Cisco, HP break-up benefits customers

With Cisco deciding not to renew partnership with HP, customers will see better contract terms, discounts and support, says analyst firm.

Customers will benefit from the increased market competition now that Cisco Systems has severed ties with Hewlett-Packard and moved more aggressively into the server space, according to analyst firm, Technology Business Research.

The networking giant announced late last week it would drop HP as a channel and global services alliance partner.

In a report released yesterday on Cisco's move, John Byrne, director of Technology Business Research's (TBR) Network Business Quarterly, said customers will see more favourable contract terms and better support, as well as deeper discounts arising from the added competition.

The move is a clear marketing strategy aimed at pushing Cisco's UCS (Unified Computing System) datacentre strategy, which marries its blade servers with networking services. However, Byrne said large organisations will likely choose HP over Cisco, if pressed to decide between the server stalwart and newcomer Cisco, which announced UCS last March.

He noted that Cisco's split with HP was "inevitable", given Cisco's move into the server market.

HP, too, has been pushing its networking arm, ProCurve. The tech giant last year brought the ProCurve division together with its storage and server divisions under its technology solutions group.

Last September, HP released a new set of ProCurve switches built to integrate with its BladeSystem servers. An HP executive had said then in an interview with ZDNet Australia's sister site ZDNet Asia that the company would compete mainly with IBM and Dell Computer in the datacentre space, and did not see Cisco as a threat.

In an emailed response to ZDNet Asia, an HP spokesperson said the company would capitalise on its global reach and portfolio breadth to push ProCurve to customers.

HP's "Converged Infrastructure architecture", announced last November, is based on HP's networking offerings and targets the same market segment as UCS does.

On Cisco's announcement, HP said: "We do not believe it is in the customer's best interest to take a proprietary stance.

"We will provide clients with consulting, integration, management and support services for their heterogeneous environments and ensure that our hardware and software platforms are optimised for all leading networking platforms."

TBR's Byrne said Cisco and HP will still maintain ties for now, drifting apart over time. "Because both companies occupy the number one position in their respective markets, they share many enterprise customers with whom they have very strategic relationships.

"Therefore, it behoves each company to 'play nice' for the time being to avoid any negative impact on their customers' businesses," he said.

Opportunity for Cisco in emerging markets

According to the analyst, Cisco's initial opportunity will lie with smaller companies or new datacentres.

In a previous interview with ZDNet Asia, Michael Warrilow, Hydrasight's managing director, said Cisco needs to convince customers to have their network and server teams work together, to ensure adoption of its UCS products.

An IDC commentary at the time also said UCS' bundled offering would appeal to customers looking to build datacentres from scratch.

Cisco announced earlier this month it has garnered 400 UCS customers.

IDC's third quarter 2009 figures revealed that HP held 50.7 per cent of the blade server market globally, with IBM at 29.4 per cent and Dell with 8.9 per cent.

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