Wednesday, November 4, 2009

VCE Forms Coalition of the Willing

As Reuters first reported last Friday, VMware, Cisco and EMC officially announced a special coalition on Tuesday under a new VCE moniker "Virtual Computing Environment".

The new VCE comprises four key components: pre-configured and tested product bundles called Vblocks; a joint direct sales and support organization headed by its own yet-to-be hired CEO; a new joint system integrator ecosystem, and a joint venture services and integration company called Acadia that counts Cisco, EMC, VMware, and Intel as investors.

This coalition is the lastest example of an increasing trend toward consolidation and vertical integration among the large enterprise IT vendors; however, what is unprecedented, is the degree to which it not only excludes, but flat out snubs all three of the VCE's existing OEM partners. Clearly, VMware is taking the biggest risk since HP alone sells 36% of all virtualized servers worldwide.

Furthermore, it's a mystery why BMC Software, a strategic partner and participant in Cisco's major UCS announcement last March, was snubbed. Perhaps it was so EMC CEO, Joe Tucci, could boast about his company's new management stack called Ionix during Tuesday's
announcement. Or perhaps it was BMC Software that wouldn't join the "Coalition of the Willing", at the expense of alienating some of it's most strategic and profitable partnerships in Dell, Deloitte, IBM, Microsoft, Oracle, SAP, and Sun Microsystems.

I suspect customers will be taking a "wait and see" stance to this announcement. But judging by the public statements from Dell and NetApp, and HP's converged infrastructure architecture and products announcement today, most of the large IT vendors are viewing the VCE coalition in the context of an all out war.

Monday, November 2, 2009

VCE Alliance Rumored to Announce Formal Venture this Week

Since August, rumors have been swirling around the VCE (VMware, Cisco, EMC) alliance companies that a data center joint venture (code named Alpine) was imminent. Fast forward to October 30th when Reuters reported that VCE was preparing to announce a new line of networking, computing, and storage products dubbed "vBlock" to better compete against IBM and HP.

Although officials from all three companies have declined comments, several industry trades have reported the rumor appears a good bet and that it will likely be announced ahead of Cisco's Q1FY2010 financial results due after market close on Wednesday.

The joint venture would allow the companies to appear as one from a customer perspective, but be backed by the credibility and balance sheets of Cisco and EMC. It remains to be seen whether the three separate companies can pull off a neutral position with their existing technology, OEM, and channel partners. Judging by the recent announcements from Dell and IBM partnering with Juniper Networks, the bigger, more strategic partners will increasingly hedge their bets by establishing partnerships with VMware, Cisco, and EMC competitors.

It's interesting that two of the most acquisitive companies in the industry would do a joint venture rather than a traditional merger. But with Cisco's $133 billion market capitalization, and EMC and VMware's combined $49 billion valuation, neither can easily afford to buy the other; however, they can ill-afford to allienate their existing >10% revenue partners either.