HP takes a ProCurve at Cisco Systems’ Canadian data centre customers

Earlier this year Hewlett-Packard (HP) announced that its ProCurve networking division had rolled out the first of a series of purpose-built data centre switches, and that it had expanded its alliance program with the ProCurve Open Network Ecosystem (ONE) Alliance. Six months later, and the message is clear: HP is gunning hard for Cisco Systems’ customers in Canada. “Early on, when Cisco got into the data centre business there was talk of them targeting Sun Microsystems,” says Darin Stahl, a lead analyst at Info-Tech Research Group in London, Ont. “But now Cisco is being targeted by HP, and there is a lot of surface area to attack.” Stahl goes so far as to say that HP’s strategy is setting a new standard. “I don’t want to be glib but HP has, in effect, ‘the’ data centre strategy,” he says. “It can look at the data centre from a compute, storage, network, and facilities standpoint.” Other analysts agree, saying that Cisco’s run of dominance may be reined in as companies are drawn to more cost-effective end-to-end solutions. “I think HP is very well positioned in the data centre,” says Jon Olstick, a senior analyst with Milford, MA-headquartered Enterprise Strategy Group. “It will come at it from a facilities and server perspective, and then pull in ProCurve.” Olstick says that increased activity and consolidation in the data centre market means that things will heat up in the months to come. The demand for 10 Gigabit Ethernet (GbE) has increased with server consolidation and virtualization, which means many companies are ripe for a technology refresh. “This is a perfect opportunity to steal some share from Cisco,” says Olstick. “Cisco has lost out on the access layer switches, which have become commodified, and now HP is coming at the data centre from the edge of the network.” Cisco has had a strong grip on the data centre networking market, but the ProCurve strategy is now driven by HP’s technology services group (TSG), and the 6600 switch series has proved to be a strong competitor. The switches have front-to-back airflow, which means they fit well with the design of today’s “hot aisle/cold aisle” data centres. And the redundant power supply on a single rack unit reduces the network footprint. However, in those data centre environments where cooling, rack utilization, and power management are top of mind, HP might still lose out to other competitors, says Olstick. “Overall, Force10 Networks, Brocade, and Foundry Networks are strong companies, as is Juniper Networks, though it is not as strong as HP or Cisco in the enterprise space.” Where is Cisco? At the Interop conference in Las Vegas this past May HP made history of a sort, in that it took the keynote speech from Cisco and also landed the highest profile booth. True, these things go to the highest bidder. But it is also true that such investments are signs of commitment, confidence, and ability, all of which HP was eager to show off. “Customers are saying that networking is becoming overly complicated, proprietary, the most expensive line item in budget,” said Maius Haas, senior vice-president for HP ProCurve Networking, in the keynote address at Interop. It was an obvious shot across the bow at Cisco. The next big message was that ProCurve was now fully integrated with HP, which will lead to obvious cross-selling opportunities. “HP has now fully embraced ProCurve,” said Hass. “There is no confusing our commitment to networking.” Haas then embarked on the usual hyperbole, about how HP will now “change the game, change the rules...with bringing together a network model that will change the world.” With all the attendant and predictable hype around virtualization, the cloud, and “everything as a service”, it was left to HP’s chief technology officer Russ Daniels to bring the audience down to earth. “The future of IT is to automate pre-existing designs while still being able to customize,” he said. “We are moving from build-to-order to configure-to-order. But design is always the hard problem – this is where the complexity and the risk are.” Though less pointed in his message, Daniels was also raising the bar for Cisco and other networking companies, suggesting that a vendor needs to have an open, well-partnered approach in order to address the configuration needs of the tomorrow’s data centre. “The rate of change in IT over the next five years will be jaw dropping,” said Daniels. “This is a huge cultural challenge for any IT organization.” Which brings us to a key part of HP’s wall-to-wall value proposition, and one worthy of taking a closer look at: the ProCurve Open Network Ecosystem, or “ONE”. All for ONE, and ONE for all ProCurve's Open Network Ecosystem (ONE) is a partner-driven initiative for integrating third party applications and services into an open-standards network. It offers HP customers a range of options but also, in its own way, exposes HP’s limitations. “If you think about the data centre there are a lot of pieces that HP doesn’t have,” says Olstick from Enterprise Strategy Group. “ONE is a good way to compete with Cisco, make it best-of-breed. An all Cisco solution isn’t always the best option. Even some Cisco customers recognize that they can get a better product elsewhere.” There are 16 alliance partners at last count, including big names like Microsoft Corp, Riverbed Technology, and Avaya. Within ONE, IT security is covered by SonicWall, McAfee and Fortinet, and IP-based physical security is addressed by DVTel. Airwave (a division of Aruba Networks) and Ekahau cover-off the wireless space – though HP itself is working hard in this area since its purchase of Waltham, MA-headquartered Colubris late last year, in which it picked up 50 research and development professionals in Montreal. As well, partner VBrick Systems makes IP-video networks, which potentially compete with HP’s Halo telepresence system. Canada’s Aastra Technologies and Mitel Corp are also partners. But of late the most significant news has been with Microsoft. “We are announcing a multi-year strategic alliance with Microsoft,” said Ann Livermore, executive vice-president of HP’s services organization, speaking from the stage at Interop. “We are focusing on unified communications and collaboration – on being able to help you 24/7 to communicate across enterprises to partners and customers, to make workflow more competitive.” At Interop HP and Microsoft promised to spend $180 million together over the next four years, though neither company would say how and when the money will be allocated. Certainly, investments will be made so that core HP hardware – smartphones, servers, storage and switches – will integrate well with Microsoft's Office Communications Server, Exchange and SharePoint portal software. “ProCurve enterprise server and storage will use Microsoft as an overlay umbrella," says Karl Soderland, HP’s vice-president and general manager for ProCurve in the Americas. “HP smartphones and desktop VoIP phones will be Microsoft certified, and Halo will integrate with Microsoft office communicator.” The news has certainly resonated with Cisco. Though Cisco and Microsoft have been testing the waters with each other over the past two years, the war is now on: during a keynote at Cisco's Partner Summit in June, Don Proctor, senior vice-president of Cisco’s voice technology group, warned that HP and Microsoft are going to burn their channel and move their unified communications business to direct sales. Not so, says HP. “That $180 million will be invested heavily in the front end,” says Karl Soderland, HP’s vice-president and general manager for ProCurve in the Americas. “This is a strategy with a dedicated business plan.” Strangely, fear mongering around the channel doesn’t play to Cisco’s technological strengths, and the real advantages that lie in going with one vendor. As it stands, although ProCurve is making progress with software like its data centre connection manager for provisioning physical and virtual server network connections, the ONE partners don’t benefit from a single technology for passing through traffic. Added software development could be required to ensure interaction between vendor modules, some of which have overlapping functions. As a Cisco blogger put it, in response to the ONE announcement: “A suitable analogy might be multiple passengers on a shared, low-cost shuttle bus, each telling the driver they have to be dropped off in a particular order, and the driver not knowing whose direction to take.” The EDS challenge Last year HP bought IT outsourcer EDS for $13.9 billion, putting it in second place behind IBM. This is a big company to swallow, and IBM is a formidable competitor, which is why HP is moving with some caution. “There is a lot of opportunity with EDS, but there are also a lot of challenges,” says Stahl from Info-Tech. “They picked EDS through exhaustive due diligence, and they picked up a lot of customers, but this is not a short-term proposition.” According to Stahl, HP and EDs are not under any illusions here. “The outsourcing deals average five years in length, about $20 million each, and when they come up for renewal HP will have to make the short list and earn its way in.” If it works, however, the pull will be amazing. EDS has more than 100 customers in Canada and manages over 2,000 servers and 7,000 network devices. In Canada its presence is particularly strong in the call-centre and help-desk market, where EDS processes over 12 million voice calls and 1.4 million help desk requests annually. In fact, in these tough times it is this stable services revenue that is keeping HP afloat: “With the acquisition of EDS services revenue is now 30% of total,” says Soderland. But that revenue is not a given. “Other managed services providers can be very predatory,” says Stahl. “HP will morph the EDS message more toward the tight economy, and will offer more discrete metrics. What else differentiates them? Computing, storage, networking, these are all becoming commodified – the real integration point is the management, to achieve an alignment with business processes.” Still, Olstick believes that as ProCurve moves up from the SMB space to get more enterprise play, a lot of new business will get pulled in by EDS on the services side. And the winner is... Hewlett-Packard is the largest technology company in the world. Its 2008 revenues, at $118 million, are twice those of Microsoft and four times Cisco’s. With Microsoft as a partner, HP is a formidable competitor. But there are risks, too, in trying to be all things to all people, and in opening major competitive fronts at one time. For those customers trying to assess their business relationships, it’s important to know where vendors like HP and Cisco are heading. “HP might buy a Force10, or an Extreme Networks,” says Olstick. “For maybe $300 million they could buy Extreme and get into the core networking space with a really strong networking product. Or it might be home-grown – they have stuff in development and will release on their own, but their switches, though good, are not as good as those by Extreme, Cisco, or Juniper.” Olstick argues that though Extreme has sophisticated switching gear, as a smaller vendor it often has a hard time getting in the door, whereas HP can always get a seat at the table. Once at that table, however, HP has to deliver in demanding enterprise and data centre environments. “What is certain is that they want a full, end-to-end networking portfolio,” says Olstick. “And they are committed to getting there. In the near term we’ll see some sophisticated switching from HP." By comparison, Cisco is a company that is trying to diversify, and its acquisitions may be less about deepening capabilities than adding new ones, and even entering new markets – particularly in the consumer space. “Cisco acquisitions will be more off-base,” says Olstick. “For example, buying the Flip video company. I would be surprised if they made any acquisitions in core networking.” And whither go the customers? For the longest time Cisco was the mantra – no-one got fired for buying Cisco. But as budgets tighten and networking becomes commodified, that might be about to change. “We talk to enterprises in Canada and globally,” says Stahl. “There are two camps: generally Cisco customers are in for a penny in for a pound, they believe that mixing and matching vendors on the network or data centre is problematic; then there are other folks who are more utilitarian, who realize they haven’t touched a server in weeks and run everything from consoles.” But when it comes to cutting costs, Stahl is hearing from enterprises that are willing to drop Cisco support contracts or buy used gear. “People are looking for value, and that’s a tough spot for Cisco,” says Stahl. “Their whole message had been cradle-to-grave with a quality product, and all of the sudden that message is being questioned.”

HP takes a ProCurve at Cisco Systems’ Canadian data centre customers

News | June 19, 2009

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