Cisco, HP Skirmish Takes Nasty Twist

Cisco Systems may have hammered the final nail into the coffin that is its long-standing partnership with HP, ditching HP as a channel partner as the two companies' relationship becomes more and more frosty.

In a blog post, Cisco Senior Vice President of Worldwide Channels Keith Goodwin wrote on Thursday that come April 30, 2010, when HP's System Integrator contract with Cisco expires, Cisco will not renew it, meaning HP will no longer be a Cisco Certified Channel or Global Service Alliance Partner.

Cisco would not discuss its terminated partnership with HP and instead pointed to Goodwin's blog post. HP told Channelweb.com that it has seen Goodwin's post and has no comment at this time.

"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," Goodwin wrote. "Despite this shift in industry dynamics, HP had remained a Cisco Certified Channel Partner. Being a Cisco Certified Channel Partner has numerous benefits including access to proprietary information (such as product roadmaps) and partner profitability initiatives. Given the evolution of our relationship it simply no longer makes sense to provide these benefits to HP."

Dissolving HP's status as a Cisco partner -- a relationship that has spanned roughly two decades -- opens the door for Cisco to directly compete against its former partner and current foe while maintaining confidence from its customers and partners, Goodwin wrote.

"We are taking this action to be transparent to both partners and customers - we will compete with HP for future business," he wrote. "That said our top priority is our customers. Our responsibility as a leader in the IT industry is to ensure we focus on our customers as our top priority amidst shifting industry dynamics."

Goodwin's comments about "different and conflicting visions" for Cisco and HP stem from a recently rekindled and oft contentious competition between the two powerhouses. At last year's Cisco Partner Summit, Cisco executives drew a line in the sand and noted that its competition with HP is no longer spirited, but instead cut-throat.

The kerfuffle between Cisco and HP grew as the two companies continually dipped their hands in the others' respective technology cookie jar: HP gaining networking market share with its HP ProCurve line of gear; Cisco going after blade server and data center customers with its Unified Computing System (UCS) last March; HP partnering with Microsoft for VoIP and unified communications; and ultimately exploding into rumored price wars and ultimatums where both HP and Cisco allegedly leaned on their partners to beat the other out of deals by any means necessary.

And while Goodwin essentially wrote that HP's days as a Cisco partner are kaput, he said the pair of high-tech giants' paths may cross again.

"... we have already reached out to HP to begin the discussion around a new agreement that ensures business continuity for existing customers and better reflects the current state of our relationship," Goodwin wrote. "We will also honor Cisco customer service contracts with HP for their duration."

Later, Goodwin added that "we will continue to work with HP wherever our customers expect it and where it makes sense for our business."

For HP, however, the loss of Cisco as a provider of networking equipment was not only inevitable, but also not a real concern.

In addition to its ProCurve product line, HP appears to already have its ducks in a row to forge on without Cisco and to have been preparing for a Cisco-less future. Last year, HP scooped up ailing networking pioneer 3Com in a $2.7 billion acquisition that gives HP 3Com's roster of H3C networking switches. The 3Com acquisition is expected to close shortly.

Furthermore, HP is building its storage component relationships with other vendors. QLogic on Thursday said that HP will be reselling its 5800V and 5802V series of 8-Gbit Fibre Channel switches to go with its BladeSystem servers and its MSA and EVA storage lines.

HP is also not the only company that has been cut off by Cisco. ChannelWeb U.K., a sister publication of Channelweb.com, reported this week, that Cisco cancelled the development of the Cisco Nexus 4001d blade switch, which was designed to be compatible with Dell's M1000e blade chassis.

The Cisco Nexus 4001d blade switch was originally planned to be released next month, CRN U.K. reported.

NEXT: What Does The Split Mean For Partners?

And while HP seemingly braced for the fallout, the breakup actually goes further than just HP's relationship as a reseller of Cisco products.

One channel source close to the two companies said that Cisco has decided it will no longer use any HP products in its own offerings. In particular, Cisco had been using HP ProLiant servers as part of its VoIP solution, but has decided to use IBM servers instead. However, according to that source, the IBM servers have yet to work in Cisco's VoIP solution as expected.

Cisco's refusal to renew HP's Systems Integrator contract could also go deeper. The rift is sure to have some affect on HP's $20 billion plus services business. HP took hold of thousands of customer services/outsourcing agreements when it acquired systems integration giant EDS for $13.9 billion in 2008.

It also remains to be seen whether the rift could cause potential network or architectural incompatibilities as both vendors aggressively move to provide new private/public cloud architectures.

John Convery, executive vice president, vendor relations and marketing for Denali Advanced Integration, a top partner for both HP and Cisco, said he sees it as critical that the companies continue to have ongoing service partnership given existing commitments with a huge installed base of customers using both Cisco and HP equipment. "You can't just operate in a vacuum," he said.

Convery said he is not surprised by Cisco's move to sever ties given HP's acquisition of 3Com and a face off that pits both vendors' partner conferences against one another in the last week of April.

"There are no surprises here," said Convery. "The big boys don't want to play in the same school yard sandbox anymore. This is competition at its best."

Convery said he sees little impact on the day-to-day business of Denali which is committed to partnering with both vendors.

"It creates an environment where the partner needs to be well engaged helping customers sort through the solutions," he said. "HP is coming at this with converged infrastructure and server kind of centric focus. Then you have Cisco taking it from the networking side. Customers are going to need the expertise companies like Denali have with hundreds of certified engineers trained in both Cisco and HP. We have to help customers through their pain points and listen to them."

For Cisco partners, the shattered pairing opens the door to questions over future interoperability, as Cisco's and HPs' technologies would play well together on the network and server side, respectively. It also raises questions around service for the legacy equipment that remains in place and how that will be serviced.

Still, a greater worry for Cisco partners is whether giving HP the boot will create more direct competition between Cisco and its channel.

"The only concern that we have is how much will Cisco start competing against its channel in the future," said Dan Holt, CEO of HEIT, a Fort Collins, Colo.-based Cisco managed services partner. Holt said if Cisco becomes "more like HP," it could lead to Cisco and some of its solution providers competing against each other for services deals.

Holt said the biggest impact of the split will be felt in massive partners like AT&T.

Meanwhile, for Headlands Associates director Carl Wolfston, the battle and ultimate breakup hit's a little closer to home. Wolfston said Cisco has been trying to court the Pleasanton, Calif.-based HP solution provider, but the VAR has so far kept its distance from Cisco.

"When you see the kind of discounts Cisco gives the big boys like AT&T, we just can't compete," Wolfston said.

Wolfston said he has been watching Cisco as it develops its UCS strategy, but so far has not been impressed.

"It's a bunch of fluff," he said. "Cisco is showing benchmarks that are faster than HP's, but with machines that are not available yet."

In the Cisco vs. HP fight, Cisco will be the company to take the bruising in the long run, Wolfston said.

"Cisco makes high margins on its networking products, but now it's going into the lower-margin server business," he said. "But HP is moving into the higher-margin network business. People are saying HP partners should be quoting HP networking gear and leaving the quote with the customer to see what happens."

The battle has reached the point that some HP partners are applauding the move by Cisco.

Mark Gonzalez, president of Nth Generation Computing, an HP solution provider, said he has been telling HP it has been too nice to Cisco, and that things will have to change.

Nth has already shut down its Cisco business completely, Gonzalez said.

"We've ramped up with ProCurve," he said. "We'll do Cisco if the customer insists. But we will ask customers, 'Did you know that ProCurve is compatible with Cisco? Did you know that ProCurve is less expensive than Cisco?' We even tell customers that if they really want to buy Cisco, get a quote from ProCurve anyway and use it to drive the Cisco price down."

Another solution provider, who preferred to remain anonymous, said it is not surprising to see Cisco cut HP off as a partner.

"It's war," that partner said.