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VCE Now Under EMC Control-Breaking Up is Easy to Do?


October 24, 2014

It has been an interesting couple of days in the virtualization business to say the least. We have witnessed mortal enemies, notably Microsoft, IBM, SAP and Oracle to name a few that have made headlines, pick new friends and join forces to accelerate cloud adoption by enabling heterogeneous environments of end user run each others’ solutions more easily and inexpensively. Plus, there was big news regarding industry structure itself with the announcement that Cisco, EMC and their joint venture VCE have decided that the best path forward for VCE would be under much greater EMC control.

VCE, which is touted to have a $2 billion annualized demand run-rate for its Vblock and Vblock-related products and services, has just experienced its sixth consecutive quarter of greater than 50 percent year-over-year demand growth. Using owner Cisco’s compute and network capabilities and EMC’s storage and data protection, and EMC-owned independent entity VMware’s virtualization and virtualization management capabilities, it has become the leading player in the converged infrastructure market. This is a market which according to IDC is on a tear, growing at 32 percent annually and expected to go from $5.4 billion in 2013 to $14.37 billion in 2017. And, demand is particularly strong in the hybrid cloud area where VCE is focused.  

The question that has arisen is if things look so good, why have the parties agreed to leave Cisco with 10 percent (down from 35 percent) of what EMC has promised will be an independently operated unit, along the VMware model ultimately, as opposed to what all of the parties say is one of the most successful JVs in industry history?

The answer likely comes from the old Chinese adage about joint ventures of any sort, which to paraphrase is “same bed different dreams.” Cisco is in the process of redefining itself and deploying assets against its core networking competencies while EMC is looking to bolster its hold in the storage and virtualization markets. 

As a result, this breaking up was not hard to do since Cisco remains part of the solution, and removes itself as part of a potential problem given differing partner priorities. For its part, EMC has been the subject of industry restructuring speculation and sent a strong message that it wants to be a hunter and not the hunted based on its view of market trends.

The fact that the partners are going through this breakup in a friendly manner is reflected in the statements from the respective CEOs with Cisco hailing its continued commitment to support VCE and be an integral part of its solutions and EMC and VCE citing the benefits of VCE being able to better explore its opportunities under the EMC umbrella but as an independent entity.    

The good news for channel partners is that the Cisco and EMC Cloud Infrastructure Solutions Accelerator Program that was introduced in May of this year remains in full force with VCE as its centerpiece, and Cisco also said that the VCE Partner Program remains unchanged meaning no impact on Cisco partners.

What this means in terms of industry structure going forward remains problematic as Cisco and EMC tend to their respective knitting. If nothing else, what it means is that when it comes to trying to maximize the move to the cloud, nothing should come as a surprise as everyone in the space continues to jockey for optimal positions. 




Edited by Maurice Nagle

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