Cisco Feeling Love Lack
Back in January, Cisco announced a line of servers that, as the concept developed publicly, looked like an attempt to get into the data center and lock the door, leaving other vendors on the outside. By June, my colleague Michael Hickins noted that big business was ignoring Cisco servers in droves. Now there's news of another development suggesting that Cisco servers could be in deeper doo-doo than previously thought.
Ironically, it seems to take the form of a positive announcement: Cisco and EMC planning a joint venture to provide technology services:
The joint venture plans to target large businesses and emphasize installing products from Cisco and EMC, according to people briefed on the plan. Cisco, which provides networking gear, and EMC, a maker of technology storage, would both have board representation on the new company, these people said.However, how do you provide networking and storage services without getting involved with servers? You don't, but all the server vendors already have sizeable consulting arms and all the server resellers are focused on integration services as a way of differentiating themselves and doing higher margin business. And even Cisco and EMC have their own service organizations, bringing in, according to the Wall Street Journal, 19 percent and 32 percent of total revenue, respectively.
But in Cisco's case, most of the services revenue comes from support for previously sold products and not the kind of design and implementation work typically associated with a standalone services provider.Why start a joint venture when they seem already so well into the market individually? Because someone or something is being ignored, suggesting that Cisco isn't enough traction for its servers on any front, including, most importantly, service-providing organizations. And going into competition with its biggest partners and resellers hasn't helped the company any. Cisco has largely frozen itself out ... well, at least to the extent that a dominant network hardware vendor can. Now it's left with some hard choices about how to proceed:
- It could back away from the server initiative, but that would be an admission of how disastrous the strategy has been, which wouldn't be good news for management.
- It could try providing incentives for VARs and resellers to promote its server line, except it already has to disappointing results.
- It could focus on acquisitions, as it has done in the past, but Cisco may be beyond the point where it can get into enough new businesses that way to satisfy investors.
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