For Marius Haas, 2010 was a good year. As senior vice president and general manager of Hewlett-Packard’s networking business, Haas saw his unit gain a lot more muscle in April, when HP closed on its high-profile $2.7 billion purchase of 3Com, an acquisition that put the company in even tighter competition with Cisco Systems.
HP has been increasingly flexing that muscle as it looks to make itself a clear alternative to Cisco in the data center networking space, and Haas believes the opportunity is out there. In an interview with eWEEK, Haas estimated that there is at least $9 billion worth of business that is opening up as businesses see their Cisco systems coming to the end of the line in 2011. HP is pitching itself as the lower cost, higher performance, more open option to Cisco.
“This basically single-vendor-dominated environment is not conducive to choice, and that is an opportunity for HP,” he said.
The 3Com deal was only one in a series of moves that has turned one-time close partners HP and Cisco into intense rivals. Fueling the competition has been the push by vendors-not only HP and Cisco, but others, such as Dell, IBM and Oracle-to offer converged data center solutions that tightly integrate servers, storage devices, networking equipment and management software in highly virtualized environments. Cisco entered this realm earlier last year with the introduction of its UCS (Unified Computing System), which not only included Cisco networking but also Cisco-branded servers. HP’s deal with 3Com upped the ante.
Haas pointed out that HP already was strong in servers, storage and management software. By adding the 3Com enterprise-level networking capabilities to what HP already had offered with its ProCurve networking portfolio, the company now offers a complete data center package.
“We’re present and relevant in virtually all parts of the infrastructure, so our reach in the market is impressive,” he said.
HP’s networking business has seen strong growth this year. According to the company’s fiscal year numbers, released in November, HP Networking-including 3Com’s impact-saw a 227 percent jump in revenue from 2009. Even without 3Com, HP’s ProCurve business had increased revenues of 50 percent in 2010. For the quarter, HP saw 40 percent growth in its Tipping Point network security business, which also was acquired via the 3Com deal.
In addition, the integration of 3Com into HP is ahead of schedule, Haas said.
When HP announced its plans to buy 3Com, analysts said the move would put HP into a solid second-place position in the networking market behind Cisco. That said, Cisco continues to be the top dog in the space, with a market share of more than 70 percent. But analysts say that Cisco is continuing to see growing competition, not only from HP-which owns about 11 percent of the market-but from other players as well. In a blog post earlier this year assessing Cisco’s networking business, Yankee Group analyst Zeus Kerravala noted the rise of competitors.
“Five short years ago we referred to this market as Cisco and the seven dwarves,” Kerravala wrote. “There was Cisco and a few niche vendors like Extreme and Foundry and some larger vendors (Nortel, 3Com) that had mismanaged the Ethernet switch business down to almost nothing. Today, Cisco’s competitors are companies like HP, Brocade, Avaya and Juniper. Bigger, stronger companies that can leverage other strengths to get a foothold in this market. This many larger competitors in the market create many more options for evaluators of network equipment, so Cisco’s ability to just stomp all over the competitive landscape is limited.”
In another blog post, Kerravala predicted that in 2011, Dell, which currently partners with third-party vendors in the networking space, will acquire a networking company.
Still, if Cisco officials are worried, they’re not showing it. According to the Wall Street Journal, Cisco CEO John Chambers, speaking to analysts at a meeting earlier in December, pushed aside notions of HP being a threat to its switching business.
“If you think the competition is HP … in switching, I think it’s actually the startups, the mid-sized companies and, candidly, the Chinese,” Chambers is quoted as saying. “We’re going to be really tough on HP in the data center.”
HP is planning to be equally tough on Cisco in the networking space, Haas said. In September, HP officials very publicly announced that they had removed all Cisco core routers and switches from HP’s six data centers, replacing them with ProCurve products and technologies from the 3Com deal.
In another move Dec. 20, HP Networking announced its “Catalyst for Change” program, an initiative that offers Cisco networking customers significant discounts on HP gear if they trade in their Cisco products. Customers can get 20 percent off HP A-Series and E-Series switches if they trade in their Cisco Catalyst 2960/S Series, 3560/E Series/X Series, 3750/E Series/X Series, 4500 E Series, 4900 or 6500 Series devices, as well as Nexus 5000 Series or 7000 Series switches.
HP also is offering various Cisco integration, migration and planning services.
Haas said he believes Cisco customers-particularly those whose Cisco equipment is due to be upgraded or replaced-are ready to entertain other vendors. They’re looking for better cost advantages-HP Networking officials estimate that their products offer 66 percent better cost of ownership than Cisco gear-more openness and more flexibility, he said.
“They don’t want to be told over the next 10 years that, -Here is a proprietary stack, we’ll tell you what to do and when to make changes,'” Haas said.
As the company enters 2011 with a more integrated 3Com business, he said HP will continue putting pressure on Cisco.