Why would Cisco move down into 25% mainstream server margin business when its networking business has yielded it 65%? That is the question many asked as Cisco announced its Unified Computing System in early 2009. Its marketing said it “..represents a radical simplification of traditional architectures, dramatically reducing the number of devices that must be purchased, cabled, configured, powered, cooled, and secured.”
Some would argue, a new class of infrastructure software – virtualization – had broken down traditional boundaries between computers, storage and networking and Cisco was merely reacting to that trend.
Events in recent weeks are confirming HP, in particular, pushed Cisco to do so.
Before Mark Hurd arrived at HP there was a strong partnership between the two with HP selling hardware, Cisco networking gear. Indeed, HP’s previous CEO, Carly Fiorina was on Cisco’s board. After Mark arrived, HP started to promote its own ProCurve networking brand while continuing the partnership. HP storage networking solutions were proposed most of the time with Cisco high-end switching directors.
Grumbling started when HP introduced its Virtual Connect product in 2006. The industry had been moving to blade servers – easy to expand by plugging in or out new blades into the chassis. But while this made easy for the server administrator, they had created problems for network and storage administration. With Virtual Connect, various network addresses were virtualized inside the module, and so are the links back to the server blades on the other side. So changes in server configuration did not affect network or storage administrators, and vice versa changes in network or storage did not affect the server administrator.
HP claimed that Virtual Connect could increase the productivity of administrators by a factor of three because of this flexibility. The foundation for next generation network virtualization was laid. Rumors started floating that HP saw an opportunity in networks and Cisco saw the HP threat
And as it introduced its Virtual Connect Flex-10 Ethernet module in 2008, HP changed its messaging from administrator efficiency to economics saying it could “cut network hardware costs up to 75%.” Flex-10 distributed the capacity of a 10-Gb Ethernet port into four connections to dramatically lower the cost and complexity of network connectivity.
And by late 2009, the split was accented as Cisco set up a joint venture to tighten relations with EMC around storage HP started more aggressively positioning its own ProCurve networking gear and announcing its own Converged Infrastructure Architecture. Now comes HP’s $ 2.7 billion acquisition of 3Com and it is all-out war.
I am not nice to HP for milking its dominant position in printers and related consumables. Its EDS unit is grossly overpriced compared to cloud competitors. Its software business gets unjustified margins.
But in reverse I need to be generous to HP for disrupting Cisco in network switches and routers.
Comments
HP, the disruptor?
Why would Cisco move down into 25% mainstream server margin business when its networking business has yielded it 65%? That is the question many asked as Cisco announced its Unified Computing System in early 2009. Its marketing said it “..represents a radical simplification of traditional architectures, dramatically reducing the number of devices that must be purchased, cabled, configured, powered, cooled, and secured.”
Some would argue, a new class of infrastructure software – virtualization – had broken down traditional boundaries between computers, storage and networking and Cisco was merely reacting to that trend.
Events in recent weeks are confirming HP, in particular, pushed Cisco to do so.
Before Mark Hurd arrived at HP there was a strong partnership between the two with HP selling hardware, Cisco networking gear. Indeed, HP’s previous CEO, Carly Fiorina was on Cisco’s board. After Mark arrived, HP started to promote its own ProCurve networking brand while continuing the partnership. HP storage networking solutions were proposed most of the time with Cisco high-end switching directors.
Grumbling started when HP introduced its Virtual Connect product in 2006. The industry had been moving to blade servers – easy to expand by plugging in or out new blades into the chassis. But while this made easy for the server administrator, they had created problems for network and storage administration. With Virtual Connect, various network addresses were virtualized inside the module, and so are the links back to the server blades on the other side. So changes in server configuration did not affect network or storage administrators, and vice versa changes in network or storage did not affect the server administrator.
HP claimed that Virtual Connect could increase the productivity of administrators by a factor of three because of this flexibility. The foundation for next generation network virtualization was laid. Rumors started floating that HP saw an opportunity in networks and Cisco saw the HP threat
And as it introduced its Virtual Connect Flex-10 Ethernet module in 2008, HP changed its messaging from administrator efficiency to economics saying it could “cut network hardware costs up to 75%.” Flex-10 distributed the capacity of a 10-Gb Ethernet port into four connections to dramatically lower the cost and complexity of network connectivity.
And by late 2009, the split was accented as Cisco set up a joint venture to tighten relations with EMC around storage HP started more aggressively positioning its own ProCurve networking gear and announcing its own Converged Infrastructure Architecture. Now comes HP’s $ 2.7 billion acquisition of 3Com and it is all-out war.
I am not nice to HP for milking its dominant position in printers and related consumables. Its EDS unit is grossly overpriced compared to cloud competitors. Its software business gets unjustified margins.
But in reverse I need to be generous to HP for disrupting Cisco in network switches and routers.
HP, the disruptor?
Why would Cisco move down into 25% mainstream server margin business when its networking business has yielded it 65%? That is the question many asked as Cisco announced its Unified Computing System in early 2009. Its marketing said it “..represents a radical simplification of traditional architectures, dramatically reducing the number of devices that must be purchased, cabled, configured, powered, cooled, and secured.”
Some would argue, a new class of infrastructure software – virtualization – had broken down traditional boundaries between computers, storage and networking and Cisco was merely reacting to that trend.
Events in recent weeks are confirming HP, in particular, pushed Cisco to do so.
Before Mark Hurd arrived at HP there was a strong partnership between the two with HP selling hardware, Cisco networking gear. Indeed, HP’s previous CEO, Carly Fiorina was on Cisco’s board. After Mark arrived, HP started to promote its own ProCurve networking brand while continuing the partnership. HP storage networking solutions were proposed most of the time with Cisco high-end switching directors.
Grumbling started when HP introduced its Virtual Connect product in 2006. The industry had been moving to blade servers – easy to expand by plugging in or out new blades into the chassis. But while this made easy for the server administrator, they had created problems for network and storage administration. With Virtual Connect, various network addresses were virtualized inside the module, and so are the links back to the server blades on the other side. So changes in server configuration did not affect network or storage administrators, and vice versa changes in network or storage did not affect the server administrator.
HP claimed that Virtual Connect could increase the productivity of administrators by a factor of three because of this flexibility. The foundation for next generation network virtualization was laid. Rumors started floating that HP saw an opportunity in networks and Cisco saw the HP threat
And as it introduced its Virtual Connect Flex-10 Ethernet module in 2008, HP changed its messaging from administrator efficiency to economics saying it could “cut network hardware costs up to 75%.” Flex-10 distributed the capacity of a 10-Gb Ethernet port into four connections to dramatically lower the cost and complexity of network connectivity.
And by late 2009, the split was accented as Cisco set up a joint venture to tighten relations with EMC around storage HP started more aggressively positioning its own ProCurve networking gear and announcing its own Converged Infrastructure Architecture. Now comes HP’s $ 2.7 billion acquisition of 3Com and it is all-out war.
I am not nice to HP for milking its dominant position in printers and related consumables. Its EDS unit is grossly overpriced compared to cloud competitors. Its software business gets unjustified margins.
But in reverse I need to be generous to HP for disrupting Cisco in network switches and routers.
November 16, 2009 in Industry Commentary | Permalink