Tug-Of-War

The most intriguing aspect of a summit meeting held in late August between Microsoft CEO Steve Ballmer and Cisco Systems Chairman and CEO John Chambers was that the two companies felt compelled to meet at all.

Ballmer and Chambers weren't coming together to announce new development or partnership plans; in fact, Microsoft's closest communications alliance is with Cisco archrival Nortel Networks. But with Microsoft stepping up its bid for a vanguard position in the unified communications market, the two Goliaths saw the need for a high-profile event showcasing their commitment to technical interoperability and fair competition on the sales battlefield. Amid the plush opulence of Manhattan's Mandarin Oriental hotel, with acclaimed interviewer Charlie Rose on hand to moderate and add gravitas, Ballmer and Chambers joined together on stage and spoke of their armistice.

"Even where we're going to compete, what the customers want is, 'Tell me you're going to interoperate. Don't make me throw away one relationship because of the other,' " Chambers told the gathered partners, customers and press. "The days of you being either friend or foe are over."

The unusual meeting between dueling tech titans spotlighted an uneasy alliance-of-necessity that VARs say is slowly reshaping the unified communications field. While Cisco and Microsoft are each aggressively expanding into new areas that put them into direct product competition, unifying their technology and playing to each vendor's strengths is a profitable opportunity for solution providers.

D&H Distributing launched a training and incentives program in May to encourage its resellers to build combined Microsoft/Cisco solutions. An internal survey showed that 90 percent of D&H's VARs worked with either Microsoft or Cisco, but not both. Through training, the company hopes to blur those lines.

"We found that if resellers see both Microsoft and Cisco going after a deal, they'll stand on the sidelines," said Dan Schwab, D&H's vice president of marketing. "As a third party, we're able to illustrate some of the scenarios where both technologies work together fluidly, and take away some of the fear. Our initial results are very encouraging. When partners sell both technologies to the same end user, the average transaction size was 40 percent larger, because you're selling more technology."

JK Computing owner Jim Brubaker, in Blairsville, Pa., began dealing in Cisco products at D&H's urging. Customers love the Cisco brand, and combining Cisco routers and other networking hardware with Microsoft server software into one solutions bundle sourced entirely through D&H gives JK Computing better margins than selling hardware and software separately, Brubaker said.

The challenge for VARs is to walk the tightrope between two dominant and demanding vendors. In search of growth opportunities, each giant is eyeing the other's turf. Hardware kingpin Cisco has software aspirations. It recently spent $3.2 billion to acquire Web conferencing vendor WebEx, which competes directly with Microsoft's Live Meeting. Meanwhile, Microsoft's Office Communications Server and surrounding product portfolio go directly after Cisco's VoIP infrastructure business.

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