Partners: Cisco And Dell EMC Will 'Inevitably' Hit VCE Architecture And Sales Crossroads

Although Cisco and Dell are playing nice for now pledging support for their VCE partnership, partners expect new sales incentives and architectural changes to impact the wildly successful VCE alliance.

Several top CRN SP500 solution providers, who have built successful practices with Cisco, EMC and VMware said they are already bracing for new sales incentives that reward the channel to sell Dell's own servers and networking portfolio more aggressively than Cisco's solutions like Unified Compute System (UCS). That change could come as soon as Feb. 1, they said, when Dell unveils its new Dell EMC unified channel program.

"Make no mistake, Dell has to compensate for nearly $50 billion worth of debt and they're not going to do that by selling competitors' products when they can sell their own," said one top executive from a solution provider who is a Cisco Gold and EMC partner and asked not to be identified.

[Related: Michel Dell And Chuck Robbins Are VCE BFFs]

"I see Dell coming out sometime within the next 12 months with its own converged platform and, while they'll still sell Cisco servers, this isn't about what they can do, this is about how they're going to behave in the field and Cisco is the archenemy," said another top executive from a solution provider on CRN's 2016 SP500 list who is a longtime partner of Cisco and EMC that did not wish to be identified. "You got to have blinders on if you can't see that ... Lots of people feel that this change is coming."

With Dell's $65 billion acquisition of EMC now closed, the seven-year relationship between VCE and Cisco is bound to hit an architectural crossroad, according to partners. For example, as software-defined storage gains greater adoption and compute nodes become more storage-based, Cisco-configured architectures will show up less often inside VCE.

"You'll see some reference architectures that will be [VMware] NSX integrated and things like that where I don't know how much R&D they'll do around Cisco ACI and CliQr and that type of stuff," said one top executive from a solution provider who is a top Cisco, VCE and EMC Platinum partner, who did not wish to be identified.

Partners predict that Dell will also create a specific VCE go-to-market strategy focusing on replacing Cisco UCS with Dell servers.

"If I'm Dell, I'm having a program to which I'm training my partners where I can go to market with a, ’replace Cisco UCS servers in a VBlock with Dell servers and we will come in and certify it and this will be produced and supported by Dell organically' -- it isn't a bad pitch," said the CRN SP500 partner. "But this is a slow roll out because nobody wants to lose this $3 billion of business and I'm not disagreeing with that, but you're going to see this chipped away as soon as February."

VCE sales reps will also have better leverage and incentives to sell Dell solutions over Cisco, said partners.

"Reps get more margin selling Dell. So I can make sure the Dell solution looks more interesting from a financial perspective because there's more margin for me to work with than there is on the Cisco VCE side," said the EMC Platinum partner. "I can sell you my version of a rack running on Dell compute at this price or I can sell you the Cisco version on Cisco compute at a higher price ... That's not going to happen tomorrow, but it's an inevitability."

In the future, partners see Cisco building a solution that will directly compete against VCE's Vblock and VxRack.

Partners also predict new moves from Cisco in the future that will strain the VCE partnership.

"I could see Cisco teaming up with NetApp using SolidFire for software-defined storage, or maybe they buy someone themselves, combine it with Cisco Nexus [switches] and CliQr and pulling all that together tightly – plus the HyperFlex for the ROBO – they would have a VxRack and VxRail similar play," said the CRN SP500 partner.

The reports from partners of trouble ahead for the VCE partnership come even as CEO Chuck Robbins and Dell CEO Michael Dell shook hands last week and pledged their allegiance to their VCE alliance in a face-to-face video interview. VCE's $3 billion Vblock business contains Cisco UCS servers and networking solutions.

Cisco declined to specifically comment to CRN regarding its future relationship with VCE, saying that the Robbins and Michael Dell video "says it all."

When contacted, a Dell spokesperson also pointed to the video as well as an open letter recently published by Michael Dell to customers and partners pledging his support to Cisco and VCE.

"After joining with Dell, VCE's close working relationship with Cisco will continue. Vblock will continue to follow Cisco's compute and networking roadmaps and EMC's storage roadmaps to bring the latest technologies to VCE customers," wrote Michael Dell in the letter. "We know that VCE is a centerpiece of EMC's 2016 plans, and we are extremely enthusiastic about VCE's future and our continued partnership with Cisco."

Partners said the recent campaigning by both sides is an attempt to reassure VCE customers that their VBlock investment is safe. Even before Dell announced its intentions to acquire EMC, solution providers said the writing was appearing on the wall that Cisco, which sold most of its VCE stake in 2014, was moving away from VCE.

In 2015, VCE launched its new VxBlock converged infrastructure system that offers VMware – now majority-owned by Dell -- NSX software-defined networking (SDN) technology for the first time. Vblock originally only supported Cisco's ACI, the company's SDN technology that competes against NSX. VCE offers customers both ACI and NSX options.

VCE last May launched its VxRack hyper-converged infrastructure line using white-box servers.

Cisco, meanwhile, unveiled its competing hyper-converged offering, HyperFlex in March.

VCE President Chad Sakac has said that while Dell PowerEdge servers will become the cornerstone of VCE hyper-converged solutions, converged solutions like Vblock and Vxblock will continue to use Cisco servers.

Partners are expecting to learn more about Dell's new go-to-market strategy in February, which is the start of the company's fiscal year, as well as when the Dell and EMC channel programs will be combined into a single program.

Solution providers aren't betting that the ’C' in VCE will be phased out due to the high profitability of the business and multi-year commitments to customers.

"We're doing very well with VCE. The pipeline is strong and we're not backing off in any capacity," said the EMC Platinum partner. "Cisco is committed to it and Chuck's committed to it … Revenues are too strong to want to disrupt it and Vblock is a three-year commitment."