VCE Touts Healthy Vblock Sales, But Partners Concerned Over New Infighting

VCE Thursday boasted that its converged infrastructure systems based on VMware, Cisco and EMC products have hit a $1.8 billion annualized run rate, with Vblock sales growing at well over 50 percent in the first quarter.

EMC CEO Joe Tucci says the EMC-Cisco partnership has "revolutionized the IT industry." Cisco CEO John Chambers says he views VCE as a "natural extension" of the networking giant's application-centric data center strategy. And VCE CEO Praveen Akkiraju, a 19-year Cisco veteran, is promising that the VCE alliance will stay ahead of the innovation curve.

In the sales trenches, however, partners say the story is decidedly less rosy. Multiple sources close to VCE told CRN the alliance is showing new signs of strain that could impact future sales.

While there has always been some give-and-take between EMC and Cisco within the VCE alliance, sources said there are new tensions developing between the VCE company and EMC. Which means customers that have accepted the ongoing EMC-Cisco squabbling now have a new reason to wonder if the VCE alliance is really an alliance.

[Related: EMC, Cisco Move To Clear Up VCE Vendor Conflict With New Channel Program ]

According to several VCE partners, EMC sales reps that used to lead with Vblocks in converged infrastructure discussions with customers are no longer doing so.

Instead, EMC sales reps are pitching in-house technologies from what EMC calls its own "unique federation of strategically aligned businesses" made up of EMC storage, Pivotal big data technology, VMware's various types of virtualization and RSA security software. VCE is not part of the federation.

"They want to make it more of an EMC story, and a VMware NSX story," one VCE partner said of EMC's sales efforts.

A VCE spokesperson told CRN that Vblocks are "incredibly well positioned as preferred converged infrastructure" for the EMC federation. "The EMC federation represents a tremendous opportunity to drive greater customer adoption of VCE's industry-leading converged infrastructure portfolio," the spokesperson said.

Meanwhile, VCE sales reps are firing back by going after customers directly. They're now competing with EMC by pitching Vblocks -- which feature pre-integrated EMC storage, Cisco UCS servers and networking, and VMware server virtualization -- on their own.

"The VCE reps are saying if EMC isn't going to bring us into deals, we're going to go after deals ourselves," one VCE partner said.

VCE operates independently with its own sales force, even though EMC owns 58 percent and Cisco owns 34 percent of the five-year-old company.

The end result, according to one VCE partner who didn't want to be named, is that EMC reps are engaged in a "mini war" with VCE sales reps. Multiple sources told CRN they believe the tension is a direct result of Cisco and EMC's competing visions for the future of software-defined networking.

NEXT: VCE Becoming A Battleground For Future Of Software-Defined Networking

Last September, VCE picked Cisco's version of SDN, called Application-Centric Infrastructure (ACI), as the default SDN technology for VCE Vblocks. But VMware's competing NSX technology hit the market first, debuting last November. Cisco isn't expected to ship ACI products until the middle of this year.

While most customers aren't yet looking to deploy SDN with Vblocks, at some point they'll have to make important decisions about which vendor's SDN they want to go with. VCE Vblocks, in essence, have become a sort of battleground for Cisco and EMC's SDN competition.

One VCE partner, who did not want to be identified, said the EMC-Cisco battle over SDN is making some VCE customersreconsider whether they want to buy Vblocks.

"We are hearing from customers that they just don't want to get caught up in that type of battle," said the partner. "Now the message from both sides is, 'We don't need you anymore.' We are beginning to see the results of that."

Another VCE partner, who did not want to be identified, said EMC and VCE are "operating totally separately, and in the field, they are turning into rivals pretty quickly. They're competitors with their own numbers and their own channels."

A spokesperson for VCE said the company doesn't comment "on the specifics of employee compensation or field engagement" but offered the following statement: "VCE and EMC remain strategic partners committed to jointly enabling the channel to deliver converged infrastructure solutions to customers."

Partners believe the Cisco, EMC and VCE relationship could get even messier now that EMC has revealed plans to ship its own hyper-converged appliance by the end of 2014. Hyper-converged appliances combine server, storage, networking and virtualization technology in a software-defined stack running on industry-standard server hardware.

At EMC World earlier this week, Jeremy Burton, president of products and marketing for EMC, told CRN the appliance will run software from EMC and VMware -- presumably the latter's NSX and VSAN storage technology -- and is aimed at the low end of the market.

Burton also said the appliance will not conflict with EMC's VCE or VSPEX partnerships with Cisco. But one of the big selling points for hyper-converged appliances is that organizations can scale as they grow by adding more appliances. So while EMC's forthcoming product won't necessarily displace Cisco UCS servers, it's not going to go over well with Cisco, partners told CRN.

EMC and Cisco launched a joint channel program earlier this month called Cloud Infrastructure Solutions Accelerator, which features sales incentives aimed at solving conflict between Cisco and EMC that has been stalling VCE partner deals.

But at least one VCE partner thinks the program isn't going to amount to much because it doesn't address the underlying issues in the EMC-Cisco relationship. "They're saying, we realize our conflict is disruptive and it's costing you money, so we're going to give you more money to make it worth your time," said the source, who didn't want to be named.

NEXT: Partners Say Current Tensions Could Impact Future Vblock Sales

Despite the problems with the VCE alliance, EMC and Cisco can point to booming Vblock sales and claim that everything is OK. However, some partners said the healthy Vblock sales figures stem from earlier sales cycles when VCE was functioning as more of an alliance than it is today.

VCE has sold more than 1,750 Vblock systems since launching the products in 2011. Research firm Gartner has named Vblocks the market-share leader in integrated infrastructure systems for two years running.

EMC and Cisco have long maintained in public that their relationship is fine and that it's OK for them to compete in some areas and cooperate in others. And while industry watchers have been predicting that VCE would crumble for several years now, the alliance has stayed intact.

But in the channel, partners on all sides believe there's a limit to how far EMC and Cisco will go to maintain the appearance that everything is hunky-dory in their relationship. And in the opinion of many of these partners, this situation may soon reach a breaking point.

"Despite both EMC/VMware and Cisco trying to keep VCE customers calm by assuring everyone that 'everything is business as usual,' just about everyone is aware that the gloves are off in this fight," said the VCE partner who is seeing customers avoid Vblocks.

PUBLISHED MAY 9, 2014