out an equitable agreement in relation to common customers at the end of the alliance and beyond."

The two companies likely will be providing "cutting-edge solutions" based on their different visions of how to deliver value to customers, he said.

"One of the benefits of an alliance as opposed to a merger or joint venture is that they offer firms greater flexibility in winding down their joint activity when it no longer makes sense given their respective strategies. This is critical especially at a time when corporate strategies shift so frequently," Canter said.

Rob Enderle, principal analyst at the Enderle Group, told eWEEK that this situation is "actually rather common, as firms often cooperate in some areas and compete in others."

"It does create tension, though, and the competition clearly makes it vastly more difficult for the two sides to communicate strategically. Care also has to be taken to avoid the impression of price fixing if the two firms compete heavily in any one area," Enderle said.

Charles King, principal analyst at Pund-IT, told eWEEK that "though vendors often do share information and collaborate on individual or specific solutions, much of the work affected by Cisco's decision lies in areas of system integration. That could put a significant bite on HP's efforts to ramp up their services offerings and possibly create opportunities for competing service integrators."

What are the most acute pain points for customers and channel partners in a spat like this?

"Where to start?" Forrester's Staten said. "The customer gets to witness and live with the finger-pointing. And only after they yell, 'Enough! You two get in a room and fix this!' does anything happen. Thus the customer has to be the big-dollar squeaky wheel.

"Look for IBM, Dell and Oracle to jump all over this. Juniper [Networks] and Brocade from the opposite side."

Customers Will Expect Both to Handle Services

Enderle said customers generally expect large services organizations like HP's and Cisco's to be able to service everything.

"This puts stress on that organization, but these problems have been common with IBM Global Services as well when applied to competing server or PC products (back when IBM did PCs)," Enderle said. "So, while not ideal, IBM Global Services was able to step up and still cover their clients.

"I expect HP will be able to as well, but I also expect that the related accounts, if they stay with HP, will drift toward HP products or neutral offerings and away from Cisco over time to avoid this aggravation."

King said he thinks both companies probably will have to work harder to keep customers satisfied.

"[Customers' biggest pain point will] probably be sorting through their HP and Cisco SLAs [service-level agreements] to determine just how exposed they are," King said.

Laliberte had a different point of view about customer issues.

"In the short term, customers potentially may have to work with another vendor," Laliberte said. "If they purchased everything from HP, they may now be forced to bring on another vendor to procure Cisco products. This might impact volume discount levels, etc.

"Potentially working through support issues may also be a worry, although I doubt this will be a problem. Both of these vendors know they need to take care of their customers. In the long term, this may be a positive for customers, as HP's challenge to Cisco's networking dominance will drive innovation, choice and perhaps even better pricing, but they need to execute."

There is a cost to going into competition with a firm that is also a large reseller and service organization, which is rarely factored in completely to new product-area decisions, Enderle said.

"This is because the folks doing the analysis are generally paid by the executives who want a 'yes' answer. Going into servers will be very costly to Cisco over time; we'll see if the eventual additional revenue was worth it," Enderle said.

Canter pointed out that both Cisco and HP have invested significant resources in building their alliance, and that it's not going to end that quickly.

"A mark of a sophisticated alliance organization is that they can end an alliance when it no longer makes sense strategically and still have enough relationship and social capital between them so that they can work together in the future and in other ways," Canter said. "Both companies are well-versed in alliance management, so they have likely thought through how to end the alliance in a mutually beneficial way."

Finally, King of Pund-IT provided the last word:

"Given the rapid evolution in enterprise IT solution development and the continuing rise in industry-standard technologies, I doubt this will be the only such break-up we'll see. Too bad. They were such a lovely couple."

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