Chambers To VMware, Competitors: 'You Compete Against Cisco, You Will Lose'3:29 PM EST Thu. Oct. 11, 2012
Cisco CEO John Chambers makes no bones about it: VMware's $1.2 billion acquisition of software-defined networking (SDN) player Nicira makes the virtualization kingpin both a Cisco friend and foe. And that's the way it is, said Chambers, even as Cisco remains closely aligned with VMware and its majority owner EMC.
"Will EMC be a good partnership for us, maybe our best? Yes. Will we compete against VMware as it relates to networking? Absolutely," Chambers told CRN. "And when we compete, we don't lose."
In an exclusive interview with CRN at Cisco's San Jose, Calif., headquarters last week, Chambers referenced comments made by Rob Lloyd, Cisco's president, development and sales, to Cisco's global sales force and to CRN in a September interview, urging Cisco sales people and Cisco partners to "compartmentalize" other vendors in terms of both partnering and competing with Cisco.
[Related: Has Chambers Tipped Hand On CEO Succession?]
"When there's an opportunity to partner, i.e. EMC, we partner. When there's software competition against Nicira, they're a competitor," Chambers said. "Microsoft is a great partner in the data center, maybe a great partner in terms of hypervisors, and then we compete against them in collaboration. IBM may be a partner in some areas and a competitor in others. What you see is an ecosystem."
During Cisco's fiscal fourth quarter earnings call in August, Chambers responded to a question about VMware competition by saying, "Candidly, they need us." Asked about that response during his CRN interview, Chambers said Cisco is pragmatic about its partnerships.
"If the relationship is good, you need each other," he said. "In terms of an area of the market, we are going to continue to be very open. When we partner ... well, I'm not looking at my wife and saying I'm going to partner with you till I find somebody cuter. That wouldn't work. That's how we approach partnerships. We are far from perfect, but we do not say we're going to partner and then move on our peers."
Both Cisco and EMC have made moves in the past year suggesting each wants to keep the other honest, even as the companies strengthen their alliance around their VCE joint venture and the converged data center trend.
NEXT: Cisco Will Own SDN, Chambers Said
Cisco partners say the networking titan is taking a pragmatic approach to the market transition and that perceived conflict between Cisco, EMC and VMware is also an opportunity for the channel to navigate vendor competition on behalf of customers.
"This is a fast-moving, fast-shifting market, so what Cisco is doing reflects the dynamics of that market," said Steve McDonald, director of business development, servers and virtualization, for Softchoice, a Toronto-based integrator and Cisco Gold partner. "I think what Cisco's done well is position themselves in a best-of-breed ecosystem. It's good for partners because we can create blended solutions with best-of-breed hypervisors and offer integration services. That's a lot better than asking customers to be squeezed into explicit terms. We're there to provide the right solution at the right time without getting too locked in to one solution set or another."
"We expect them to work together on certain things and compete aggressively on others," said Gary Alexander, president and CEO of Alexander Open Systems, an Overland Park, Kan.-based solution provider. "Cisco knows the name of the game in that [virtualization] space is still VMware. So there'll be business as usual even as VMware gets its act together on the company it bought."
Despite its partnerships with VMware and others, Cisco doesn't plan to be outgunned in SDN or any other network-centric market transition. Insiemi, the secretive startup into which Cisco has already invested $100 million, is one aspect of Cisco's SDN and virtualized networking approach, and it is expected to be Cisco's definitive counterpoint to Nicira and other SDN startups looking to disrupt Cisco's base.
"Look at these things like software and the data center, which we've seen coming for a long time," Cisco's Chambers told CRN. "Why do you think we did Insiemi? You know what we're going to do there: the best ASICs, the best hardware, the best software team and our speed to market. It isn't just about the number of transistors and capacity; it's about how many spins can you do, and can you get it out there in two to three years, or 12 months? All together, that's a tough team to beat."
Continued Chambers: "If you think about the software aspects and the architectural play, this is right in our home-run area. Some of our peers will come at us with just software-only. Well, then they have to figure out what's in the network, which means they have to take snapshots and program those snapshots. Meanwhile, we open up our APIs. What happens then?"
Cisco's appeal to customers is in both its innovation and its time to market, he said.
"The best technology doesn't always win. While I think we have the best technology here, our key is execution," he said. "We have to execute at Cisco speed with even more consistency than we did two years ago."
NEXT: Cisco Will Partner In Storage, Chambers Said
Cisco's acquisition machine, largely silent during its 2011 restructuring, has roared back to life this year. But despite persistent rumors that Cisco has kicked the tires on NetApp and other smaller storage players over the last few years, Cisco's Chambers said the company prefers to partner in storage.
"We see storage evolving very rapidly," Chambers told CRN. "If you gave the choice between partnering with a player like EMC, and a very good partnership we have with NetApp, or you take it out to related markets like what we have with Citrix, or Red Hat, or Microsoft, or an OpenStack capability, or IBM, I vastly prefer the bigger picture."
Storage is an area where Cisco can expand the "pie" by partnering, not building or buying, he said.
"We've always had a philosophy where we'd like to make the pie much bigger and have a smaller percentage of the pie, instead of having a much smaller pie on our proprietary advantages but a much smaller revenue stream," he added. "It's our culture. We have an open culture; we think that's what wins."
That said, Cisco will continue to be more explicitly aggressive about competition than ever before, Chambers said, whether it's VMware, or HP, or Avaya, or Cisco's most recent "bete noir," Huawei.
"You are seeing us [be] tougher on competition -- make no mistake. I love to compete," he said. "And it isn't just the big guys like HP from 18 months ago; or Juniper, who made fun of us in the Wall Street Journal and said how they're going to pull away from us with these new products that aren't even coming out and now they're laying off people; or an Avaya, who made all this noise about what they're going to do with collaboration versus Cisco; or Huawei that we're getting really good to compete against. They're relatively easy to beat now compared to what they were just 12 to 15 months ago. People realize the many flaws they have when they come to market."
With Cisco on an upswing and other tier-one companies from HP and Dell to Oracle and Microsoft all seeing declines in key areas, expect Chambers and his lieutenants to hammer home Cisco's message to the field.
"I think it's time," Chambers said. "We perhaps took a few more shots than we should have. We're going to err on transparency. But when you compete against us, you will lose. It is that confidence that goes across the board at Cisco, with all the caveats. We all know that we could falter, it's just that I wouldn't bet against us."
PUBLISHED OCT. 11, 2012