No Fear Here: Cisco Partners Downplay HP With Bigger Issues At Stake

When Cisco's Keith Goodwin opened this week's Partner Summit on Tuesday, he noted what a difference a year makes. He was addressing the recovering economic climate in the channel, but Goodwin might just as well have been talking about Cisco's competitive rhetoric toward rival HP: unmistakable at the 2009 Partner Summit in Boston, but barely a footnote at this year's Summit in San Francisco.

According to partners, that's no accident. And to many, it's also refreshing: even with all the anti-Cisco chest beating happening at HP's Americas Partner Conference in Las Vegas this week, many Cisco VARs say they don't see HP so much as a market share threat in networking as they do a healthy competitor to keep Cisco honest.

"There was a lot of backlash that came from Cisco saying 'game on,' last year," said Peter Belyea, vice president of Teracai, an East Syracuse, N.Y.-based solution provider. "I think now they realized that they don't have play like that. They can set the strategy and focus on what's important."

Some partners see Cisco's comparative lack of saber rattling as another form of Cisco calculation. In other words, knowing that HP would challenge Cisco on the networking front, thanks to its acquisitions of 3Com and the debut of HP Networking, Cisco saw an opportunity to be perceived as taking the high-road.

"Well, they are trying to take the high road," said Kari Yent, vice president of strategic alliances at Force 3, Crofton, Md. "Staying away from that [HP bashing] is a good competitive strategy this year."

Last year, Yent reasoned, Cisco's Unified Computing System (UCS) was still brand new and Cisco needed to come out swinging with more aggressive messaging to help convince partners it was serious about server technology and the data center.

To some VARs, however, the messaging is now confused.

"They misplayed their hand on this one," said one Cisco VAR who asked not to be identified. "They can't just spend an entire Partner Summit calling out HP and then the next year pretend like it's not really an issue. If we're expecting fiery sermons, it's because we were conditioned to expect that last year."

Still, admitted the solution provider, to see Cisco buckle down and focus its Partner Summit discussion on high-level strategy has been "refreshing." A lack of HP-baiting is also a sign that there's a bigger elephant in the room than HP: Cisco's ongoing supply chain woes, which has been by far the most dominant topic among VAR and Cisco executive conversations at this year's Summit.

"It's affected us, no question about it," said Gia McNutt, president and CEO of Special Order Systems, Campbell, Calif., who said that compared to supply chain issues and strategy, Cisco's rivalry with HP seemed almost "silly."

"It hasn't been devastating, but it has been significant," she said.

NEXT: Wrestling With Product Availability

Goodwin, Cisco's senior vice president of worldwide channels, and Randy Pond, executive vice president of operations, processes and systems, said during the opening keynote Tuesday that component shortages, changes in the Chinese labor force and the magnitude of the business decline last year were all to blame.

But there wasn't much in the way of explanation for how the problems would be fixed, VARs noted.

"It's great that they addressed the elephant in the room, but they didn't answer the questions," Belyea said. "It's costing us opportunities at this point."

"I've seen some promise in accelerated delivery, but it's still a substantial threat," said Rus Healy, CTO of Annese & Associates, Herkimer, N.Y. "We've lost tens of thousands of dollars in revenue and lost customers. They gave us the reasons but they didn't articulate concretely what the strategy is."

"It has been frustrating, but at a certain point, the world economy is not under Cisco's control," offered Kent MacDonald, vice president of network services for Long View Systems, a Calgary-based solution provider. "Have they made the situation as positive as the channel would have hoped by now? No. Are they improving? Yes."

Force 3's Yent was similarly optimistic.

"There have been customer frustrations, certainly, and we could use a more accurate forecasting system for ship dates," she said. "But I'm not sure what they can do beyond what they're already doing."

Identifying the problem at the start of the conference -- Cisco's most public statement so far on the issue -- was a reassuring sign, other observers suggested.

"I think it was a brave thing to do," said Jon Pritchard, president of Comstor Worldwide, the Cisco-centric business arm of distributor Westcon Group. "Let's be clear: products constrained versus products not available is a huge difference. From where we sit, we have a huge number of backorders compared to what we'd normally see, but very few of those backorders have resulted in order cancellations. These are genuine customers and their support has been quite positive for us."

NEXT: The (Network) Vision Thing

Compared to the supply chain issues and Cisco's vision for how solution providers will compete in collaboration, in video and in the data center, the net effect of HP at the Partner Summit has been one of minor distraction -- though never too far from the discussion.

Some VARs said the argument that partners can make bigger profits selling HP over Cisco in networking is true in the sense of undercutting Cisco on price. But Cisco's bigger picture, they said, is more compelling: an organized strategy around building converged, video-ready data center infrastructure with the network at the center of it, and driving products and technology that support that strategy.

"Margins are compressed on the Cisco side, no doubt. It's not a viable product-only business model for the channel, so HP positions itself as better margin and lower cost," Belyea said. "But where's the message about major infrastructure investment there? You can't just follow what Cisco's doing at a lower price."

Cisco can follow through on its promise to be a viable competitor to HP without replaying the aggressive rhetoric, others said.

"Last year Cisco took action and also gave HP notice on the reseller contract side. They heard what the channel community has asked for them to do, and they took appropriate action. Looking in the rear view mirror isn't going to change it," said Long View's MacDonald. "At the end of the day, the challenge in the networking side is a positive development. May the best technology win."

According to Comstor's Pritchard, the HP vs. Cisco rivalry is no more dramatic than other examples of business bravado the channel sees every few years.

"Cisco is going to be successful in this space. Whatever you say about anything, the technology and how it fits together is going to continue to be there," he said. "My view? Let the customer decide. You're always going to have spats in the market. Cisco is ambitious and you weren't just going to have HP and IBM move aside, right? What's interesting now is the HP approach versus the IBM approach. HP is very publicly puffing its chest. IBM is saying, I prefer to be everyone's friend, where's the joint opportunity. In the end, all of them are going to do what they're going to do."