Customers to benefit from Cisco-HP divorce

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

update 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 (TBR).

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

In a report released Tuesday on Cisco's move, John Byrne, director of TBR's Network Business Quarterly, said customers will see more favorable 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) datacenter strategy, which marries its blade servers with networking services. However, Byrne said large organizations 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.

Keith Goodwin, senior vice president of Cisco's worldwide partner organization said in an e-mail to ZDNet Asia: "Over the last few years, our relationship with HP has evolved from a partner to companies with different and conflicting visions of how to deliver value to customers."

Retaining HP as a certified channel partner would give the company access to Cisco's proprietary information such as product roadmaps, noted Goodwin. "Given the evolution of our relationship it simply no longer makes sense to provide these benefits to HP," he said.

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 Asia that the company would compete mainly with IBM and Dell Computer in the data center space, and did not see Cisco as a threat.

In an e-mailed response Tuesday, an HP spokesperson told ZDNet Asia the company would capitalize 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 to sever ties, 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 optimized 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 behooves 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 data centers.

Mike Allen, director of channel operations in Asia for Cisco said the company expects growth from emerging markets. "In our last earnings announcement, we saw double digit growth year on year from the Asia-Pacific region, led by countries such as China and India."

Cisco plans to focus on its virtualization and collaboration message to customers in the region, Allen added.

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 data centers 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 percent of the blade server market globally, with IBM at 29.4 percent and Dell with 8.9 percent.