Cisco's Hyper-Converged Strategy Is To Partner, Not Acquire, Says CEO Chuck Robbins

In an exclusive interview with CRN, Cisco's new CEO Chuck Robbins said the networking giant is currently very happy partnering with companies for hyper-converged infrastructure solutions compared to creating its own product line.

"As we think about the overall IT architecture that our customers are going to be looking for in a few years, so far our partnerships have been very successful on both the storage side as well as with the SimpliVity side on the hyper-converged," said Robbins. "So as long as our customers are pleased with those solutions and what they're providing to them as it relates to what we need to do ... for now, we're very happy with the partner model."

Partners have been questioning for months what the San Jose, Calif.-based networking giant's hyper-converged strategy will be as the market begins to explode. Research firm IDC estimates that the hyper-converged market will hit $806.8 million in sales in 2015, growing to $1.57 billion in 2016.

[Related: Cisco's Chuck Robbins On VMware's Shortcomings, The HP Split And The Future Of Cisco-SimpliVity]

Cisco partners with hyper-converged software developer SimpliVity, where Cisco sells the Westborough, Mass.-based startup's hyper-converged software and hardware card on UCS servers.

Robbins told CRN that hyper-converged is an area Cisco is often questioned about. Instead of creating its own internal hyper-converged product line or acquiring a company, Robbins said Cisco will stick with its partnership strategy with SimpliVity for the time being.

"We'll see how things evolve over time," Robbins said.

Partners were cautiously optimistic about Cisco's decision to stay the same course in the hyper-converged space for the time being.

"Probably what our approach will have to be is we have hyper-converged through other manufacturers we have partnerships with -- especially like EMC who I think a lot of Cisco partners are EMC partners -- so, obviously, when we have a hyper-converged requirement, that might push us to that direction for the time being," said Robert Keblusek, CTO at Downers Grove, Ill.-based Sentinel Technologies, a Cisco and EMC partner ranked No. 128 on the 2015 CRN Solution Provider 500.

Keblusek said Sentinel does not have a partnership with SimpliVity but will start looking into how they can go to market with the company.

"If Cisco is going to be doing more and more introductions with them, then that might be something that is important for us," he said.

Another solution provider who partners with Cisco and EMC said the networking giant having its own hyper-converged product line could help drive sales.

"If you're going head to head with Nutanix, you're putting something together with Cisco and a third partner versus them walking in with a full complete solution right out of the box," said the executive, who declined to be identified.

"But Cisco can go into any customers and say, 'We've got a Cisco play in whichever platform you pick versus having one hyper-converged solution,' because they got some great partnerships," he said.

Solution providers agreed that Cisco is not pushing SimpliVity hard in the partner community to sell.

"I see us driving it, but I don’t necessarily see Cisco coming to us and saying, 'Hey we're in the hyper-converged marketplace with this solution set, go out and tell your customer base,' said Scott Perry, manager of collaboration and data center at Cisco partner Force 3, a Crofton, Md.-based solution provider ranked No. 79 on the 2015 CRN Solution Provider 500 list.

Perry is in favor of Cisco partnering with SimpliVity compared to the networking giant creating its own hyper-converged product line.

"A lot of our customers already use Cisco in their data centers and they're familiar with UCS and Cisco's hardware strategy around UCS, so coupling with SimpliVity to us is an attractive way for us to dive into that customer data center versus trying to bring in a whole new product or portfolio where sometimes you're trying to reinvent the wheel or the sales cycle again," said Perry.

SimpliVity CEO Doron Kempel said the Cisco partnership has opened up a "floodgate" of hyper-converged sales at his company. He recently told CRN that the partnership allowed SimpliVity to post record sales in July.

The hyper-converged platforms market will grow at a five-year CAGR of 71.6 percent from 2013 to 2018 as customer demand for a more streamlined virtualization experience increases, according to a recent report by Technology Business Research.

Cisco's partner community was buzzing in May with rumors that it was eyeing the purchase of hyper-converged startup Nutanix. The speculations were soon squashed by Nutanix CEO Dheeraj Pandey who said in a statement there was "no truth" to the rumor and that Dell -- who Nutanix has an OEM agreement with -- would have first dibs if the company ever decided to be acquired.

Solution providers said the Dell-Nutanix and Cisco-SimpliVity partnerships are similar, with no vendor having a leg up on the other because neither has its own hyper-converged offerings.

On Wednesday, Cisco reported record revenue growth of $12.8 billion for its fourth-quarter fiscal year 2015, beating analysts' $12.6 billion revenue estimates. Product sales reached $9.9 billion for the quarter, while service revenue hit $2.9 billion -- both showed a 4 percent growth rate from the prior year's quarter.

PUBLISHED AUG. 13, 2015