The concept of co-opetition — the combination of competition and cooperation — doesn’t go back quite as far as 400 BC when China’s Sun-tzu made his famous statement about friends and enemies, but it certainly seems timely when considering the recent developments surrounding the entity known as VCE (Virtual Computing Environment).
The Richardson, Texas-based company, formed by Cisco and EMC in 2009 with investments from VMware and Intel, has become a $1 billion-a-year vendor of integrated compute/storage/network solutions for the datacenter, in direct competition with such former BFFs as IBM and HP.
It appears as though VCE is becoming a victim of its own success — the convergence of the IT industry. While the partnership has vaulted up the CI (Converged Infrastructure) charts, convergence looks to be pitting the members against each other. The undisputed leaders in their respective markets — networking (Cisco), storage (EMC), and virtualization (VMware) — all three have begun infringing on each other’s territory.
The first major crack in the partnership occurred in the summer of 2012 when EMC’s majority-owned VMware coughed up $1.26 billion, a huge premium, to acquire Nicira, Inc. The small developer of the Network Virtualization Platform (NVP) was picked up to advance VMware’s interests in the software-defined data center (SDDC). “In this brave new world, not only are compute workloads created, managed, and reclaimed automatically (through server virtualization), but their accompanying network, storage, security, and related components are as well,” said Forrester infrastructure and operations analyst Dave Bartoletti.
The VCErs all proclaimed that Nicira was not a threat to the partnership, but it’s hard to see how EMC/VMware making a major investment in software-defined networking (SDN) was not a direct threat to Cisco. Still, the relationship remained in place and sales continued to skyrocket, but now we come to the more recent moves.
At the end of August VMware announced the next step in its SDDC ambitions, the Nicira-based NSX, the Platform For Network Virtualization. Although not due to ship until the fourth quarter, the platform drew support from a broad range of networking vendors, none of whom were named Cisco.
The VCE response was supportive of NSX. “With so much talk around the unveiling of VMware NSX and Cisco’s Application Centric Infrastructure, network virtualization is certainly having it’s day in the enterprise sun, and rightfully so,” wrote Jeramiah Dooley, Office of the CTO, in a recent blog, calling the introduction of application-based policy into the physical and virtual networks that support enterprise workloads an exciting thing. “As VMware’s vision of SDDC becomes clearer, the emphasis on tools and operational process to maximize the return on this fundamental change will become stronger and stronger. VCE and VMware are committed to leading this charge together.”
NSX is new and different and it has teeth, blogged Enterprise Management Associates analyst Tracy Corbo. “VMware’s message is clear: we are going to do network virtualization the right way, our way.”
NSX has an awfully steep mountain to climb, according to Jon Oltsik, Senior Principal Analyst, Enterprise Strategy Group. He also downplays the potential threat to Cisco: “Cisco still owns the enterprise market and has its own vision for SDN and network virtualization. And Cisco has been successful at warding off VMware in the past.”
Finally, we have the most recent development, Cisco’s announcement that it intends to acquire Whiptail, a developer of high performance, scalable solid state memory systems. The objective is to strengthen its Unified Computing System strategy and enhance application performance by integrating scalable solid state memory into the UCS’s fabric computing architecture.
Both EMC and VCE were quick to put a positive spin on the news. “I think Cisco wants (as they state in their release and the blog) to leverage the disruption of flash and some of the Whiptail IP to try to leapfrog their competitors in the server and networking space,” said EMC’s senior vice president for global systems engineering Chad Sakac on his blog.
Jeremiah Dooley, a member of the CTO’s office at VCE wrote that the only ones to be put out by the announcement are Whiptail customers. “Yesterday, I had a partnership with a company that offered both hardware and software, and today I see that they are being bought as a software layer for a server manufacturer. Maybe Cisco will continue to sell the appliances for a while, heck, maybe customers will even continue to buy them, but the Whiptail that people invested in is no longer.”
Storage analyst Howard Marks said the deal is another sign that major industry players are no longer comfortable with their traditional boundaries. He believes Cisco and EMC still need to play nice together, and the acquisition shouldn’t be a threat, unless “Cisco’s long-term goal is to become like Thomas Watson’s IBM — the soup-to-nuts IT provider to the enterprise — then the Whiptail acquisition is only the first wave.”
This is a smart move by Cisco, but it could prove challenging for VCE and NetApp with their respective vBlocks and Flexpod solutions, said ESG Senior Analyst Mark Bowker. “The Whiptail acquisition isn’t going to replace these types of solutions in the short term, but long term software-led storage virtualization from the likes of VMware with VSAN and Microsoft with Storage Spaces certainly will prove to be interesting to consider.”
Another analyst, Zeus Kerravala, doesn’t see this as a shot at Cisco’s two primary storage partners, EMC and NetApp. Cisco has been good at managing “co-opetition” in the past, and I don’t see why that would be different now.”
Stuart Miniman, Principal Research Contributor for Wikibon, agrees that this is not a move into the broad enterprise storage market. The challenge that they have is that there is great risk that conflict with storage partners could cause the loss of more revenue than the Whiptail solutions are likely to create in the next 1-2 years. “By positioning the acquisition specifically as part of the UCS, Cisco signals that they want to maintain all of the server/desktop solution partnerships. As EMC (XtremIO) and NetApp (FlashRay) all-flash solutions push into the market, there will be competition, but these are not currently the primary products that are part of the VCE, VSPEX and FlexPod partnerships.”
I hate having to use the cliché that ‘only time will tell’ how this will all work out, but I’ve been burned a few times making predictions that did not materialize. Still, I think the recent developments have made the long-term prospects for VCE a lot murkier.
Image credit: Wikimedia Commons