Commentary
9/27/2010
10:44 PM
Bob Evans
Bob Evans
Commentary

Global CIO: IBM Turns Guns On Cisco With Acquisition Of Blade Network

IBM adds Blade Network's innovative technologies and in-Cisco's-face competitiveness to IBM's expanding ambitions in networking and the data center.



On top of the proven technology innovations and customer relationships IBM is acquiring with Blade Network Technologies, IBM is also gaining an intensely competitive and vocal critic of Cisco Systems in Blade CEO and founder Vikram Mehta.

While driving the company's growth as a deeply focused and successful force in data-center switching over the past several years, Mehta was also a relentless critic of what he called Cisco's proprietary architectures and its delivery of average performance for absolutely premium prices.

One example: about 20 months ago, when Cisco launched its Unified Computing System, Mehta immediately posted on his CEO Blog an entry called, "10 Reasons Why Cisco's UCC Will Get Pushback From Customers," and in a moment I'll share some of Mehta's thinking on that.

But this pattern tells us two strategic outcomes of the the IBM-Blade combination:

1) In Mehta, IBM has brought aboard an executive who found a way slug it out with Cisco in one of its core businesses without being either (a) crushed or (b) acquired.

2) And second, IBM will very likely be taking full advantage of that expertise by having Mehta lead an expanded and relentless assault on Cisco in the data-center market that IBM regards as its to lose.

Two years ago, we might have been able to say that IBM and Cisco could well be candidates for a strategic partnership, as IBM was focusing more of its time and energy on software and services while Cisco was the powerhouse in large-scale enterprise networking. Back then, they might scrapped against each other for a bit of business out around the edges, but they weren't really direct competitors of any consequence.

But my oh my, what a difference 24 months can make! IBM has totally revamped and expanded its hardware line over that time, while Cisco has remade itself as a full-line IT supplier, with not just networking gear but also servers, storage, and a no-holds-barred commitment to becoming a force in the data center and elsewhere.

Along those lines, it's interesting to note the language IBM used in its press release announcing the acquisition because if you take that language at face value—and there's no reason you shouldn't—it positions IBM as a company very eager to be a vigorous player in the networking space (boldface emphasis mine):

"With Blade, IBM can drive innovation at the systems networking level to enable clients to speed the delivery of key information from system to system—for workloads such as analytics and cloud computing—while also reducing data center costs. . . .

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"Over the past 18 months, IBM has expanded its core networking business through relationships with leading networking companies. IBM plans to continue providing clients a choice in core networking solutions through these important, ongoing relationships while using Blade's industry standard-based system networking technology to create systems that are efficient, easy to manage and simple to deploy." (End of excerpt.)

So while IBM didn't specifically call out Cisco to slap leather, the chief executive of the newest addition to its rapidly expanding stable of acquired companies surely has—early, often, and with about as much subtlety as a mouthful of jalapeno jelly. For example:

  • In January 2009, when Cisco was about to introduce a blade server, Mehta wrote on his blog, "What Cisco is not talking about is that their approach to virtualization is only virtual to the extent that the data center must go 100% Cisco, all the way from network to server and virtual switch. And that means that customers can expect to pay a significant if not outlandish premium for the privilege to run a pure-Cisco environment. . . . Cisco's machinations boil down to issues of trust and value—and at what price? . . . . Cisco may be on its way to discovering that it's foolhardy to undermine the strengths of HP and IBM – companies that have tremendous relationships with data center customers, companies that have spent decades building strong relationships with CXOs who are concerned with controlling cost of ownership, reducing carbon footprint, and particularly in today’s economy, trying to do more with less. I do not expect these customers to rip out their HP and IBM servers to enable Cisco to make its 70% gross margins."

  • In an April 2010 blog post, Mehta hit once more on one of his primary theme—Cisco's proprietary requirements: "At a time when Cisco is embarking on major product line transitions that require customers to buy into a single-vendor rip-and-replace approach, our products allow customers to overcome their problems without taking away their freedom-of-choice when it comes to servers, storage, hypervisors and network equipment."

    Now, we all like underdogs, so in some ways it was appealing to watch Mehta and his fast-growing but relatively small and privately held company take on one of the world's best-known and most-powerful IT brands. But if all that Mehta and Blade Network had to offer were a feisty attitude and some provocative commentary, Cisco and others would have shredded them years ago.

    IBM clearly sees significant value in the Blade approach, and in particular the contributions Blade's products and technologies can make in IBM's rapidly expanding move into "workload-optimized systems." Here's a key section on IBM's rationale for acquiring Blade (from the IBM press release):

    "This year, IBM introduced a full line-up of new, workload-optimized systems that incorporate innovation at each level—from microprocessors and firmware software to middleware and hardware. With Blade, IBM can drive innovation at the systems networking level to enable clients to speed the delivery of key information from system to system—for workloads such as analytics and cloud computing—while also reducing data center costs.

    "Emerging business models from smart grids to smart traffic systems are infusing intelligence into everyday processes, generating a torrent of information. Business decisions require rapid access to that information. Blade's proven, industry-tested switches and software are designed to improve systems performance for faster delivery of information, optimize virtual environments and lower energy use.

    "Over the past 18 months, IBM has expanded its core networking business through relationships with leading networking companies. IBM plans to continue providing clients a choice in core networking solutions through these important, ongoing relationships while using Blade's industry standard-based system networking technology to create systems that are efficient, easy to manage and simple to deploy." (End of excerpt.)

    But there's no denying that Mehta's penchant for calling out Cisco at every opportunity helped him build credibility for his company as a feisty and better alternative to a huge global company that doesn't always enjoy the best reputation for flexibility in dealing with customers. And perhaps Mehta's best example of that type of positioning was his blog post from 18 months ago called 10 Reasons Why Cisco's UC [Unified Computing] Will Get Pushback From Customers—and as you read these, just imagine that the guy making these bold statements now has the resources of the IBM Corporation behind him:

    "1. Goliath vs. the world. Cisco may be on its way to discovering that it's foolhardy to undermine the strengths of HP and IBM—companies that have tremendous relationships with data center customers, companies with a long history of driving costs out of the system and maximizing performance via balance between the components. . . .

    "2. CIOs and IT managers won’t drink the Kool-Aid: In today's frugal economy, CIOs and IT managers who are concerned with controlling cost of ownership are unlikely to rip out their existing data center infrastructures servers to enable Cisco to make its 60-70% gross margins.

    "3. Unified Computing means standards with a "C." According to Cisco, converged data and storage networking requires Cisco’s Data Center Ethernet (DCE), thus eliminating freedom of choice with a sole-source Cisco-only server and network. . . .

    "4. It's more about packaging than true innovation. . . . . The more costly data center infrastructure components—CPUs, RAM, and networking silicon—remain unchanged, except Cisco's prices are higher and—surprise, surprise—more Cisco gear is needed to control them.

    5. "Cisco: Looking for a few (thousand) good FEs. Cisco does not have the field people required to sell, configure, install or support servers or the applications. The non-hardware aspects of winning the data center are weighted heavily in the favor of the incumbents.

    "6. More I/O bandwidth-hungry VMs. . . . . Cisco is highly incented to make the I/O equation work by delivering additional I/O in the network, which means more yet more money for guess who? See Reason #10.

    "7. "Unified" is fine so long as you're only worried about the "unity" of one vendor's gear. . . .

    "8. In Cisco, we trust. The "Unified Computing" paradigm forces the customer to trust Cisco 100%, putting choice of technology, functionality and pricing at the whim of Cisco.

    "9. Back to the Future. Cisco's "Unified Computing" paradigm looks a lot like the old minicomputer days with single-vendor control and lock-ins. . . .

    10. Follow the money—into Cisco's bank account. . . . the total cost of ownership will be similar to the cost of living in California." (End of excerpt.)

    Well well—in the past couple of years, with regard to hitting back at competitors in public commentary, IBM has certainly become a lot more pugnacious than it used to be, but Mehta's in-Cisco's-face competitive posturing might have to be toned down a bit to comply with the IBM profile.

    But I hope not.

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    GlobalCIO Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

    To find out more about Bob Evans, please visit his page.

    For more Global CIO perspectives, check out Global CIO,
    or write to Bob at [email protected].

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