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Cloud Spawns New Type of Supplier: a 'Vendorgrater'

VCE, the joint cloud effort of Cisco and EMC, with investments from VMware and Intel, can be described as 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.

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