Is HP-Microsoft Deal Pushback Against VMware, Cisco?
HP and Microsoft on Wednesday unveiled a three-year agreement to invest $250 million to significantly simplify technology environments for businesses of all sizes, with a special emphasis on cloud computing and virtualization.
The news comes at a time of rising tension in the IT industry as some of the top vendors look to offer as complete a hardware and software stack as possible.
The new HP and Microsoft relationship has many of HP's solution providers wondering if this signals the start of a rift between HP and VMware, which is a key partner in the virtualization market with HP.
Two of the most active vendors in the data center convergence movement are Cisco, with its Unified Computing System (UCS) strategy which unites server, storage, and networking in a single architecture, and HP, which in November said it will acquire networking vendor and Cisco rival 3Com.
Currently, there is a complex series of competitive relationships and partnerships among these vendors as they jockey for position in the data center. Cisco's top UCS partners are storage leader EMC and virtualization leader VMware, the majority of which is owned by EMC.
Cisco and EMC are two of HP's top competitors. HP is one of VMware's two top resellers, while Microsoft is the top rival to VMware.
The expanded HP-Microsoft relationship may not mean an immediate rift between HP and VMware, but HP is nonetheless sending a signal to VMware, said Mark Gonzalez, president of Nth Generation Computing, a San Diego-based solution provider and HP partner, in an emailed response to Channelweb.com.
"This is a not-so-subtle reminder to VMware that, if it chooses not to be platform-agnostic, that two can play that game," Gonzalez said.
Gonzalez said 2010 could end up being a defining year for VMware as it pertains to Microsoft as a competitor.
"As I've said before, VMware (and I'm sure that it's EMC pulling the strings) is making a huge strategic mistake by aligning themselves so closely with Cisco -- and each day that alignment is more and more overt," he said. "I have to believe that there's something larger (like Cisco acquiring EMC) that's in the works for them to be going down this path."
The key to the press release that accompanied the HP-Microsoft news is the phrases "converged, prepackaged application solutions; comprehensive virtualization offerings; and integrated management tools," Gonzalez said.
"That's a direct response to Cisco's UCS and VMware's Cloud Computing initiative," he said.
Another solution provider executive, who did not want to be identified, called the HP-Microsoft alliance a "childish reactionary" move to counter the Cisco-EMC-VMware Vblock reference architecture alliance.
But given VMware's big lead over Microsoft with regard to virtualization technology, the HP-Microsoft partnership right now amounts to little more than "hype and noise," he said.
"This is really childish on [HP Chairman, CEO, and President Mark] Hurd and HP's part," the executive said. "Microsoft can't hold VMware's jock when it comes to virtualization technology. They aren't even close. If you look at the technologies, they are way behind VMware. HP is reacting to the Cisco-EMC-VMware Vblock alliance. Hurd is making noise and rattling his sword."
Given the scant details behind the HP-Microsoft announcement, it amounts to a move to put enough market noise out there to put "fear, uncertainty and doubt" (FUD) out there for customers looking closely at moving forward with the Cisco-EMC-VMware Vblock technology, the executive said.
Another HP solution provider who also asked to remain unnamed said it is easy to see the HP-Microsoft news as a push back against Cisco and VMware.
"VMware is pushing the Cisco stuff," the solution provider said. "I can't bring that into my HP customers. If VMware has a slide presentation for us, we have to screen it ahead of time to make sure no Cisco Nexus [switch] information gets through."
A couple of analysts, Charles King of Pund-IT and Merv Adrian of IT Market Strategy, wrote in an analyst brief that collaborations such as Cisco-EMC-VMware's VCE Coalition and now HP-Microsoft demonstrate how vendors with more specialized offerings could provide an entire data center stack of hardware, middleware, virtualization, and management technologies.
However, they wrote, the HP-Microsoft partnership could result in significant challenges concerning their other critical partners.
"How will Dell, IBM, etc. react to Microsoft's declared preference for HP? Should VMware go out of its way to support HP when the company is promoting Microsoft's Hyper-V virtualization platform? Just as important, how will the thousands of Microsoft and HP channel partners who earn their daily bread by integrating and optimizing SQL Server, Exchange and other Microsoft solutions feel about those processes being incorporated into manufacturing," they wrote.
They should not be worried at all, according to the three vendors involved.
At a press conference around the HP-Microsoft news, Hurd said there is nothing that should make VMware worried.
"I wouldn't want you to think of this as a reaction to anything," Hurd said.
Microsoft CEO Steve Ballmer echoed those comments when he said, "We're driving out aggressively with Hewlett-Packard. We're going to do a heckuva lot more together with HP. But we respect that HP's still going to work with guys that we compete with and that we're going to work with guys that HP competes with."
A VMware spokesperson said not to read too much into the HP-Microsoft news.
"HP is so big, anybody would want to work with it," the spokesperson said. "These guys are going to serve customer needs in any way they can. I don't think it's necessarily at the point where they are trying to escalate a full-blown war."
Furthermore, not all of HP's solution providers are convinced that the vendor's new relationship with Microsoft hurts its VMware relationship.
The move by HP to work more closely with Microsoft is less a poke at VMware and more related to the growing maturity of Microsoft's Hyper-V virtualization platform, said Dhruv Gulati, executive vice president of Lilien Systems, a Larkspur, Calif.-solution provider and long-time HP partner.
"Microsoft announced Hyper-V a year ago, but wasn't ready with it," Gulati said. "It's about where VMware was a couple of years ago. Hyper-V is a good product."
The new agreement has nothing to do with HP's VMware relationship, Gulati said. "A lot of customers have strong relationships with Microsoft," he said. "It's not just HP customers, but also from companies like Dell. They wanted to talk to Microsoft about virtualization three, four, five years ago, but Microsoft wasn't ready. So they went with VMware. Now they want to look at Microsoft again."
Rather than a poke at VMware, the HP-Microsoft news is actually a visionary look at where the two vendors want to be in the next three years, said Dave Butler, president of Enterprise Computing Solutions, a Mission Viejo, Calif.-based solution provider and HP partner.
"$250 million in three years is significant," Butler said. "I see them drawing up a product roadmap, and developing strategies to help customers with public and private clouds. And that is a function of the OS, the hardware, the applications, and the software. This allows them to go down the road to offer cloud solutions to customers."
Butler said 90 percent of his virtualization business comes from VMware. "But with this announcement, it tells me I better be ready to work with Microsoft."
Steve Burke and Damon Poeter contributed to this article.