Cisco vs. HP: A Partner Reality Check

The hype. The noise. The lunacy. Frankly, The VAR Guy is getting a bit tired of media companies pumping up the competitive drama between Cisco Systems and Hewlett-Packard. Are these two tech giants really at war 24×7? And how do their views on the channel differ? Here, at last, is a simple reality check for channel partners.

First, a little background: Published reports suggest that The VAR Guy — yours truly — is the only blogger who was crazy enough to attend both Cisco Partner Summit (San Francisco) and the HP Americas Partner Conference (Las Vegas) this week. So our resident blogger has heard directly from Cisco and HP on a number of fronts. Based on interviews with numerous sources within and around HP and Cisco, here’s a reality check for partners.

Buzz From HP Americas Partner Conference

HP’s View of the World: HP CEO Mark Hurd is calling on partners to help HP (A) push deeper into the SMB market and (B) accelerate the convergence of servers, storage and networking. Hurd says HP will leverage x86 business dynamics to deliver open, standards-based solutions that deliver a price-performance edge over Cisco. HP also wants partners to potentially promote HP Services to end-customers.

• Key Stat: Hurd says HP’s channel-driven revenues are at an all-time high, though HP declines to disclose what percentage of its revenue goes through the channel.

HP’s View of Cisco: Without mentioning Cisco by name, Hurd is warning partners to avoid proprietary, high-cost unified computing solutions that lock customers into expensive hardware.

Cisco’s Response to HP’s Claims: Cisco maintains that its unified computing system (UCS) delivers cost advantages over traditional, non-integrated server-storage-networking approaches. More than 400 customers have embraced UCS since Cisco launched the solution in July 2009.

Buzz From Cisco Partner Summit

Cisco’s View of the World: Cisco believes UCS will transform how businesses design and scale their data centers. The UCS strategy positions Cisco to compete against HP, Dell and IBM in the server market. But Cisco also is making SMB and consumer moves. The VAR Guy remains intrigued by Cisco’s Flip video camera — which is loading up the Internet with user-generated video, and therefore creating more demand for Cisco’s switches, routers and bandwidth optimization solutions.

• Key Stat: More than 80 percent of Cisco’s revenues involve channel partners.

Cisco’s View of HP: Cisco alleges that HP’s buyout of EDS creates channel conflict, positioning HP to sell direct into large accounts, and leaving only SMB opportunities for channel partners. Cisco also believes HP’s lower-margin approach to networking and storage will trigger profit challenges for HP’s channel partners.

HP’s Response to Cisco: Hurd didn’t mention Cisco too frequently during the HP Americas Partner Conference. But he did mention that HP partners will help to apply x86 pricing economics to the storage and networking markets, placing potential pressure on Cisco.

The Bottom Line

Sometimes, the media spends too much time painting winner-take-all scenarios. In this case, both HP and Cisco are growing, highly-profitable companies.

Still, The VAR Guy sees some clear differences between the HP and Cisco strategies.

For most of the HP Americas Partner Conference, HP described how partners can potentially sell more products — products, products, products — into SMB accounts. But HP didn’t say much about VAR-driven services or managed services. So far, that strategy has treated HP well. After all, the company’s product brands are firmly established within enterprises and consumer homes. Now, HP wants to repeat that product strategy in the SMB sector.

Meanwhile, Cisco continues to promote services-led strategies to partners. Also, Cisco has successfully revamped its managed services partner program. Cisco made the volume-to-value partner program transition roughly a decade ago. More recently, Cisco has promoted and refined its various partner specializations.

Again, The VAR Guy is not suggesting a winner-take-all scenario. In some ways, Cisco and HP are at war. Of course, The VAR Guy reserves the right to stir up some hype and hysteria based on Cisco CEO John Chambers’ keynote on April 29. In the meantime, the points above give readers a reality check devoid of hype and hysteria.

Sign up for The VAR Guy’s Newsletter; Webcasts and Resource Center; and via RSS; Facebook; Identi.ca; Twitter and VARtweet.