Cisco Systems Inc. and Hewlett-Packard Co. have shown their fangs and are out for blood.

The two powerhouses' relatively peaceful coexistence has been burned -- torched to the ground -- as each encroaches on the other's territory. And among the embers are partners left wondering if, or more importantly when, they'll be forced to choose sides as the battle hits a crescendo.

Partners see it coming, but few are quick to talk about the war that's being waged. One large partner that generates a great deal of revenue through both Cisco and HP sales said that just discussing the kerfuffle is "very high risk" and "could open a huge storm." He's nervous, and for good reason. Upsetting either vendor could hurt, and the fallout could be to the tune of tens of millions of dollars.

"HP and Cisco are starting to cause problems in the channel," that partner said, asking his name not be used. VARs are leery that one of their key vendors may pull their certifications or status if they make a deal with the other side's gear.

They're scared. But at the same time, they're excited, because tough competition sparks innovation and innovation eventually trickles down to more sales.

"Anything that makes the channel more competitive is beneficial," said Justin Burleigh, manager of operations at Tempe, Ariz.-based solution provider Network Infrastructure Corp. "But whenever you have two Goliaths of infrastructure competing, something's got to give."

Who Started It?

Pinpointing when and where the chest beating started is proving difficult. HP has made waves with its ProCurve line of networking switches and equipment, chipping away at some of Cisco's market share. HP kept ProCurve relatively quiet for years, just recently trumpeting it as a true alternative to Cisco's higher-cost gear.

Cisco battled back, launching the Unified Computing System (UCS), a solution set that ties together the network, compute, storage, virtualization and servers into one cohesive fabric. UCS essentially propelled Cisco into the blade server and data center game, one in which HP has been a mainstay for years. Though Cisco is only planning to ship 200 UCS systems in the first round and has only about 20 partners selling it, "Cisco is creating a market and creating a buzz," one solution provider said.

Another stone was cast the day after Cisco unveiled UCS. That day, HP Canada issued a press release with the headline "HP To Cisco: You Have A Lot To Learn About The Data Center." In the press release, HP pointed out holes in Cisco's data center portfolio, calling the San Jose, Calif.- based networking behemoth's data center innovation "reactionary and laggard."

Then there's collaboration and unified communications, an area Cisco sees as a $34 billion opportunity for itself and its partners and one in which it has heavily invested. In May, HP lifted the curtain on a four-year, $180 million partnership with Microsoft Corp. to develop, build and service unified communications and collaboration solutions. That was the straw that broke the camel's back, prompting Cisco to come out swinging, and swinging hard. It started with a blog post from Cisco global channel chief Keith Goodwin, claiming that the HP-Microsoft unified communications pairing appears more of a direct play than a channel-friendly partnership.

Cisco's spouting crescendoed at its annual Partner Summit in June. With the fury of a howitzer, Cisco spit anti-HP sentiment loud and often. On stage, Don Proctor, senior vice president of Cisco's software group, said HP leaves partners out of the loop and lacks the networking chops to be a true player in the collaboration space.

"Don't buy into the hype. This is about HP and Microsoft taking the business direct and cutting you out," Proctor told roughly 5,000 Cisco partners -- 1,500 in attendance and 3,500 virtually -- later adding, "You can't build a world-class collaboration solution unless you have a world-class network, and they don't have one."

HP denied it, saying its UC offerings with Microsoft will create a host of opportunities for the channel. "We have been and will continue to be a channel-based company," said Karl Soderlund, HP America's vice president and general manager of sales and marketing for ProCurve. "We are not setting up a direct model."

Here's The Punch Line

The newfound animosity -- from Cisco's side, at least -- began not long after the appointment of Rob Lloyd as Cisco's executive vice president of worldwide operations, considered by many to be the most likely successor to Chairman and CEO John Chambers. Before Lloyd took over for Richard Justice earlier this year, HP and Cisco kept their competition behind closed doors. Now the door's been opened wide.

"I think we've been taking too many punches with regard to the competitive landscape and not punching back. We'll keep it clean, but for you we need to help define the value proposition on why we're a better choice than [HP] ProCurve," Lloyd said, garnering applause from the audience during his Partner Summit keynote. "I'm encouraging all of us to punch back -- with a little bit of class -- and if we get it right, it will make a big difference in the market."

Regardless of who started it, it's on now. And Cisco, which typically sticks to Chambers' mantra of not discussing the competition, has exploded into a booming chorus, calling for the head of its new foe.

"HP is a competitor, and we're going to have fun competing. We've never had a $110 billion competitor before," Chambers said. "The last time we had this type of opportunity in front of us was with Nortel, Lucent [and] Alcatel: great companies, and we held our own pretty effectively."

"We are competing with HP. Period. End. It is competition," added Wendy Bahr, Cisco's senior vice president of U.S. and Canada channels, noting that partners will be the ones who ultimately decide which is better.

HP: Who Us, Worry?

HP executives, meanwhile, are less fired up than their Cisco counterparts when asked about the burgeoning rivalry.

"It looks to us like Cisco is making its assessments to extend into what they see as adjacencies. But it's been largely saber-rattling," said Paul Miller, vice president of marketing for HP's Enterprise Storage and Servers business. Miller speaks in measured tones, without much inflection, choosing words that seem designed to put the rivalry to bed rather than stir it up. Of Cisco's initial server offerings in UCS, which feature blade servers and Cisco's newer UCS C-Series rack servers, he claimed that Cisco at this point has none of the strengths of more established rivals to pose a credible threat to HP.

"Dell has the volume side and IBM has the IT side. We think we have the right formula to compete against both. We look at guys like Cisco and EMC, and they're kind of stuck without either a total portfolio of products and services like IBM or a total volume economic engine like Dell," Miller said.

"What partners need to do is to take a step back and look at it from a customer perspective. Are they going to put customers at risk over the long term? Resellers need to really watch out that they are not getting wrapped up in a lot of hype and overselling of capabilities for what customers need to have today."

HP's Miller and Soderlund characterize the rivalry as largely one-sided, with Cisco having more to fear from HP's established ProCurve business gaining strength than HP has to worry about from Cisco's early efforts to build a server business.

"This is not as much of a competitive situation as it is a Cisco response to HP's growth in the marketplace with ProCurve," said Miller. His colleague Soderlund adds, "We're not reacting to what Cisco's doing. We're just continuing to execute on what we've been doing."

While the HP executives largely stick to the narrative that the other company is the upstart in this latest round of competition, Soderlund isn't above slinging a few arrows in Cisco's direction. "Cisco's dominance has not really followed Moore's Law. They've held on to that market share and those margins for too long," he said.

Is Soderlund claiming that Cisco's success in the networking hardware segment is somehow artificially enhanced? Intel founder Gordon Moore's famous "law" specifically predicts that semiconductor manufacturers will be able to double the density of transistors on an integrated circuit roughly every two years while maintaining the same cost of materials. But many people extend the basic principles of Moore's 1965 observation about the complexity of integrated circuits to predict a steady pace of price-for-performance gains in computer technology in general.

Soderlund suggests that the performance of Cisco products has improved over time in accordance with one principle of Moore's Law but that the prices for those performance gains as passed on to Cisco's customers haven't dropped the way the second leg of Moore's Law would predict.

"Look, has Cisco been affected by Moore's Law the way other industries have, whether you're talking about chips or PCs? We don't think they have," he said.

The Partner Dilemma

Partners are less concerned with the he said/she said and more interested in which company is bringing innovative products to market and which presents the best profit opportunity. At the same time, VARs fear that either Cisco or HP will take away their business if they lead with one or the other (see story on the ProCurve battle, p. 26). One partner who asked not to be identified said he's already been told by HP to lead with ProCurve networking gear and not Cisco when selling HP servers, or else.

"One of the major issues going on right now is when customers are buying HP servers, HP is coming back and saying if you sell Cisco networking and not ProCurve we're not going to do as much business with you. HP is stepping up trying to pressure partners to sell ProCurve," that partner said.

But according to Don Bialik, CEO of Calgary, Alberta-based Long View Systems, playing the ultimatum game will work against the vendors. Long View, which also works closely with both Cisco and HP, looks at its vendor relationship balancing act as "bringing three girls to the prom and keeping them all happy," Bialik said.

While Cisco's and HP's fight has become more public, Bialik said it's nothing new, though it appears that the "gentleman's agreement to stay out of each other's hair" the companies had during Carly Fiorina's tenure as HP's CEO, which also involved a stint on Cisco's board of directors, is long gone.

Still, Bialik said, if Cisco and HP do pressure their partners to choose, it'll be to the companies' detriment.

"If one side gives us what amounts to an ultimatum, that will work against them," he said. "If you make me choose, I'll choose the other one."

Network Infrastructure's Burleigh agreed. "If they say, 'go with us or go somewhere else' people are going to go somewhere else," he said, adding that partners are still weighing which camp they'll choose.

Still, both vendors swear up and down the ultimatums won't come from them.

"They won't be forced to choose by us," Cisco's Bahr said, adding its technology, solutions and architectures stand on their own and it lets customers and partners decide where they want to invest. "We believe our architectures and solutions are better for the customer."

HP said the same; it won't force partners to make a choice, but instead will let its technology lead the charge, and the exodus away from Cisco.

"Partners are going to pick what wins deals," HP's Miller said. "The strategy we have will win deals more quickly and will make partners richer at the end of the day."

But Wait, There's More

Cisco and HP aren't the only ones butting heads wanting to control both the network and the data center. Other vendors that are traditionally network-focused have come out of the woodwork with a data center play.

Juniper Networks:

The Sunnyvale, Calif.-based networking vendor last year launched its Data Center Infrastructure Solutions architecture. Then, earlier this year, Juniper offered insight into its new Stratus project, a single data center fabric with virtualization and cloud-computing at its core.

Brocade/Foundry:

Alone, one was a data center player and the other was an IP networking player. But when you combine the two, they create a data center networking rival for both Cisco and HP. Brocade acquired Foundry last July and since then, it has billed itself as the only true alternative to Cisco.

Extreme Networks:

Another traditional networking player, Extreme this year put the final touches on its next-generation data center line in its bid to catch a piece of the data center pie. With the release of its BlackDiamond 8900 Series Modules for BlackDiamond 8800 Series switches, Extreme's new gear can be used end-of-row or top-of-rack to build Gigabit or 10 Gigabit Ethernet data centers.

3Com:

In a move to re-establish itself in the enterprise market it abandoned years ago, 3Com this year brought its H3C line of gear to the U.S. and at the same time launched the new H3C S12500, a data center aggregation and core switch that offers a 6.6-Terabit fabric, can transmit 2.2 billion packets per second and offers up to 512 10 Gigabit Ethernet ports and 864 1 Gigabit ports. 3Com is billing the switch as a rival for Cisco's Nexus 7000 data center offering.

Did Someone Just Throw A Curve Ball?

Cisco Systems is reportedly telling its cadre of solution providers to reduce prices on its networking gear to match those of rival Hewlett-Packard's ProCurve Networking division, a move that has partners of the two vendors worried that winning a price war is a losing battle for the channel.

Two different Cisco and HP VARs have told CRN that they have been verbally contacted by Cisco and told to beat ProCurve pricing at all costs in a bid to win more deals. One VAR said the price matching is part of a new program Cisco is preparing dubbed "Ahead Of The Curve." Both VARs asked that their identities not be used for fear of retribution from Cisco.

"Cisco made it very clear in verbal communications that HP is the enemy and they're not going to lose business to them," one VAR said. "They said they're not going to lose to ProCurve on price."

And ProCurve has also gotten in on the price war action, offering 20 percent off its list price to customers who trade in Cisco equipment through Oct. 31.

Cisco has denied having a ProCurve price matching initiative but has refused requests for interviews on the subject. Instead, one Cisco channel executive crafted a blog post highlighting Cisco's position. The post, written by Wendy Bahr, Cisco's senior vice president of U.S. and Canada channels, neither denies nor confirms whether Cisco is telling partners to match ProCurve prices.

And while Cisco has refused to comment, ProCurve executives are embracing the alleged price matching, calling it "fantastic." "The win for us is awareness and the entrance into new opportunities," said Karl Soderlund, ProCurve vice president and general manager of sales and marketing for the Americas. "We're the price performance leader. We've built our business around it. We don't believe they're going to win more deals. This is another opportunity to drive us into more accounts and get more at bats."

Some VARs, however, said that it isn't in Cisco's nature to fully match ProCurve's pricing, which is typically between 20 percent and 40 percent lower. Instead, they see Cisco matching prices on a case-by-case basis.

Mark Hilz, president and COO of INX, a Lewisville, Texas-based solution provider, said he has not been told to match HP pricing, but added Cisco has gotten more aggressive on pricing and value proposition in response to ProCurve gaining more market visibility.

"They are willing to get aggressive and not let HP have any more market share," Hilz said. Cisco is more likely to offer aggressive pricing on deals where enterprises and certain verticals are under tight budgetary pressure and are extremely price-conscious, he said. Hilz said in some cases that has resulted in price matching to thwart HP from gaining market share, but those cases are few and far between.

"I don't doubt that on specific deals they get down to skinny margins when they have to," said Don Wisdom, president of Datalink Networks, a Santa Clarita, Calif.- based solution provider. "It's one thing to do one-offs and treat individual deals and discounts pretty deep," but a channelwide initiative to match ProCurve pricing seems unrealistic, Wisdom said.

UBS Securities analyst Nikos Theodosopoulos agreed that it would be "out of character" for Cisco to slash prices across the board, but that the vendor could be dropping its prices to edge out ProCurve on specific deals.

"I think Cisco, in select deals, is doing something to better compete with ProCurve on their lifetime warranty and pricing," he said, adding that it's a "case-by-case, select deals situation."

Theodosopoulos also said that "it's very non-Cisco to just go and match HP's pricing across the board."

Despite it being out of Cisco's character to wage a price matching war, Theodosopoulos said he can't dismiss the idea completely.

"I can't rule it out. Anything is possible," he said. "But you can't go back once you do something like that."

When Giants Collide

HP vs. Cisco is just one of the coming battles between technology's titans

Surprise, surprise. The contraction of the economy has led to accelerated consolidation of market positions by big IT vendors -- and some major players are really starting to step on each other's toes. What we're talking about is the carving out of brand-new theaters of war by industry giants who haven't traditionally competed with each other. Here's a quick look at some new vendor battles that have technology watchers breaking out the popcorn.

HP vs. IBM vs. Dell

The retail industry's mantra is "location, location, location" -- and tech companies are building their own "rule of three" around services. IBM really kicked its service transformation into overdrive about six years ago, and its success has shown that providing IT services for recurring revenue is a lucrative antidote to falling margins in a world of commoditized hardware. IBM's traditional rivals HP and Dell clearly want a piece of that action. Dell, in addition to shoring up its storage portfolio with the acquisition of EqualLogic in early 2008, gobbled up managed services software vendor Silverback in a less-noticed move that has quietly bolstered its services offering for SMBs. HP's acquisition of EDS last year means that IBM's major enterprise-level service engagements are squarely in HP's sights, but the company has also been very public in its effort to crack the SMB and midmarket segments. Can HP build a services business that pleases everybody -- or has the company bitten off more than it can reasonably chew?

Google vs. Microsoft

Microsoft's Bing search engine has garnered a lot of the headlines, and it was no mean feat for Redmond to break into search in such a big way. But for our money, the most interesting battle between Microsoft and Google isn't in search -- it's in the cloud, where Microsoft is attempting to counter upstart office products in the Google Apps lineup with its own Web-based versions of Microsoft Office, and at the OS level itself, where Google's ambitions with its Chrome venture could be the tech story of 2010.

Oracle vs. Oracle

Nobody doubts that Oracle CEO Larry Ellison has some grand plan for Sun, which Oracle said it would acquire back in April. But what that plan entails is somewhat of a mystery. Should the deal go through, Oracle would inherit a hardware business, stewardship of the Java platform, the Solaris OS and, of course, MySQL. Any one of those might have prompted Oracle to make the move. But suppose Ellison and Co. plan to blend as much of Sun into their own future as possible? One theory is that Oracle is preparing to hit the cloud in a big way. With Sun, Oracle doesn't just gain a server-building business -- it's also the owner of a heckuva lot of servers, a very cloud-friendly relational database management system and a highly scalable OS. Sounds like most of what you'd need to build massively scaled-out data centers that deliver SaaS products. Of course, that's where you'll also find the rub -- if Oracle is serious about taking to the cloud, it'll have to artfully navigate a potentially treacherous transition away from its softwarein- a-box model without too much cannibalizing of its own revenue streams.

And not being able to turn back is what some VARs fear. "Whenever you bring price into the equation, everyone gets squeezed," one VAR said. "I can tell you one thing; our margins will not go up."

With additional reporting by Damon Poeter and Jennifer Hagendorf Follett.