Partners: HP Open Source Networking Switches Will Hit Cisco Hard

Solution providers Thursday predicted that a new line of Hewlett-Packard branded open source, white-label network switches for the data center will put the financial squeeze on networking market leader Cisco Systems.

"This finally gives the channel a serious competitor to Cisco in the core of the network beyond just edge and campus switching," said an executive for one of the top solution providers in the country, who has tight partnerships with both Cisco and HP. "This gives the HP channel an opportunity to start having conversations with CIOs and CEOs on open source as an alternative to Cisco so those customers can get the economics associated with Facebook and Amazon."

The HP announcement comes just one week after Facebook launched a new open source network switch called "6 Pack." The big difference with the HP open source networking effort may well be the computer giant's global support for its new open source switch line, said the solution provider executive. "That is a big deal," he said. "Customers love the idea of open source but they are terrified that it is not a fully baked recipe and there is no one to support it."

[Related: Feisty CEO Chambers Tells Rivals It's Go Time As Cisco Beats Estimates For Q2 ]

HP said Thursday that the new line of web-scale, white-label, open source switches will be available sometime in March. Pricing for the two network switches that HP said will enable the 10G/40G spine and 10G leaf data center deployments was unavailable.

HP has traditionally said its networking offerings are one-third less than the cost of the Cisco products, but the white-label savings will almost certainly be much greater in web-scale deployments, said solution providers.

HP said that Accton Technology Corp., a Taiwanese manufacturer, will make the switches. Cumulus Networks, a Mountain View, Calif.-based company, will supply its open source Linux network operating system as part of the HP offering.

Solution providers said the HP open source offering takes direct aim at the high margins Cisco makes on its proprietary network switch line and the annuity stream that comes from Cisco's annual SmartNet support for those switches.

"This is a big shot at Cisco," said Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, No. 234 on the 2014 CRN Solution Provider 500. "It's another alternative for customers looking to reduce the cost of networking hardware and the yearly maintenance associated with Cisco's bread and butter, high-margin SmartNet network annuity stream."

Next: Cisco Facing Increased Competition In Data Center Networking Market

Venero said the push by a slew of networking competitors, including Dell and Juniper Networks, has weakened Cisco's position in the core data center networking market in recent years.

Future Tech, for its part, is in the process of replacing its entire Cisco network infrastructure with Dell networking products, said Venero. That rip-and-replace of Cisco networking gear will save Future Tech up to $200,000 in hardware costs along with tens of thousands of dollars in annual SmartNet fees, said Venero.

"The Dell story has always been about open standard products," said Venero. "Now HP is jumping on that with open source switches, which makes sense since open source is being adopted on a wide scale by customers. It is going to be difficult for anybody to compete with that, especially a company like Cisco which is very proprietary in nature."

Future Tech will definitely evaluate the HP open source switches and consider offering them to customers, said Venero.

The HP open source assault comes just one week after Cisco made a networking comeback of sorts, posting an 11 percent increase in switching sales to $3.6 billion for its second fiscal quarter ended Jan. 24.The impressive results, which included robust sales of Cisco's Nexus 3000 and 9000 switches, had Cisco CEO John Chambers boasting that Cisco is crushing the white-label switch product offensive being promoted by the likes of Facebook.

Chambers has said the white-label switches pose a serious security risk for customers. He said integrated security is one reason Cisco's switching business is doing so well. What's more, Chambers said the Cisco brand is stonger than it has ever been.

In 2014, Cisco dominated the network switch market, capturing 66.2 percent market share through the channel, up 3.6 points from 62.6 percent share in 2013, according to market researcher NPD Group, which tracks sales through distributors. HP was second at 12.4 percent market share in 2014, down 1.7 points from 14.1 percent market share in 2013.

The CEO for a large national solution provider, who partners with both HP and Cisco, said it would be a mistake to underestimate Cisco's dominant position in the core data center networking market.

"Most of the big data centers have Cisco at the core," said the executive. "That is a very hard place to unseat Cisco. Competitors have had success on the edge and other areas but not at the core. It's a tall order to take on Cisco there. They are a fierce competitor with an army of sales reps and tons of partners."

Additional reporting by Mark Haranas.

PUBLISHED FEB. 18, 2015