HP And Cisco Bury The Hatchet To Accommodate Customers – Everyone Wins?

In a surprising move, HP and Cisco announced that HP will be reselling a custom-developed Cisco Nexus switch, the “Cisco Nexus B22 Fabric Extender for HP,” commonly called a FEX in Cisco speak. What is surprising about this is that the FEX is a key component of Cisco’s Nexus switch technology as well as an integral component of Cisco’s UCS server product, the introduction of which has pitted the two companies in direct and bitter competition in the heart of HP’s previously sacrosanct server segment. Combined with HP’s increasing focus on networking, the companies have not been the best of buds for the past couple of years. Accordingly, this announcement really makes us sit up and take notice.

So what drove this seeming rapprochement? The coined word “coopetition” lacks the flavor of the German “Realpolitik,” but the essence is the same – both sides profit from accommodating a real demand from customers for Cisco network technology in HP BladeSystem servers. And like the best of deals, both sides walk away thinking that they got the best of the other. HP answers the demands of what is probably a sizable fraction of their customer base for better interoperability with Cisco Nexus-based networks, and in doing so expects to head off customer defections to Cisco UCS servers. Cisco gets both money (the B22 starts at around $10,000 per module and most HP BladeSystem customers who use it will probably buy at least two per enclosure, so making a rough guess at OEM pricing, Cisco is going to make as much as $8,000 to $10,000 per chassis from HP BladeSystems that use the B22) from the sale of the Cisco-branded modules as well as exposure of Cisco technology to HP customers, with the hope that they will consider UCS for future requirements.

Who really wins? Despite dressing this arrangement in the feel-good aura of addressing customer demands, it is not an even trade. Customers win big time, and that is a laudable outcome, if depressingly unusual in these days of industry-transforming vendor battles. But my take is that Cisco got the slightly better end of the deal. Tactically, HP gets protection from UCS incursion into its installed base, but unless they intend to abandon their network hardware products (a suggestion raised by my colleague Andre Kindness), HP cannot be happy about allowing a key element of both Cisco’s Nexus switches and its UCS servers to play a visible role in its BladeSystem franchise, and this increased visibility cannot help but benefit Cisco. Additionally, an HP enclosure with the B22 cannot use HP’s Ethernet or FCoE Virtual Connect at the same time, making them more vulnerable to future Cisco predation with UCS, as UCS offers the advantages of the FEX plus many of the advanced capabilities of Virtual Connect.

In case anyone is wondering, a FEX (Fabric Extender) extends a parent Cisco switch fabric (Nexus platform) to the server, making the ports on the server look like they are connected directly to the Nexus switch, allowing the Nexus switch to act as a single point of management, homogeneous policy enforcement, troubleshooting and software upgrades across 2000+ physical ports, logical ports, and virtual machines. Not surprisingly, the benefits cited by Cisco appear to strongly overlap those cited by HP for its BladeSystem and Virtual Connect, including lower TCO, reduced cabling expenses, and simplified management. Note, however, that FEX technology by itself does not provide any of the virtualization capabilities of HP’s Virtual Connect technology – that battleground is where Cisco UCS and HP compete.

The bottom line for Forrester’s I&O constituency is simple. This arrangement between Cisco and HP gives you more options in defining your future infrastructure, and that is a good thing. And, of course, while no mention was made about any exclusivity or lack thereof, it is not hard to envision a future where other vendors like Dell and IBM want the same ability, and it would be hard to believe that Cisco allowed itself to be bound exclusively to HP for any extened period, so stay tuned...

Let us know if this changes your plans for servers and networking looking forward.

Comments

Wow. HP just goes from one

Wow. HP just goes from one really bad move to another. What did they think they had to gain here? Customer loyalty? It's tantamount to crowning Cisco king of the network through abdication. This is bizarre and only goes to show how badly adrift the management level of HPQ is. This is very depressing, and does NOT bode well for my HPQ stock. I keep hoping to outlive the board's stupidity, but it seems that theirs is increasing and dragging mine with them.

I ask myself what happens to

I ask myself what happens to the smaller companies, who are in the same business for cloud-based Solutions. When the giants unite, the small will suffer! like: http://www.effective-contactcenters.com/

Customer Driven

As the article states –this is a customer driven product more than a vendor driven product. Granted the status quo in the datacenter is changing, but this product is not much different than the cisco or brocade switches already available for the HP blade chassis.