Cisco and HP: The Times They are A-Changin’

The big news in the tech industry this week surrounds the very public divorce of HP and Cisco:

Cisco Smacks Down HP Partnership

Posted by Alexander Wolfe, Feb 19, 2010 12:17 PM

Both of these companies are members of TSIA. Like a child in any divorce, it is wise not to take sides. So this entry is not about the split, but the current environment where this dispute is occurring. To me, that is the larger story that all tech providers should be heeding. In fact, this specific dispute reminded me of the lyrics in Dylan’s classic tune, The Times They are A-Changin’:

Come writers and critics, Who prophesize with your pen

And keep your eyes wide, The chance won’t come again

And don’t speak too soon, For the wheel’s still in spin

And there’s no tellin’ who That it’s namin’.

For the loser now, Will be later to win

For the times they are a-changin’.

So, let’s explore why the HP-Cisco split serves as a milestone marker for the more dramatic market changes to come.

Parting of the Ways: Low Stakes

The line it is drawn, The curse it is cast

The IT bloggers and analysts are thoroughly covering this split. Here is an excerpt from Alexander Wolfe’s post this week:

Here’s the money quote from the Cisco blog post, which comes via channel chief Keith Goodwin, who is senior vice president of Cisco’s worldwide partner organization:

“Over the last few years our relationship with HP has evolved from a partner to companies with different and conflicting visions of how to deliver value to customers.”

Clearly, this is a significant shift in partner strategy for Cisco and HP. However, some of the analysts are comparing this to the divorce that occurred between HP and EMC roughly a decade before.  That split forced both HP and EMC to restructure their channel models after parting ways on product collaboration. The image below captures where the conflict occurred and what the impact was ongo to market models for the two companies.

The HP-EMC Divorce, Ten Years Ago

Both companies recovered nicely after the dust settled and markets were not fundamentally restructured. Perhaps this current breakup will ultimately play out in the same manner.

Parting of the Ways: High Stakes

This current divorce is playing out in a very different marketplace. Joseph Kovar from channel web makes the observation:

However, there is one key difference between the 1999 and the 2010 breakups. Whereas HP and EMC fought over how storage would be sold, they fought for their own part of that particular business.

For HP and Cisco, the stakes are higher. There is no single point of contention, such as storage, between them. Instead, they are fighting over the future direction of data center infrastructures, which has the potential to impact a wider range of technology and channel partners.

HP-Cisco Divorce Recalls HP-EMC Breakup

By Joseph F. Kovar, ChannelWeb

In fact, the entire go to market model for tech companies like HP and Cisco is on the cusp of a radical restructuring. Instead of the battle ground being focused on specific products and specific channel partners, the battle ground is being shifted to datacenter infrastructure and service consumption models. CIOs will not be negotiating with a reseller on how much Cisco or HP gear to purchase. A CIO will be negotiating with a service provider around the monthly or annual costs for entire datacenter capabilities. Services, routers, applications—the whole deal. This is the future Cisco and HP are now dancing around. The image below capture the new marketplace.

The HP-Cisco Dispute

 

The Waters Have Grown

So, it strikes me that this dispute is not like the one that occurred a decade ago between HP and EMC. The stakes are much higher. The go to market model is shifting much more dramatically. There will be big winners and big losers over the next decade.  

In Barcelona this month, I hosted a panel discussion of executives from Dell, Xerox, and HP. The topic was the recent acquisitions these companies had made of pure service firms. I asked the panel if their companies intended these acquired service organizations to remain “product agnostic.” The answer from HP was clear: “No.” The other executives layered on by stating that customers were asking less about the products being implemented, and more about the total cost of the environment.   This panel discussion should send shivers down the spine of any product-centric company that is being relegated to providing commoditized technology in this new market landscape.

And the words of Dylan keep ringing in my head:

Come gather ’round people, Wherever you roam

And admit that the waters, Around you have grown

And accept it that soon, You’ll be drenched to the bone.

If your time to you, Is worth savin’

Then you better start swimmin’, Or you’ll sink like a stone

For the times they are a-changin’.

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