Cisco Partners Brace For Tougher Competition From HP Enterprise

Hewlett-Packard's split into two independent companies is set to intensify an already heated enterprise battle with rival Cisco Systems in markets including cloud, software-defined networking and hyper-converged infrastructure, Cisco solution providers told CRN this week.

"It's going to provide more of a focus for HP," said Dave Frederickson, vice president of sales and business development at Long View Systems, a Calgary-based HP and Cisco partner. "And that suggests they will provide some stiffer competition to Cisco."

"There is a race toward the software-defined data center and there is ground that people are trying to win," Frederickson continued. "I think Cisco is in great shape -- I think they are laser-focused -- but this is going to put some more intense competition around it because the HP enterprise group will be really focused in and around its core."

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HP Monday revealed plans to split itself in two, spinning off its PC and printing business from its enterprise computing group. HP's enterprise business, which will will operate as Hewlett-Packard Enterprise, will house the company's servers, storage, networking, converged systems, services and software, as well as its OpenStack Helion cloud platform.

HP's personal systems and printing business, meanwhile, will operate as HP Inc.

Both companies are valued at roughly $56 billion each.

The move comes as $48 billion networking king Cisco continues to attack some of HP's bread-and-butter markets. In June, Cisco for the first time overtook HP to become the No. 1 x86 blade server vendor in North America by revenue, according to data from research firm IDC. Cisco's ascent to the top, which was fueled by strong sales of its Unified Computing System, knocked HP down to the No. 2 spot for the first time since 2006.

The two companies also are butting heads in enterprise cloud, where Cisco's Intercloud strategy competes directly with HP's Helion platform.

HP CEO Meg Whitman told CRN Monday that the independence of HP's enterprise unit will allow it to move forward more often, and more quickly, with strategic acquisitions.

According to one Cisco partner, who asked not to be named, it's this increased M&A activity from the HP enterprise unit that poses the biggest threat to Cisco -- especially since those acquisitions will likely target SDN and other fast-growth markets, such as hyper-converged infrastructure.

Even more impactful, the partner said, would be if HP acquired VMware, Cisco's top rival in SDN. HP was pegged as a potential suitor to VMware when reports last month suggested VMware parent company EMC was weighing a spin-off of its cloud and virtualization business.

"If they split HP and then turn around and buy VMware, that would be a point of concern for Cisco," the partner told CRN. "If this is setting the stage for a big, strategic acquisition like that, then this would make HP a much more formidable opponent to Cisco."

Another Cisco partner, who also requested anonymity, said if HP's enterprise business scooped up hyper-converged infrastructure startups Nutanix or SimpliVity it would pose an even bigger threat to Cisco.

Sources told CRN in June that HP already was holding talks with SimpliVity about pursuing a deal.

"I would be less shaken up and I think Cisco would be less shaken up over an [HP Enterprise] SDN acquisition," the Cisco partner said. "But in converged infrastructure? I mean, yeah. I couldn't say yet whether Nutanix or SimpliVity would be more of a threat than the other, but from my perspective … Cisco could be left holding the bag."

Chad Williams, vice president of research and engineering at Matrix Integration, a Jasper, Ind.-based HP and Cisco partner, applauded HP's decision to split, and agreed that the move could allow HP's enterprise group to turn up the heat on Cisco.

"I am in favor of this split by HP," Williams told CRN via email. "My belief is this will allow each division of HP to better focus on the business objectives and priorities in each segment. … As for HP and Cisco's focus in leading areas like networking, SDN and cloud, I think HP's split will ultimately make the competition between these two companies even that much greater."

Cisco declined CRN's request for comment.

Zeus Kerravala, principal analyst at ZK Research, agreed that the HP split makes the two units "better equipped to compete" than they could as a single company. The move also, however, presents a near-term opportunity to HP competitors such as Cisco, who can use the restructuring to cast a shadow of doubt over HP's long-term strategy.

"It forwards the opportunity to competitors to create fear, uncertainty and doubt with customers," Kerravala said. "It also slows things down as [HP] tries to figure out the split of personnel and resources, and that's something I don't know if HP can afford in this era of converged infrastructure," Kerravala said.