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Cisco Partners Want Hyper-Converged Acquisition, Not OEM Agreement

Sources tell CRN Cisco is preparing an OEM agreement with hyper-converged startup Springpath, but channel partners are campaigning for the networking giant to make an acquisition instead.

Partners are pressing Cisco Systems to make a hyper-converged infrastructure acquisition instead of an OEM agreement as sources tell CRN the networking giant is preparing an OEM agreement with hyper-converged startup Springpath.

"I would rather an acquisition than a partnership because partnerships can dissolve if somebody else buys them, and that wouldn't be good for Cisco," said a top executive from a Cisco Gold partner, who declined to be identified. "What happens when some other player decides to buy that company and then you're left with, 'What do I do now?' [For example,] Cisco has an OEM agreement with F5, and if something happens with F5, they could probably pretty easily switch over to Riverbed. That would be more difficult in the hyper-converged space."

Sources told CRN that Cisco is creating a new hyper-converged appliance that combines its UCS servers with technology from the Springpath partnership. Under the Springpath pact, sources said Cisco has the option of acquiring the Sunnyvale, Calif.-based software company.

[Related: Sources: Cisco Inks OEM Deal With Startup Springpath, Preps UCS Hyper-Converged Appliance]

"Would I like to see an acquisition? Yes," said Michael Girouard, executive vice president of sales at TekLinks, a Birmingham, Ala.-based solution provider and Cisco partner. " I don’t think the market knows Springpath. If they aren't going to buy a known entity [like SimpliVity or Nutanix], a [Springpath purchase] is a great way for them to dip their toe in the water."

Another executive from a solution provider that partners with Cisco and is ranked on the CRN 2015 Solution Provider 500 list said Cisco won't gain reasonable market momentum or a leg up on the leaders in the space if it settles for an OEM agreement.

"All of the Cisco reps would bone up on [a hyper-converged acquisition], and Cisco would have a channel program rolling out to get people certified so they could end the year with some market momentum -- that's not going to happen with an OEM agreement. It's not going to change a thing," said the executive, who declined to be identified.

Partners said Cisco made numerous acquisitions in 2015 in areas such as security and cloud and that a hyper-converged purchase could be just as important.

Randy Olsson, vice president of Strategic Technology Group, Network and Security at New York-based Presidio, a top Cisco partner ranked No. 21 on the CRN 2015 Solution Provider 500 list, said he's confident Cisco will make a play in the hyper-converged space soon.

"They need to respond to the hyper-converged market, and they need a good answer," said Olsson. "I can't wait to officially hear what that answer is … It will be another tool in the toolbox to deliver customers what they're looking for."

Cisco, San Jose, Calif., said it does not comment on rumor or speculation.


Research firm IDC estimated that the hyper-converged market hit $806.8 million in sales in 2015 and will grow to more than $1.5 billion this year.

Last year, Cisco partners had also called for the networking leader to make a big play in the hyper-converged space, flames that were further fanned by Cisco's shutdown of its Invicta storage business. In an interview with CRN in August, Cisco CEO Chuck Robbins said the company is "very happy" with the partnering model for hyper-converged infrastructure solution compared with creating its own product line.

Speculation also arose that Cisco was seeking to acquire hyper-convergence leader Nutanix in May. Nutanix CEO Dheeraj Pandey quickly squashed that rumor, saying Dell -- which has already has a partnership with Nutanix -- would have "a front-row seat" if it ever decided to become part of another company.

Cisco created a partnership in September 2014 with hyper-converged appliance developer SimpliVity to sell the company's software and hardware with Cisco UCS.

Solution providers said it's not too late for Cisco to dive head first into the market with an acquisition of Springpath.

"My gut tells me, 'Wow you guys are really late to the game' -- but when I step back and look at the market, are they really?" said the Cisco Gold partner. "There's been a lot of buzz and a lot of people talking about it, but when it comes down to it, how much is Nutanix really selling and how much are customers really clamoring for it? I think their timing might be OK, even though my first thought was they should have done something a year ago."

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