Cisco: Post-VCE, Is It a Wounded Bear?

In its October 2014 quarterly earnings statement, EMC2 announced that it was taking VCE under direct control and moving it under the umbrella of its federated companies by buying back a significant proportion of Cisco’s share in the company, leaving Cisco with only 10%. Cisco also announced the same.

There is a saying, “don’t poke the bear.” It is commonly used as a warning to prevent someone from doing something that might provoke a negative response or backlash.

From the position of EMC2, this makes sense; it allows it to grow its storage company, push VMware ESX into more environments, integrate its newly announced SDDC offering that blends several technologies from the five members of the federation onto Vblock hardware, and lock more people into its view of the world. It also allows VMware to push NSX into VCE, or should I say VcE?

It is an open secret that relations have been fractured within the alliance for a number of months, if not years, notwithstanding all the rhetoric to the contrary, most of it coming from Cisco, to be fair. Cisco had its nose pushed out of joint due to VMware’s purchase of Nicira. EMC was surprised by Cisco’s moving into the storage market through its purchase of AFA vendor Whiptail. It was also surprising that the rumors of an EMC/HP merger were admitted as truth a couple of weeks ago. If that had come off, it would have added even more pressure to the already strained relationship. (VCE environments have traditionally used Cisco UCS servers without exception.) I will also put forward EVO:RAIL and EVO:RACK as additional nails in the relationships coffin. It is telling that Cisco is the only major compute manufacture not to have announced a EVO:RAIL model. Add to that Cisco’s jumping in bed with SimpliVity. With all this going on, it is a wonder that VCE has lasted this long, as Chambers stated in 2009.

What is harder to understand is Cisco’s position regarding this divestment of interest. The majority of UCSes were most likely purchased as a result of VCE-delivered Vblocks. Yes, some were sold as a part of a FlexPod tie-up, but that is more of a loose coupling rather than a focused company. Some may have been sold through its partners, albeit a quick look at the partner page for the UK for UCS shows the likes of Fujitsu, which surely would lead with its own server brands, and IBM again, which surely would lead with Lenovo. A large proportion of the rest are FlexPod partners like ANS, or routing and switching specialists. Cisco, whilst part of this alliance/company, has managed to enter a market sector and has moved to become the fourth biggest compute vendor by numbers sold and revenue by 2014. It will be interesting to see what the latter half of this year and 2015 bring in numbers.

One possible outcome is that Cisco could move closer to its FlexPod partner NetApp, perhaps even acquiring the Sunnyvale-based storage vendor (this has been mooted previously) or even Fort Lauderdale–based Citrix, although I feel this is less likely now that Citrix has distanced itself from XenSource and is struggling with its legacy XenApp business.

I am sure that Cisco will say that it is moving away from control of VCE to concentrate on core markets, but even that seems hollow, what with the movement of key personnel from Cisco to VMware and its ACI marketing team having appeared to have gone quiet.

This is not to say that Cisco is about to implode, but I feel that it has moved from being seen as an innovator in the networking market space to that space that IBM held in the late 1980s and early 1990s. Remember “Nobody got sacked for buying IBM”? The only problem is that the market has moved on from those days. We are more educated and willing to try new technology: just look at the sudden growth of companies like Nutanix and PernixData. I have a soft spot for Cisco; I spent some of my early IT career as a network analyst building and supporting its equipment. I really hope this is not its Battle of the Little Big Horn, with it being cast as Custer; however, it seems to me that the bear has given up, and the poking is not making it angry, but just driving it farther back into its cave.

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