MoneyWatch Tech

Cisco vs. HP: War Breaks Out, Corporate IT Will Profit

By Erik Sherman

Updated on: February 19, 2010 / 4:44 PM EST / MoneyWatch

News that Cisco (CSCO) will drop HP (HPQ) from its reseller program at the end of April is a bombshell that shatters long-standing industry divisions and creates some interesting dynamics for corporate IT departments. The gloves are off and war is on -- as it will be throughout the industry. The battle has been brewing publicly for over a year:

In January 2009, Cisco announced that it would enter the server market.
Immediately after, HP announced that it would manufacture data switches for the datacenter market.
Last fall, HP said it would acquire 3Com.
Cisco said it would drop HP as a reseller.
HP said it would work with QLogic, a Cisco competitor.

Given lead times for business decisions, these events were in motion long before we heard about them. All stem from pressure on major companies to grow. That's tough when, according to Forrester, more than half of corporate software budgets will go to maintenance, and organizations want to reduce spending -- which includes capital expenses like hardware. Companies are fighting for bigger pieces of a shrinking pie. That's pushing them to cross traditional boundaries.

You can expect bad blood and suspicion when partners walk into each other's turf. Not only do they resent losing customers, but they mistrust each other's motives. For example, analyst firm Ovum said in a release that Cisco "does not want to provide HP with roadmap information on competing 'innovative' products," like Cisco's UCS system, that resellers normally get.

Then there is the changing nature of computing that will favor network-centric views.

The important point is that this isn't only about Cisco and HP. Industry pressures will set a number of companies against traditional partners, because it's a symptom of the times. And those times are a-changing. I expect that savvier IT departments will exploit this, playing former business partner vendors against each other to drive product prices down even further.

Image via stock.xchng user dr-chong, site standard license.