Cloud Spawns New Type of Supplier: a 'Vendorgrater'


For a few months now I’ve had a question
rolling around in my head about the long-term
viability of this business experiment called
VCE -- the joint effort of Cisco and EMC that
also has investments from VMware and Intel.

The way I see it is that there are so many issues surrounding
this experiment and so many potential different interests that
it will be worthy of a Harvard Business School case study if
those involved can make it work.

The theory behind the joint venture is that VCE can deliver
an integrated product that leverages the
best technology from Cisco, EMC and
VMware via its Vblock offering. There is
no doubt that Vblock is a solid product
that is well-positioned, and I dare say
may even have the advantage of being
well-timed, for a market that is moving
toward more cloud deployments.

But while that is all true, VCE has
both advantages and challenges that no
other competitor in the market faces,
and it is trying to build a company
built on others’ technology in a way
no other has ever attempted.

On the advantages front, it does have
a special relationship with the three
most important contributors to the venture.
Cisco, EMC and VMware all have
a vested interest in its success. In fact, with Cisco and EMC
each having invested hundreds of millions there is no doubt
senior management wants a return. The best way to get that
return is to help VCE sell lots of Vblock laden with technology
from EMC, Cisco, VMware and Intel. So we can expect that
VCE will have the inside track on technology and business
decisions coming down from its investing parents.

The management challenge, of course, is that while all parties
involved want a strong, successful VCE, the success of their
respective independent company is most important and has to
take precedent. So there are decisions that will undoubtedly be
made by the investors that mean VCE gets no more of an advantage
than its competitors. If it makes business sense for one of
them to do a deal with a competitor, you can bet it will happen.

While VCE has built in Vblock, a robust private cloud platform,
there are competing offerings out there, some of which
use much of the same technology. Fundamentally, VCE’s value,
at least right now, is really that of being a systems integrator
of others’ technology but carries with it a brand of its own.

This arrangement makes VCE neither a pure-play vendor
nor systems integrator. While it is integrating
other suppliers’ technology, it’s
not doing so independently. To make
it even more interesting, VCE is taking
advantage of the channel of its
investing parents as well as building
its own channel.

All this puts VCE in a class by itself and
makes the company a “vendorgrater” --
a word I’ve made up to describe what
could be a new category of supplier as
we further journey to the cloud.

This arrangement comes with a multitude
of challenges. VCE is constrained
in its integration efforts because if it
were to incorporate technology from
competitors, I can’t imagine its parents
would be thrilled. As such, it’s unlikely
to be seen as an independent integrator. So the company needs
to turn this to an advantage by positioning itself as having built
a better mousetrap with technology available to others. If it can
do that, and build a world-class support system around it, this
experiment could work. It’s a management challenge with high
risk and high reward and it certainly will be fun to watch.

BACKTALK: Make something happen. Robert Faletra
is CEO of UBM Channel. You can contact him via
e-mail at robert.faletra@ubm.com.