HP Keeps UCC Options Open

When it comes to unified communications and collaboration (UCC), HP isn’t ready to bet the house on a single partner. It has struck UC-related partnerships with Microsoft, Avaya, and Alcatel-Lucent, and it also has the capability, through products obtained as a result of its 3Com acquisition, to develop a home-grown alternative.

It isn’t surprising that HP’s channel partners and customers, as well as neutral observers, are confused by HP’s seemingly promiscuous approach to UCC solutions. I’ll try to shed a bit of light on the situation, but I suspect nothing is carved in stone and that HP’s strategy will be subject to change.

HP’s latest UCC-related move involves Avaya.  The two companies announced a three-year alliance in which HP will sell and service Avaya UC and contact-center products as part of HP’s UCC enterprise-level services portfolio. The deal was inked in the aftermath of a similar 10-year accord that HP struck with Alcatel-Lucent.

Avaya and Alcatel-Lucent struck their deals with HP’s services business, which will act as a system integrator in bundling and delivering solutions to customers. It’s worth noting that HP also has a video-collaboration and UC partnership with Polycom.

The partnership with Microsoft is a bit different. That relationship primarily involves HP’s product and marketing groups, and it entails ongoing product integration and joint-marketing programs that stemmed from  the companies’ Frontline Partnership. Another difference is that Microsoft is taking a desktop-oriented approach to delivering unified communications whereas HP’s other partners, Avaya and Alcatel-Lucent, are addressing it from the IP PBX.

HP has decided to play the field for a couple reasons. First, the UCC space remains an underdeveloped market whose best days remain ahead of it. Despite years of hype, unified communicaitons has yet to fulfill its potential. To be fair, the reasons for that underachievement have more to do with industry politics and macroeconomic circumstances than with technological factors. Nonetheless, the market is one that has seemed perpetually on the cusp of better times.

Another reason that HP has cast a wide net with its UCC partnering efforts is that the predilections of the market, both with regard to vendors and architectural approaches, have yet to be revealed. Neither the PBX approach from Avaya and Alcatel-Lucent nor the desktop gambit from Microsoft has been declared a definitive winner. Moreover, the possibility exists that hosted UCC solutions might prove attractive to a significant number of enterprise customers. HP is getting into the game, but it’s spreading its bets across a number of leading contenders until the odds shift and one vendor establishes a clear market advantage.

As for why HP is getting into the game, well, the answer is partly that the company detects improving fortunes for UCC and partly that it feels compelled to respond to Cisco. One thing that HP and all its UCC partners have in common is competition against Cisco. HP needs an enterprise alternative to what Cisco is offering, and these partnerships provide it with various options.

Even though HP focused on the SME space with its latest Microsoft UCC announcement, I can’t see clear horizontal- or vertical-market delineation in HP’s partnering strategy.

Consequently, HP’s technology partners can’t feel overly secure. Any of these deals could fall apart, in real (revenue-generating) terms, without much warning. HP will follow its customers’ money. At the same time, it might be tempted to build or buy its own alternative. Further chapters in this story are sure to written.

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Apple Isn’t in the Cisco Cius Picture

I don’t want to spend a lot of time on it, but I’ll offer a relatively brief assessment of Cisco’s Cius enterprise-tablet announcement yesterday.

Look, folks, the Cius is not competing with the iPad for the affections and disposable income of tablet-buying consumers. That’s not Cisco’s game, is not part of Cisco’s plans, and is just not happening. So, as difficult as it might be to do, forget about Apple and the iPad for now. Put it out of your minds. Apple gets more than its share of attention already, and I’m sure we’ll have many other reasons to pay homage to the iPad, the iPhone, and the other iWonders best0wed upon us by the wizards of Cupertino.

Now that we’ve determined what the Cius (as in “see us,” get it?) is not, what exactly is it? For starters, it’s clearly an extension of Cisco’s enterprise videoconferencing and video-collaboration portfolio. Cisco has been working from the high end to the low end, starting with luxury, room-based telepresence, buying its way into a wider range of corporate telepresence and videoconferencing through its Tandberg acquisition, and now developing its own low-end tablet, the Cius, to make enterprise video mobile and to deliver it to desktop docking stations.

So, one way of understanding the Cius is as a means for Cisco to  extend telepresence, videoconferencing, and video collaboration to areas of the enterprise it has yet to penetrate. It’s Cisco’s way of making sure video proliferates throughout its customer base, giving Cisco opportunities to derive sales not only from video-based products, but also from the enterprise-network upgrades that inevitably result from widespread utilization of high-bandwidth video on a corporate campus. For Cisco, there’s a revenue multiplier effect that is concomitant with the spread of enterprise video.

Not coincidentally, this move also precludes potential competitive encroachments by competing vendors of low-end videoconferencing and video-collaboration products. Cisco had a hole at the low end of its video product portfolio, and it has closed it with this announcement.

With the Cius, Cisco also integrates its enterprise-wide video-collaboration tributaries with its preexisting IP phone, unified communications (UC), and data-collaboration (as in WebEx) product streams. The docking station that comes with the Cius isn’t just an ornamental device holder; it is intended to act as the physical point of integration between personal video-collaboration and Cisco IP phones.  Competitors cut off at the pass here include Microsoft, HP, Avaya, and scores of others.

Finally — and Cisco’s reach might exceed its grasp on this one — the networking giant would like enterprises to view the Cius as an office-computer replacement. In defense of that argument, Cisco cites the Cius’ notebook-caliber Atom chip, its capacity to accommodate a monitor and keyboard, and its support for virtualization. I think Cisco has to put more meat on these skeletal bones, but I can see where they’d like to go and why. Again, Microsoft is a big target. It will be interesting to see how closely Cisco and Google, whose Android OS runs the Cius, can work together to disrupt their common foe.

All in all, the Cius was a logical move for Cisco, a practical and broad-based extension of its video-collaboration strategy. Apple, though, isn’t in this particular picture.

Google’s “New Approach” to China Search More Like Raised Finger

A blog post earlier today by David Drummond, Google’s SVP of corporate development and chief legal officer (CLO), seems to have engendered some confusion in certain media circles. I am here to elucidate.

Titled “An Update on China,” the relatively brief blog post explains why and how Google will attempt “a new approach” to the delivery of search results to Chinese users.

Google is considering this new approach because China has forced its hand. As Drummond explains:

We currently automatically redirect everyone using Google.cn to Google.com.hk, our Hong Kong search engine. This redirect, which offers unfiltered search in simplified Chinese, has been working well for our users and for Google. However, it’s clear from conversations we have had with Chinese government officials that they find the redirect unacceptable—and that if we continue redirecting users our Internet Content Provider license will not be renewed (it’s up for renewal on June 30). Without an ICP license, we can’t operate a commercial website like Google.cn—so Google would effectively go dark in China.

Okay, got that? After Google and China exchanged unpleasantries over Chinese hacks and theft of Google intellectual property, Google relocated its search servers from China to Hong Kong. Chinese users who visited Google.cn automatically were redirected to the Google.com.hk.  Ostensibly this approach enabled Google to avoid having to provide filtered (as in censored) search results to its Chinese users. However, as I’ve mentioned before, the Google-China conflict wasn’t primarily about censorship, notwithstanding Google’s protestations to the contrary.

Just to recap, if I may speak freely, Google eventually came to believe that the China market was fixed, rigged in favor of China’s Internet players, including Baidu (more on which later). It wasn’t a fanciful deduction. Google had been subject to hacking, IP theft, aggressive state-sponsored corporate espionage, and an official government  policy of “indigenous innovation” that actively promotes the interests of Chinese companies over those of foreign rivals. All the while, of course, those foreign companies are invited by the Chinese government to do business in China, primarily so that their IP and trade secrets can be transferred to Chinese firms.

Anyway, getting back to Google’s blog post of earlier today, let’s consider the “new approach” Google is implementing in place of the automatic redirect from China to Hong Kong. What Google will do now — and it already works from North America — is provide a landing page at google.cn, from which Chinese visitors can click on a link that will take them to Google’s Hong Kong site (google.com.hk).

Incredibly, CNN, among others, is portraying this move as some sort of capitulation. Nothing could be further from the truth. In the face of official China’s strong disapproval of the automatic-redirect approach, Google has chosen to make the redirect manual, requiring that users merely click once before arriving at the Hong Kong search site. It’s a cheekily clever attempt  to circumvent China’s restrictions while adding just one step to the process of Chinese visitors availing themselves of Google’s Chinese-language services. Nothing substantive has changed, and Google has made no meaningful concession.

Obviously, China will see right through the maneuver. Google not only instituted “a new approach” that isn’t really a new approach at all, but it irreverently announced it  — in a public blog post, no less — to the entire world. Google has thrown down the gauntlet, and raised a middle finger for good measure. I don’t see how Google expects China to do anything other than reject its resubmitted application for an ICP license.

Meanwhile, we have news from Baidu (I told you I’d come back to them). Starting next month, Baidu will be hiring 30 “mid-to senior-level software engineers from Silicon Valley at a job fair on July 10 to drive new technology projects, its first direct hiring from the United States,” according to a Reuters report.

If Google won’t bring talent and trade secrets to Baidu in China, then Baidu will have go to California to get them.

Utilities Still Aren’t Ready to Get Serious with Consumers

In his Green Tech blog, Martin LaMonica of CNET News writes that utilities have acknowledged belatedly that they are poor marketers .With that realization in mind, they are said to be redoubling their efforts to explain smart-grid benefits to skeptical consumers.

Notwithstanding utility executives’ apparent contrition and ostensible commitment to institutional reform,  I remain unconvinced that they have seen the light. I still think they require further reprogramming, a service that disaffected consumers will be only too happy to provide.

As I read through LaMonica’s piece, I noticed the absence of a very important word. The utility executives, despite their recitation of anodyne platitudes, could not bring themselves to say the word, though they ventured occasionally into its outlying neighborhood.

That word? Savings.

Although the article featured many instances of utility bosses talking about getting consumers onboard, getting consumers involved, and treating ratepayers as customers, there was no specific mention of passing significant, quantifiable savings to smart-meter-equipped residential consumers.

Jim Rogers, CEO of Duke Energy, came closest to striking gold. He said consumers will want better ways to manage and reduce their energy use for economic reasons. But he should have gone further .

All the utilities should and must go further. It’s well understood how smart meters, dynamic time-of-use (TOU) pricing, and demand-response programs can help utilities reach their business objectives and regulatory mandates. What’s less clear is exactly what consumers will get from the deal.

It’s too late in game for the utilities to be using nebulous niceties and vague concepts to sell consumers on smart meters and the smart grid. Now is the time for utilities to cut consumers a pice of the action. It’s time to incentivize the consumer with hard ROI numbers and compelling savings. Don’t dance around the consumer benefits; spell them out.

Utilities say they want to treat their consumer ratepayers as customers. Well, customers don’t buy products or services unless they perceive value in doing so. Utility executives seem to realize that what they’re peddling doesn’t have the raw sex appeal of an iPhone or an iPad. Consequently, they should recognize that the value they offer to consumers must include a strong monetary dimension.

It’s long past time for utilities to get specific about the tangible benefits, including savings, that consumers can derive from smart meters. If the smart grid is to result in something more than efficiency and operational savings from upgrades to transmission lines and distribution automation (DA) facilities, consumers must have good reason to play their part in making it happen.

HP’s Converged-Infrastructure Story Gets Better, but Customers Understandably Wary

Earlier this week, Hewlett-Packard took further strides toward the realization of its vision for converged infrastructure. The occasion was HP’s TechForum 2010 event in meretricious Las Vegas, where nothing is as it seems and sensory overload is a state of mind.

HP announced a raft of products and product enhancements, including new server, storage, and data-center offerings. The prominent themes were automation, cost-reduction, efficiency, simplification, and — lest we forget — convergence.

HP’s message was one of coherence and symmetry. You can see where it’s going and how these product announcements — which brought HP up to speed with its competitors in some areas (rack-mount and blade servers) and arguably ahead in others (simplified application provisioning and server energy-effiency management) — advance the company, and perhaps some of its customers, toward an all-HP converged data center.

Still, HP hasn’t delivered a knockout punch, with this announcement or any that preceded it. Instead, it has fleshed out a narrative, telling a better story as it goes along. Gaps remain, especially in networking, where HP has yet to fully integrate 3Com and its product portfolio into its grand scheme for converged infrastructure. That story will come, I’m sure.

A bigger concern, though, is whether customers will buy what HP is selling. Early indications suggest customers are understandably wary about getting boxed into HP’s self-contained world of converged servers, storage, networking, management tools.

HP will cavil here, protesting that what it offers isn’t proprietary. It will say, as it does, that HP’s converged infrastructure is built on open standards, and that customers “can change out whatever they like.”

Well, HP is being disingenuous. It knows that’s not entirely true, and so do savvy customers.

Yes, much of HP’s hardware products are based on industry standards that make them functionally interoperable with gear from other vendors. That said, HP includes proprietary management software with its servers and storage boxes that feature special hooks for optimized performance on HP systems. Once customers buy into HP’s infrastructure-management software — for application provisioning, automation, energy efficiency, and so forth — HP hopes they’ll be disinclined to accept any potential performance trade-offs inherent in a mixed-vendor environment.

HP’s challenge, then, is to convince customers that the value inherent in its converged infrastructure is sufficiently attractive to compensate for the perceived or real cost of proprietary lock-in. HP must show that it has a sustainable edge, that it will continue to innovate, that its approach really does deliver compelling ROI and superior cost savings from all that automation, simplification, and — yes — convergence.

It’s a daunting challenge. Customers and resellers aren’t certain they want to take the ride. The former have products and systems that already work from vendors with which they’re comfortable, and many of the latter aren’t sure they want to bet the farm on HP.

For HP, conceiving and articulating the big-picture vision for converged infrastructure was the easy part. Getting the rest of the world to buy into the master plan will involve a lot of hard work. It’s too early to render a definitive verdict, but HP might have to reconcile itself to a world in which customers continue to subscribe to the vendor diversity and system interoperability HP claims to espouse.

Smart-Grid Post at GigaOM Pro

Readers with an abiding interest in the smart grid might wish to check out a piece I wrote for GigaOM Pro (subscription required) on Cisco’s foray into ruggedized networking gear for utility substations.

In that post, I examine the market opportunity, the competitive landscape, Cisco’s strengths and weaknesses in the space, and some of the challenges the networking giant will have to meet as its seeks to extend its hegemony into what should be a natural “market adjacency.”

Maintaining Perspective on China’s Rising Labor Costs, Currency Moves

I don’t disagree with the basic facts presented in John Boudreau’s article at the San Jose Mercury News’ SiliconValley.com website, but I think the piece overstates the degree and significance of recent developments in China.

Boudreau correctly notes that labor costs are rising in the coastal region where most of China’s electronics and technology products are manufactured. At some point, those rising costs will result in decreased margins for product vendors or in higher prices for consumers and businesses that buy products from those vendors.

It’s also true that contract manufacturers operating in China’s main manufacturing hub will begin or have begun exploring alternative arrangements. Options include setting up factories further inland, in China’s less-developed interior, or shifting some types of manufacturing to automated facilities in Taiwan or to other low-wage countries, such as Thailand or Vietnam.

But those moves will not happen overnight. We should recognize that, even though the cost of Chinese labor is increasing, it’s still low. What’s more, China offers other advantages — such as a ready supply chain and access to plentiful raw materials (such as rare-earth metals essential to the manufacture of many kinds of technology hardware). Additionally, China still has that low-cost interior mentioned above, where there’s more than enough labor available to provide a helping hand.

Let’s also consider the appreciation of the Chinese yuan, also known as the renminbi. China’s authorities are allowing the currency to appreciate relative to the dollar, but the yuan won’t be allowed to skyrocket. China is not a so-called “invisible hand” market-based economy; its government retains firm control over the trading range of the country’s currency. Don’t expect a dramatic rise in the near-term valuation of the renminbi to the dollar. It’s not going to happen. Instead, advances and declines will be  controlled, incremental, and measured.

Finally, there’s the question of whether, and to what degree, increased Chinese wages might result in more consumer spending on imports from the U.S. and other countries. The assumption is that Chinese workers who assemble and  build Apple iPhones and iPads — not to mention HP and Dell PCs — now will be able to buy them, too.

To a degree that might happen, but bear in mind that China wants to move up the technology industry’s value chain. China won’t be happy functioning merely as foundry and consumer market for Western brands. China’s long-term objective is to architect and develop major technology companies of its own, Lenovo and Huawei being notable examples.

Those familiar with the term “indigenous innovation” know that Chinese companies will receive government support and encouragement as they increasingly compete against major Western companies across China’s technology landscape. We in the West need to exercise caution in assuming that China’s consumer market will function similarly to its counterparts in market-based economies. Not only does China’s government actively assist domestic companies — often through direct or indirect state control — but many Chinese consumers will actively and purposefully purchase goods and services from Chinese companies instead of those offered by Western companies.

What we’re seeing in these developments — the rising labor costs, the gradually unpegging of the yuan to the dollar, the country’s desire to ascend the technology value chain — are signs of a growing, maturing economic and industrial powerhouse. I don’t think they should be construed as symptoms of Chinese volatility or weakness.

Microsoft Past Its Prime, but Even Blodget Wouldn’t Bet on Its Imminent Demise

Henry Blodget’s Business Insider is a guilty pleasure. From the tabloid headlines to the flashpoint content, carefully contrived to generate criticism and heated debate, Blodget gives you plenty of sizzle even when he forgets to put a steak on the grill.

Occasionally, though, he’ll provide some food for thought alongside the crowd-seeking sensationalism. In one of his latest pieces — portentously titled, “The Odds Are Increasing That Microsoft’s Business Will Collapse” — Blodget injects enough plausibility into his argument to evoke the image of an erstwhile software giant staggering incontinently toward an open grave.

To summarize, Blodget contends that Microsoft draws the vast majority of its profits from its Windows and Office franchises. He provides colorful charts to illustrate the point, which is indisputable. He then posits Microsoft’s predicament: the Internet, the rise of mobility (in which it has been abject), the ascent of cloud computing, and the determined competitive incursions of Apple and Google have put Microsoft’s cash cows in mortal peril.

As Blodget phrases it:

The desktop PC isn’t the center of anyone’s universe anymore. The Internet is. And the Internet doesn’t require Windows.

As for Office, he points to the rise of Google Apps, which Blodget perceives as a “classic disruptive technology” that is “cheaper, easier, and more convenient to use than Microsoft Office.”

At the end of the piece, Blodget presents three scenarios for Microsoft:

Right now, the investors are concluding that Microsoft will gradually become the equivalent of a technology utility–a boring but necessary provider of the software that runs the world’s business community.  A smaller, more optimistic crowd is still arguing that, one day, Microsoft will be able to turn its fortunes around, and fight its way back into an industry leadership position.

What almost no one is talking about is a third possibility, one that becomes more likely by the day: The possibility that, a couple of years down the road, Microsoft’s business may just completely collapse.

Given enough time, anything is possible. Still, is there a strong likelihood that Microsoft’s business will “completely collapse” in two years? I doubt it. The primary reason for such doubt is that customers aren’t moving to the cloud fast enough to bring about Microsoft’s immediate demise.

Startup companies, free of established processes and prior IT investments, increasingly are adopting cloud models that tend to leave Microsoft out of the action (or with only a small piece of it). Even so, Microsoft has a Windows installed base of SME and enterprise customers that will think at least twice before abandoning the devil they know. That’s human nature, especially during a period of great and persistent economic uncertainty.

The situation is similar, though perhaps more tenuous, for Office. Google will win defections, starting in vertical markets where Microsoft’s Office pricing is most onerous and its high-end features less necessary. There’s no question that Microsoft will see erosion in its licensed and shrink-wrapped Office business, but that erosion is not likely to become a catastrophic landslide within two years.

Are Microsoft’s best days behind it? Yes, I think so. The company is extremely unlikely to reach anything approaching market leadership in mobile platforms and smartphones, its former hold on PC and mobile-device OEMs has slackened, and it’s at a perennial loss in areas such as web search and  in most consumer markets. It needs to invest more in its SME and enterprise offerings, including its business-oriented cloud services, and less in consumerist boondoggles.

But the collapse of Microsoft in two years? All things considered, I’d bet against that outcome. I tend to think Blodget would, too. Then again, he’s drawn traffic with his provocatively headlined post, so he probably won’t mind the hedging strategy.

Magor Offers “Telecollaboration” to SMEs

Some have accused telepresence of being the preserve of the rich.

To be sure, room-based telepresence has an exclusive aura, conferred by its prohibitive price and imperious requirement. It is a proficient, if costly, means of bringing meeting participants together around a virtual boardroom table, but it is relatively inflexible and stiffly formal when asked to share the stage with data-based collaboration.

For verisimilitude, though, telepresence sits at the pinnacle of the video-meeting throne. It is followed in the hierarchy by videoconferencing, which covers a broad swatch of ground and extends from specialized systems to software-based services that provide a best-effort experience on nearly any device with a broadband Internet connection. With regard to the latter, think Skype.

It has become readily apparent, in fact, that the market for video communications is richly segmented rather than monolithic. Cisco would like to get more than its “fair share” of the market action, but its current portfolio (even with Tandberg) remains vulnerable to competitive incursions in the SME space, where price sensitivity is more acute than in the rarefied environs of the world’s largest transnational corporations. To be fair, though, even the world’s corporate kingpins are holding their wallets a little tighter as we move into a “new normal” of permanent cost controls and reduced growth scenarios.

Macroeconomic misgivings aside, there is also that unsettled question about how elegantly collaboration can be brought, figuratively and literally, into the videoconferencing picture.

One company taking its best shot at addressing the challenge is Magor Communications Corporation. The company calls what it does “telecollaboration,” which it defines as an “emerging category of communications solutions (that) . . . . combines high-definition (HD) videoconferencing and advanced collaboration capabilities to enable life-like interactions and experiences no matter where people are located.”

Put simply, Magor is trying to fuse adaptable high-quality (1080p, where possible) videoconferencing with data-based collaboration.

The company, which is now raising a round of financing, recently gave me an opportunity to experience its technology firsthand.  I came away impressed by the price-performance proposition, the quality and naturalness of the videoconferencing experience, and the smooth interplay of collaboration and videoconferencing. The user interface also seemed uncluttered and surprisingly simple. Like the best telepresence and videoconferencing systems, Magor’s facilitated a natural eye-to-eye conversation without getting in the way.

The Magor technology doesn’t give you all the visual brilliance of, let’s say, Cisco’s telepresence, but it also won’t give mid-sized enterprises sticker shock. That factor, and some others I’ll mention at the end of this piece, could be pivotal to the company’s success.

If you ask Magor what sets it apart from the pack, it cites four main differentiators.

At the top of its list is a patented video-compression technology that allows Magor to stream HD video at 2 Mbps, peaking at 4 Mbps. In contrast, it says, its competitors transmit at 5 Mbps, peaking at 30 Mbps, to accommodate one 1080p stream. When the network is heavily congested, Magor says, its system can dynamically and gracefully adjust the video quality to accommodate constrained resources. If network conditions improve, Magor readjusts video quality accordingly. To effect these quality adjustments, Magor’s software samples the video stream multiple times per second.

A second point of differentiation, according to Magor, is that its functionality is delivered entirely in software that runs on industry-standard, off-the-shelf hardware. Magor says it is looking to port its software to a range of platforms, including increasingly powerful notebook PCs, tablets (such as the iPad), and smartphones.

Magor says another distinguishing characteristic is its support for original-format data collaboration rather than for a bandwidth-sapping H.323 “collaboration image” pushed through a side channel.

Finally, Magor points to how easy its systems are to use. To add users or data collaboration to a conference, participants need only push a button on a SIP phone or click on a mouse.

With regard to pricing, a single-display system goes for approximately $15,000, with a dual-display system selling for about $30,000, and a three-display configuration going for $45,000. The two- and three-display configurations are offered with the option to purchase additional HDTV cameras, which increases the price of the packages by about $2,000.

Launched in 2006 under the aegis of Wesley Clover — an investment firm chaired by Terry Matthews, founder of Mitel and Newbridge Networks — Magor sports an accomplished executive team. Mike Pascoe, the company’s CEO, served in the same role at Meriton Networks and PairGain Technologies. Dan Rusheleau, Magor’s executive VP of product development, co-founded Newbridge. Not surprisingly, considering its progenitor, the entire executive team comprises alumni of Terry Matthews’ corporate constellation.

I suspect there’s a potentially sizable market for what Magor is selling, but it will face competition from above — Cisco, HP, Polycom — and from below, where Logitech’s LifeSize and the cheap-and-cheerful Skype are among the players.

The big challenge for Magor will be to establish strong business partnerships that give it the industry profile, channel reach, and business scalability to gain separation from the pack. It is busily building OEM strategies, vertical-market plans, and reseller networks. It already has Mitel in its camp, and it is working on a series of other agreements.

Dell Reloads in Mid-Market Data Center

Last week, Dell announced a fusillade of products for small- and medium-sized enterprises looking to benefit from converged, virtualized data centers.

Depending on one’s vantage point, Dell proactively announced the products to offer its mid-sized enterprise customers interoperable solutions that will allow them to derive efficiencies from data-center automation;  or it made the announcement reactively, in a bid to preclude incursions into its installed base by Cisco, IBM, HP, and perhaps even Oracle, which has yet to play the data-center-hardware hand that it was dealt in its marathon acquisition of Sun Microsystems.

In receiving an update yesterday from Brian Payne, director of Dell PowerEdge servers, and Mike Roberts, senior manager of Dell PowerEdge servers, I was struck by how much emphasis the Dell spokesmen placed on two key themes: openness and innovation.

For Dell, architectural openness is defined by interoperability, adherence to industry standards, and customer freedom from proprietary lock-in. Dell draws a distinction between its interoperable approach to data-center networking and the proprietary offerings of Cisco and, increasingly, HP. Dell contends that customers that adopt  converged data-center solutions from HP or Cisco — encompassing servers, storage, networking, and virtualization — could find themselves tied to a vendor that stops innovating. For those customers, the result could be competitive disadvantage, especially if their counterparts patronize vendors  — for instance, Dell — that offer an interoperable, open model.

This leads to a discussion of innovation. Dell is at pains to stress that it has innovated and continues to innovate in the data center. Indeed, while there’s nothing revolutionary or dramatically disruptive in Dell’s new slate of product announcements, the company is making noteworthy advances in its server architectures, its storage offerings, its management software, and its support for virtualization. It’s also innovating, through its Dell Business Ready Configurations, in offering preconfigured solution bundles to mid-size enterprises in target vertical markets.

Although Dell suffers from a brand-image hangover that has proven difficult to shake,  the company has escaped from the ghetto of white-label box vendors. To be sure, Dell still has chapters to write in its data-center narrative, but it is proving adept at devising and deploying viable technical architectures and business solutions for its target markets.

In that respect, what Rob Enderle, principal analyst at the eponymous Enderle Group, told Channel Insider rings true:

“The market likes choice and specialization. No one vendor, since IBM owned this market, has been able to be expert enough at all business sizes and types providing room for each vendor to specialize and carve out a market.”

“Dell tends to favor firms who want to do much of the work themselves, aren’t particularly interested in global services, and want a hardware vendor who is at arm’s length from software to avoid lock-in. There appear to be enough of those folks to sustain Dell.”

I generally agree. Moreover, I think a case can be made that those customers, once they’ve made a significant data-center buying decision, are unlikely to switch vendors unless they’re given a compelling reason to do so. Usually, though not necessarily, that impetus would involve their incumbent vendor falling woefully behind the innovation curve over a sustained period.

Dell is cognizant of the risk, which explains why the company is pushing the innovation theme so forcefully. It wants customers to understand that its interoperable converged data center doesn’t involve an innovation tradeoff in relation to alternatives from IBM, HP, and Cisco.

Accordingly, Dell draws attention to the fact that its new blade-server hardware features the latest industry-standard microprocessors from Intel (in the PowerEdge M710HD) and AMD (in the PowerEdge R715), not to mention an interesting utilization of general-purpose GPUs in its PowerEdge M610x.

Similarly, Dell cites automated data tiering and performance improvements in its EqualLogic PS6000XVS and PS6010XVS storage arrays. It also talks up the performance advances in its PowerVault MD3200 and PowerVault MD3200i storage arrays.

On the networking side, with the release of PowerConnect-J series of products, the first offerings derived from Dell’s OEM agreement with Juniper, Dell emphasizes that its customers can rely on Dell’s networking partnerships to ensure that they don’t suffer from Cisco envy. There is a similar message in Dell’s extension of the PowerConnect B-Series of chassis-based switches OEMed from Brocade. which recently gave its own notice that it has its head and heart back in the enterprise-networking fight.

Dell also draws attention to energy-efficiency enhancements delivered in its M1000e blade-server chassis, and it notes systems-management updates to its Lifecycle Controller, Chassis Management Controller, and Integrated Dell Remote Access Controller (iDRAC). Yes, a lot of this is rustic meat and potatoes, but it’s all part of the data-center buffet, and Dell needs to demonstrate that it hasn’t forgotten to provide  a full menu.

When I spoke with Dell, I got the feeling that it fears Cisco most of all. IBM plays upmarket, mostly out of Dell’s neighborhood, and HP is a known commodity — in more ways than one — perhaps with a reputation for enterprise innovation that is no longer warranted under the grim cost-cutting scythe of Mark Hurd’s technocrats of doom.

Cisco, though, seems to command Dell’s full attention. There appears to be a belief within Dell that Cisco won’t be content to spread its Unified Computing System (UCS) for data centers exclusively to high-end enterprises and cloud-based service providers. That assumption is probably correct. Dell has reason to be concerned.

Then again, healthy paranoia never hurt anybody. If concern about Cisco keeps Dell focused on delivering solutions to its core customers in the middle market, the preoccupation will have been a positive stimulus.

As a company, though, Dell might have a better chance defending its turf if it put more resources into its SME and enterprise strategies and product portfolios and proportionally fewer resources into consumer markets, where it seems destined to lose market share and squander brand equity.

Learning from F5’s Success Against Cisco

Earlier today while perusing the morning chatter on Twitter, I learned via Brad Reese that market-research firm Infonetics says F5 Networks has opened a commanding nearly 20-point lead over Cisco Systems in the market for application-delivery controllers (ADCs).

Citing the Infonetics data, which reaches as far as the first quarter of this year, Reese professes astonishment that F5 has surged so far ahead of Cisco after being in a neck-and-neck battle with the networking giant as recently as the fourth quarter of 2008.

I can’t say that I’m surprised at F5’s success. Despite Cisco making several acquisitions over the years in the load-balancing and application-delivery markets, it never has been able to find the silver bullet to smite F5.

We can see now that load balancing and its descendants were markets that got away from Cisco. If you look back into the ancient history of networking — yes, let’s go back as far as 1996, shall we?  — we see that Cisco first tossed its  LocalDirector into the ring to dispose of F5.

After LocalDirector was discontinued in 2003, Cisco turned to technology it had obtained as a result of its extravagant acquisition of ArrowPoint Communications, for a whopping $5.7 billion, in 2000. Before the discontinued of LocalDirector, Cisco went through an uncomfortable period where LocalDirector, technology from ArrowPoint, and other in-house technologies jostled for dominance in Cisco’s load-balancing portfolio. It wasn’t pretty, and it was confused for field-sales representatives and channel partners alike.

At this point in my narrative, I will digress, but stay with me.

In retrospect, Cisco might claim, given the obscene valuations of public and private companies back then, that its ArrowPoint purchase wasn’t as crazy as it looks from our current perspective. To support its point, Cisco might cite Nortel’s acquisition of Alteon WebSystems, an ArrowPoint competitor, for stock initially valued at $7.8 billion (but which was worth less by the time the deal closed).

But citing Nortel’s acquisitions as a rationalization for one’s own corporate debauchery probably isn’t the strongest defense. As a loquacious lawyer would say, that sort of rationalization might explain one’s actions, but it does not excuse them. Besides, Nortel eventually sold its Alteon assets to Radware for $17.65 million, which tells you all you need to know about why Nortel is a defunct company.

Returning from my historical perambulations, I want to draw a couple of inferences from the trip down memory lane. First, all those companies — not just Cisco, but Radware, ArrowPoint, Alteon (and later Nortel) — were F5 competitors. Second, once upon a time, given the erstwhile valuations of the likes of ArrowPoint and Alteon, the market attached whopping value to the space and felt it was ripe for big-vendor consolidation and a changing of the market-leadership guard.

But it didn’t happen. Despite all the big vendors buying companies around it — Intel also acquired a company called iPivot, for $500 million in 1999, that was trying to solve server-bottleneck problems — F5 more than held its own. And it continued to do so, even though Cisco has kept taking runs at it.

So, considering the big picture, why has F5 succeeded against Cisco where so many others have failed?

One of the reasons, and I have seen and heard others mention it, is focus. Unlike some vendors who’ve failed miserably against Cisco over the years — Nortel, the pre-Chinese incarnation of 3Com, Cabletron and its scattered progeny — F5 had market discipline, focus, and unswerving resolve. It was not blinded by hubris or delusions of grandeur. The company went deep rather than wide, stuck to what it knew best, and worked hard at staying close to its customers and building the best products on the market.

When F5 has chosen to expand into new markets, it has not done so hastily. The company has taken a measured approach, adding products purposefully and making acquisitions (most of the time) of the tuck-in variety, ensuring that such purchases are accretive in the near term. This was all part and parcel of F5’s business and market discipline.

What else? I think the company’s channel-sales structure was carefully planned and well built, drawing from best practices in networking and other sectors. After learning some hard lessons, F5 stressed quality over quantity (as in number of) partners. F5 constructed a sales-support apparatus that could scale effectively, providing all the necessary backing that channel partners needed to prosper.

In technology partnerships, F5 has been similarly focused. Look, for example, at its application-related partnerships with Microsoft, SAP, and Oracle. F5 knows where BIG-IP plays in those application environments, and it has derived considerable value from providing proven and innovative solutions that help customers run those applications more productively.  Again, discipline has been key. The same holds true for the company’s other technology partnerships across areas such as infrastructure, management, security, telecommunications, and virtualization.

Its solution sets and vertical-market programs have grown in a similarly deliberate manner.

Another important consideration — and, again, it’s something others have mentioned — is its community outreach to customers, IT professionals, and developers. In that regard, F5’s DevCentral has been indispensable. A lot of attention and resources are invested in DevCentral — and it shows. The site went through a refresh earlier this year, but it invariably has provided a welcoming forum for collaboration and discussion not only relating to F5’s products but also to some of the broader data-center challenges faced by IT professionals.

F5 demonstrates that it’s possible to compete and win against Cisco. As Cisco extends itself into market adjacencies, it is advancing into areas that are new to it but that often already have incumbent vendors. Those companies — in the smart grid, in next-generation IP video services, in digital signage, and in many other areas besides — should study the F5 playbook. It offers practical guidance on how to keep the giant at bay.

Motivations and Machinations Behind Brocade One

Well, I’m finally getting around to commenting on the Brocade One announcement earlier this week. To understand the present, however, it often is necessary to have an appreciation of the past. Brocade’s recent history was the precursor to its announcement this week, and recounting that history will help us understand what the company is trying to accomplish.

Cast your mind back to last fall. You might recall that a neon “for sale” sign had been placed in front of Brocade’s corporate logo. The company was being shopped aggressively by its investment-banker agents. Its executives appeared to have concluded that the company would be better off under the auspices of a bigger industry player than it would be as an independent vendor. Rumors abounded that somebody — HP, IBM, Oracle, Dell, even Juniper — might take the company off the market for copious riches that would keep Silicon Valley’s luxury-car dealers from having to carry lower-end models. Of course, the rumored deal never happened, and Brocade’s CEO protested that he wasn’t shopping the company.

That non-event still reverberated, primarily within Brocade’s installed base. Customers don’t like hearing their vendors are for sale. When customers buy products, they invest in relationships with vendors that sell the products. Amid all the heated hype and careless whispers about Brocade’s rumored sale, customers got nervous. Who would buy the company, and what would the new owner, when on materialized, do with Brocade’s product portfolio?

Investment bankers might have stopped talking about a Brocade acquisition, but many Brocade customers couldn’t and didn’t forget about it. They wanted to know whether Brocade had thrown in the towel, whether the company remained committed to them and dedicated to the markets it served. These were valid questions, and just having field sales representatives provide stock answers wasn’t enough.

In the period preceding the acquisition chatter, Brocade was struggling to integrate its own $3-billion acquisition of Foundry Networks, an Ethernet-switch vendor that, like so many before it, tilted quixotically at Cisco’s enterprise windmill. Brocade, which made its name in storage networking, didn’t seem to know what to do with Foundry, whose morale and sales suffered in the deal’s aftermath. Pulling the companies together under a shared vision and unified product strategy proved exceedingly difficult for Brocade’s executives.

When it became clear that Brocade wasn’t about to find a buyer, that it had to solve the Foundry problem on its own, the company changed gears. It brought aboard some seasoned executive talent, including John McHugh, who had extensive experience battling Cisco in Ethernet switching, and it sought to craft a new narrative stressing reinvention and a bright future.

So, that’s the context for the announcement that took place earlier this week. Brocade’s challenges were threefold: calm a nervous customer base concerned about the company’s direction and future viability; demonstrate that it had righted the foundering Foundry ship; show some thought leadership on the future of data-center networking, with due consideration given to rampant virtualization and increasing adoption of cloud computing.

In announcing Brocade One, the company addressed all those issues. Brocade showed it had the necessary chops for vision and strategy, it illustrated that it finally had harnessed and integrated the Foundry portfolio into a cohesive solution set (at least on paper), and it demonstrated to customers that it was ready to provide new collapsed network fabrics for evolving data centers.

Well played, Brocade, well played. You turned an existential corporate crisis into an opportunity for triumphant reinvention. The company deserves credit for recognizing its dilemma and climbing out of the hole it had dug for itself.

Not surprisingly, Brocade is taking a partnering approach to providing solutions for the next-generation data center. In this case, though, necessity is the mother of invention. Unlike Cisco, but like Juniper, Brocade has chosen the partnering path because it’s the only one available to it. That doesn’t mean that path isn’t the right one, or that it won’t lead to a pot of gold, but Brocade didn’t have much choice in the matter. Against Cisco or HP, it wouldn’t win in a competition based on resources and vertical scale.

All the big networking players are emphasizing virtualization, cloud computing, and convergence. Brocade is no exception. Theoretically, they’re all in agreement about the need to abstract (hide) complexity from customers through automation, and they’re all seemingly committed to simplifying and flattening network architectures. All networking vendors are saying today’s networks won’t adequately support increasing virtualization, but some beat the drum more fervently than others. Obviously, Cisco — as the enterprise networking behemoth — has more to lose than its competitors from a jarring or sudden market transition away from the status quo.

Clearly that transition presents a once-in-a-lifetime opportunity for Cisco’s competitors. An awareness of that opportunity was implicit in much of the message Brocade delivered this week.

Meanwhile, Cisco, Juniper, and Brocade are taking different architectural approaches to redesigning the data-center networks, whereas HP, for now, seems content to position itself as the vendor who will commoditize the hell out of them. Cisco is pushing its Nexus switches, its Unified Computing Systems (UCS), VMWare virtualization technologies, and EMC storage. HP is coming at the market with a similar one-stop-shopping approach, though it will play the field on virtualization, pushing a cheap-and-cheerful approach to low-priced, standards-based networking gear. For HP, at least at this point, networking is where it will pound away at Cisco’s margins rather than where it will innovative its way to market leadership.

Juniper, as we know, has laid out its 3-2-1 strategy, on the road to Stratus. It’s a partner-intensive formula, with IBM and Dell critical to the company’s success.  Juniper has spent a lot of time formulating a JUNOS strategy that looks relatively well baked. The more substantive value it can deliver to its customers and partners through JUNOS, the more likely Juniper will prosper. It’s a good plan, albeit one that remains, like much of the next-generation networking architectures, a work in progress.

An interesting sidebar will be HP’s partnership with Brocade. Now that it owns 3Com, HP has Ethernet switches that span the enterprise gamut. Those will compete against Brocade’s Foundry portfolio, even though HP still carries Brocade’s storage-networking products.

Some observers believe Brocade remains for sale, and that the company chose to pursue a strategic makeover for the sake of appearance, to make it look both more attractive and more threatening to potential acquirers. If that’s  true, HP remains a company whose attention Brocade would want to draw. Oracle has yet to play its networking cards, too, and Dell is at a crossroads, unsure of whether to follow the path of HP or of IBM.

In any good story, the reader can’t wait to see what happens next. As data-center networking gets redefined by pervasive virtualization and cloud computing, we’ll all be closely monitoring events.

For the first time in years, and to a far greater extent than in recent history, customers will hold nearly all the cards in enterprise networking. Incumbency has its privileges, obviously, but it’s no guarantee of indefinite rule. Change is coming, vendors are staking positions and making claims, but customers ultimately will decide which vendors will lead them into a brave new world.