Robert C. DeMarzo

Channel Centric

June 19, 2009

For a change, tough talk emanated out of Cisco's recent partner conference. Senior executives had stiff spines and sharp tongues when it came to the competitive set and those Tweeting from the conference were all, well, a-twitter over Cisco's new competitive stance against HP. Many solution providers said it was about time Cisco got tough. It's one stance you don't get from Cisco, perhaps because the company's leader is rather cerebral and soft-spoken. Inspiring? No doubt. But you cannot compare him to Microsoft's Steve Ballmer, who can literally foam at the mouth when it comes to talking about the competition.

Partners heard the following: "We are competing with HP. Period. End. It is competition," said Wendy Bahr, Cisco's senior vice president of U.S. and Canada channels, adding that partners will be the ones who ultimately decide which is better. Rob Lloyd, head of worldwide sales, said Cisco is going to be more aggressive because it's rolled with the punches long enough.

Those are fighting words from a company that has enjoyed dominant market share in the networking arena for years. Chambers is fond of including a chart in his presentations comparing Cisco's market value to that of its hapless competitive set, and it is embarrassing for those rivals. But the chart looks different if you compare Cisco to HP. While Cisco does have an edge in stock market valuation to HP -- $110 billion vs. $89 billion -- its sales are substantially smaller as HP has a $117 billion run rate compared with Cisco, which is heading toward $40 billion. That certainly could change overnight if Chambers were to set his sights on an acquisition that would further push Cisco into the server or storage markets. After all, the main reason these two companies are squaring off is because of Cisco's push into those markets, where HP has made a good living. HP has also gained ground in the core switching and routing market, with ProCurve emerging as a key alternative to Cisco.

But where does this all put partners? Caught, between Wendy Bahr and Adrian Jones of HP because they are going to start forcing partners to choose sides. They will be motivated by market share, compensation plans and strategic goals, which may just conflict with a Cisco or HP partner's focus on what is best for the customer. Watch for continued coverage in print and online on Channelweb.com.

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While I was flying in to Washington, D.C., for our XChange Government Integrator event, I read a Wall Street Journal editorial titled "Boom Town," which portrayed our nation's capital as awash in good times. Business is brisk, unemployment is well below national averages and you can't get a table at the most popular restaurants. It was a great setup for our event, which focused on consultants and integrators selling into public sector, be it federal, state and local, health care or education. Some of the stimulus money is already flowing and integrators and consultants (they don't like to be called "VARs" in the Beltway) are starting to reap the benefits along with their vendor partners. It was an amazingly upbeat event. Integrators were smiling, vendors were in search of new partners, charts flashed with huge opportunities and analysts had pockets full of cash from clients paying them to make sense of it all. Makes you want to pick up and move to Washington at least through 2010 because that is when everyone thinks public sector will cool down. For players in the game, they are in the right space at the right time.