HP Says Cisco Ignores Customers By Going It Alone

Hewlett-Packard on Friday said Cisco's decision to break the long-term relationship between the two companies marks a return to a proprietary attitude toward business and will hurt customers.

Instead, HP said it and its customers can succeed without relying on any one networking platform, including Cisco's.

It's a message close to the heart of HP's solution providers, who say that the vendor's strength in server and storage combined with its growing ProCurve networking business make the divorce between HP and Cisco a cause for optimism.

Keith Goodwin, senior vice president of Cisco's Worldwide Partner Organization,, said in a blog post on Thursday that Cisco notified HP that it will not renew HP's System Integrator contract when it expires on April 30, 2010, resulting in HP no longer being a Cisco Certified Channel or Global Service Alliance partner.

HP, in a statement issued on Friday, shrugged off the move by Cisco, calling it a proprietary move that is not in customers' best interest.

The statement read, "History has proven that customers and the market demand both coopetition and collaboration between IT vendors. Most major players compete in one deal and partner in others to best serve clients' needs. 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.

"Our strategy and platforms will continue to be market driven to create advantage today and into the future for our clients."

The long-expected break between HP and Cisco came as no surprise in the wake of Cisco's decision to tie servers, storage, and networking into a single platform it call Unified Computing System, or UCS.

That move, which is bringing Cisco into competition with former partner HP's own server and storage business, is being countered by HP's pending acquisition of networking vendor 3Com.

The split between the two vendors will spur HP to focus more resources on its networking business, which will be a boon to customers looking for alternatives to Cisco and its expensive service contracts, HP solution providers said.

Cisco will always control the core networking market, said Bob Venero, CEO of Future Tech, a Holbrook, N.Y.-based solution provider and partner to both HP and Cisco.

"But take a look at the edge of the network," Venero said. "There's where the opportunity is, especially with products that offer differentiation. This will force HP to focus more on ProCurve, and provide its partners more resources and education. That's an opportunity for VARs."

Talking Cisco with customers means running into a lot of competition, Venero said. "Today, if you talk networking with a customer, you're competing with every Tom, Dick, and Harry who are talking Cisco. If you go in with HP, you can talk ProCurve, and soon 3Com."

While Cisco has the largest share of the networking market, HP has one huge advantage in the lifetime guarantee it offers on its ProCurve switches, solution providers said.

That is a big advantage said Scott Hansen, sales manager for enterprise solutions at Melillo Consulting, a Somerset, N.J.-based solution provider and HP partner.

"HP's lifetime warranty is for next-day service and phone support, but that's no big deal for customers," Hansen said. "If someone loses a switch, they don't care. They keep an extra in their closet. But a lot of enterprise customers who are cutting costs are looking at ProCurve, especially at the network edge, because Cisco's maintenance contracts are expensive."

A lifetime warranty means big cost savings for HP customers, Venero said.

"In an economic downturn, people are looking for alternatives," he said. "If a customer doesn't need a maintenance contract for a switch, that's a huge differentiator."

Next: HP Partners To Cisco: Bring It On!

HP's solution providers almost relish the thought of Cisco breaking with HP.

Venero said the move could be good for HP's SMB customers.

"In the SMB space, there might not be a networking core, where Cisco is strong," he said. "There, the business might just be on the networking edge, where HP is strong."

The only real loser in a war between HP and Cisco will be Cisco, said Mark Gonzalez, president of Nth Generation Computing, a San Diego-based solution provider and HP partner.

Cisco's public break with HP makes it clear how relationships between the two have deteriorated, Gonzalez said.

"Personally, I'm very surprised that Cisco has gone public with this strategy vs. pursuing one where the relationship was allowed to die on the vine due to benign neglect," he said. "Cisco is clearly trying to deliver a message both to customers and the industry at large, and it's a sign that HP's counter-attack is beginning to really hurt them. Cisco's message to customers is, 'Choose, it's either us or them.'"

Gonzalez compared Cisco's move against HP to Napoleon's decision to attack Russia in the dead of Winter.

"Just because you're a big fish in a small pond like the networking world, doesn't mean that you should take on the great white shark of the computer industry," he said. "I see no way in which Cisco can win this war. Their message at the VMware Partner Conference was that their goal was to 'uncommoditize' a commodity business. Good luck with that strategy in the middle of the greatest recession since the Great Depression."

Gonzalez said that, in the time since Cisco's decision to compete with HP in the industry standard server business, HP has decided to acquire 3Com even as it put greater emphasis in its ProCurve partner compensation to compete with Cisco.

In the meantime, HP is the market leader in industry-standard servers, and that its industry standard server business grew 27 percent in its most recent quarter compared to the same period a year ago, Gonzalez said. HP is also a top storage vendor, and buys more disks than any other vendor or customer.

He also expects other changes at HP that will hurt Cisco.

"Want to bet that very serious conversations are taking place within Enterprise Services, formerly known as EDS, about substituting ProCurve everywhere that Cisco was spec'ed originally?" he asked.

HP's strategy when it comes to competing with Cisco is to emphasize the compatibility between its ProCurve and Cisco's networking products and prepare to use its 3Com acquisition to force Cisco to defend its business across the board.

The HP message to customers is clear, Gonzalez said.

"HP is saying, 'Are you tired of paying the high maintenance costs for Cisco products? Are you tired of funding Cisco's 65 percent gross margin lifestyle? Then Mr./Ms. Customer come talk to us about ProCurve. Who knows, you may like our products -- a lot of customers do. But even if you decide you don't want to buy our ProCurve products, get a quote from us and use it to leverage Cisco's pricing,'" he said.

In a nutshell, HP's strategy boils down to telling partners to win the deal, Gonzalez said.

"If you can't win the deal, delay it," he said. "If you can't win the deal and you can't delay it, then scorch the earth to where the deal will never be profitable to Cisco in the customer's lifetime."

Next: Reality Check: For Some, Business As Usual

For some HP solution providers, the public split between HP and Cisco will have little impact for now.

It is time to take a wait-and-see attitude, said Dave Butler, president of Enterprise Computing Solutions, a Mission Viejo, Calif.-based solution and partner to both HP and Cisco.

"This is just a continuation of what's been happening for some time," Butler said. "There's no, 'oh-my-gosh' here. They've been battling in the sandbox for a couple of years."

Both customers and partners are aware of the fighting between the two vendors, which Butler said caused him to scratch his head when reading about the Cisco blog post on Thursday.

"Other than putting it in print, what's changed?" he said. "A lot of buzz about nothing. The white elephant was already in the room."

Another solution provider who works with both vendors and who preferred to remain anonymous said the surprise was gone a long time ago.

For Cisco-focused partners, the vendor break-up is probably good news, the solution provider said. "Before, they had to compete with HP," the solution provider said. "Now they can work better with Cisco."

There should not be much impact on HP partners either. "They may lose a bit of business where they sold maintenance contracts with the Cisco gear, which will also give an 'in' to a Cisco VAR," the solution provider said.