Dell’s OEM Deal with Juniper Likely to Spark Further Action

In announcing their OEM agreement today, Dell and Juniper Networks potentially have triggered an interesting sequence of events among vendors of enterprise servers and networking gear.

The deal itself will see Dell rebrand Juniper’s MX Series routers, EX Series Ethernet switches, and SRX Series services gateways as Dell PowerConnect products.

In many respects, the deal is similar to one IBM struck with Juniper to sell many of the same products. There are differences between the deals, though, which have more to do with the respective strengths of Dell and IBM than with the Juniper products involved.

As David Helfer, vice president of OEM at Juniper, told InternetNews.com:

“Our relationship with Dell is complementary to our partnership with IBM. Our go-to-market model and the presence that Dell has in the market, both in small and medium-sized business as well as in public sector, are strengths of Dell and we look forward to partnering with Dell out in the field.”

Simply put, Juniper sees IBM as its pathway into the largest of enterprise accounts and it sees Dell as its conduit into SMB and government customers.

Of course, Dell and IBM also share an OEM relationship with Brocade Communications. In many respects, at least in relation to its networking partnerships, Dell seems to be following IBM’s lead.

Like IBM, Dell perceives a difference between what Juniper’s networking products offer customers and what Brocade’s gear brings to the party, even though there is an overlap in data-center switching between Juniper’s EX Series switches and Brocade’s Foundry switches.

Speaking with InternetNews.com, Larry Hart, senior manager of networking at Dell, explained:

“Both of these partners come at the solution from slightly different perspectives. Brocade is largely coming at it from a storage perspective and has a very healthy business in Ethernet LAN switching, while Juniper is a recognized leader in WAN and security solutions and they bring expertise in that space.”

“By having this type of choice for our customers, we’re giving them the variety and option to deliver on the promise of the efficient enterprise.”

Dell is correct in arguing that Juniper’s products offer distinct advantages in Layer 3 routing, WAN connectivity and security. Nonetheless, the folks at Brocade can’t be pleased, particularly because this deal — and what it portends about Dell’s approach toward data-center networking — would seem to put at least a temporary kibosh on a rumored (by some, anyway) Dell acquisition of Brocade.

More than ever, Dell seems to be following IBM’s playbook.

Like IBM, Dell has chosen not only the same OEM networking partners, but also the same integrative services-led approach to putting together converged data-center solutions atop standards-based hardware infrastructure. With Perot, Dell now has a services team — albeit a smaller one than IBM’s — that can execute on the plan, though it lacks the software depth and breadth that IBM possesses. My guess is that Dell will pursue storage- and virtualization-software acquisitions in the months ahead to bolster its data-center credibility.

For Juniper, this is a good deal. It places it in the center of the action, working both with IBM in the largest enterprise accounts and with Dell in SMB markets and government and healthcare.

While many observers have noted that the deal intensifies competition between Cisco and Juniper, it also deepens competitive antagonisms between Juniper and HP, which has a similar data-center strategy to Cisco’s, except that HP started from servers and extended outward to network infrastructure whereas Cisco started in networking and has branched out to servers. Both vendors want to be soup-to-nuts, one-stop solution providers in the converged data center.

In cutting OEM deals with IBM and now with Dell, Juniper is furthering the strategic objectives of HP”s data-center-server competitors.

What will be interesting now is HP’s reaction. It could go it alone, continuing to build out its homegrown networking and storage infrastructure. That’s the conservative option, and it’s probably the one HP will take.

However, if HP really wanted to be a big cat among the pigeons, if it wanted to throw its server-vendor rivals into convulsions of data-center confusion, it would consider acquiring Juniper.

Not only would HP benefit from Juniper’s core data-center switching and routing technologies, but it would strike a devastating strategic blow at two major competitors. That’s just my mischievous mind at work, and I have no idea whether HP would make such a move. Still, the idea must be tempting for Mark Hurd and the HP ProCurve Networking bosses.

There would be overlap, though, between ProCurve and Juniper, and that’s the aspect of the deal that HP would have to consider carefully before pulling the trigger.

This deal also has consequences for smaller networking players. As data-center convergence takes hold, smaller players such as Extreme Networks, Enterasys, and 3Com are left in dire straits competitively. They could reposition in niche markets and the SMB space, but Dell and others will find them there, too.

As Yankee Group’s Zeus Kerravala bluntly stated in comments to Network World:

“The Seven Dwarfs are dead. This is a whole different landscape. It’s not just networking; it’s networking and computing combined.”

The vertically challenged vendors to which Kerravala alluded are Cisco’s seven adversaries in Ethernet enterprise switching, all of which battle for the 75% of the market not controlled by the networking giant.

Those players, no doubt, will be rooting for an HP acquisition of Juniper, which would give them a scintilla of hope that they might play a meaningful role — or serve as acquisition bait — for Dell and IBM.

Today’s announcement is sure to trigger further moves on the data-center chessboard. All eyes now turn toward HP, which is likely to reply in one way or another.

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3 responses to “Dell’s OEM Deal with Juniper Likely to Spark Further Action

  1. Don’t you think that Juniper is a bit big for HP to swallow?!

  2. While more leveraged than Cisco, HP has nearly $14 billion in cash as well as its stock. HP could pull off a Juniper acquisition, but it would be a relatively bold move for the company to make.

    I think HP ought to give Juniper serious consideration, but I suspect — as I say in the post above — that Hurd and his executive team will take a more conservative approach, with a smaller buy or two, more in-house resources accorded to ProCurve, and perhaps additional near-term partnerships to fill gaps in the product portfolio.

    They will do something. Everybody’s been saying the Juniper-Dell deal takes aim at Cisco, and that’s true.

    But Cisco knew this was coming when it jilted Dell and pursued UCS. HP is the one, pressured from above by IBM’s deals with Juniper and Brocade and from below by Dell’s partnerships with the same companies, that truly is in the hot seat. There are holes in ProCurve that HP will have to fill.

  3. HP should also consider Brocade and pick up the SAN switches which JNPR doesn’t have.

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