Editor’s note: Cisco’s latest acquisition announced this week – a $415 million deal for Whiptail – could have some unintended consequences. While bolstering Cisco’s product lineup, the Whiptail deal also threatens its relationship with EMC and NetApp. All three firms have a big presence in the Triangle. Krisa Macomber, an analyst with Technology Business Research in Hampton, N.H., offers her analysis of the Cisco deal.
RESEARCH TRIANGLE PARK, N.C. – Cisco’s newest acquisition will improve the UCS [unified computing system] value proposition but may jeopardize existing storage relationships that serve to extend its enterprise reach
Cisco’s planned acquisition of solid state memory system vendor Whiptail, announced Tuesday, will enhance Cisco’s ability to capitalize on demand for workload-optimized converged systems through improved application performance in its UCS servers. However, incorporating proprietary storage technology into its portfolio threatens to negatively impact Cisco’s long-term ability to fully capitalize on networking market share and revenue opportunities inherent in converged infrastructure, particularly if it damages the company’s relationships with storage market leaders EMC, NetApp and Hitachi Data Systems (HDS).
As the leverage of flash storage technologies to accelerate workload performance is currently a key area of focus for EMC, NetApp and HDS, as well as in the storage market at large, Cisco’s Whiptail buy will strain Cisco’s relationships with these vendors. The acquisition will further compound the tension created between EMC, VMware and Cisco following VMware’s July 2012 acquisition of software-defined networking and network virtualization provider Nicira. However, despite the potential for further tension, Cisco is traditionally a highly partner-centric IT provider and is capable of managing the relationships.
More Deals to Come?
TBR believes that this will not be Cisco’s final storage acquisition.
Augmenting Cisco’s networking and server capabilities with nonflash storage is necessary to protect its leading presence in the enterprise switching and routing market through capitalization of burgeoning converged infrastructure demand. However, shifting to an owned-storage strategy would be a gamble for Cisco, as it would need to quickly integrate the acquisition into Cisco’s corporate DNA, including its sales and marketing fabric, and roll out new offerings in a timely manner. Further, Cisco would need to assure customers that its fully Cisco-led converged offerings provide the same or greater value than offerings previously provided in tandem with EMC, NetApp and HDS.
EMC, NetApp and HDS have leading storage market share and support Cisco’s existing converged infrastructure presence, and Cisco heavily invested in joint product development, marketing, support and channel activity with these vendors. If Cisco’s relationship with EMC deteriorates as a result of Cisco’s forays into owned storage, TBR believes that EMC may consider evolving from its storage roots by acquiring a server vendor to organically meet rising market demand for workload-centric converged systems. However, EMC would face challenges similar to those faced by Cisco if it were to fully enter the storage space.