HP and Cisco Square Off

I love a good dust up in the computer industry. The latest WWF style bout comes to us courtesy of HP and Cisco. In one corner of the ring is Cisco who won't be renewing a system integrator contract with HP. In the other corner is HP who plans to bail from the Cisco Certified Channel and Global Service Alliance Partner programs.

Two giants of the industry beating on each other is so much better than David and Goliath match ups. Those make us feel sorry for the little guy and angry at the mean old big company beating down on the poor entrepreneur who's just trying to make the world a better place.

These bare knuckle brawls are both good and bad for the industry. First, it brings to light the farcical nature of big company alliances. Let's face it, they are marriages of convenience. These folks really want to be on top and there can only be one top dog. It's good that they occasionally remind us not to get too vested in them.

Competition is also good. It drives down prices and ratchets up innovation. When things get too cozy, the industry tends to stagnate. We need another round of wow! inducing products at woo hoo! low prices about now.

It is bad though for those caught in the wake of these two battleships as they try to sink each other. In this case, the indirect channel partners of both companies could become collateral damage. It may well become more difficult to integrate products from both companies and channel partner customers are not likely to want to pay extra for that added effort. It's not their problem that HP and Cisco went from lovers to bitter rivals practically overnight. There will be costs that someone has to absorb and the channel looks like the dry sponge here. Hopefully a hardware price war will ensue that give a little more margin to channel service providers.

This move is just one act in an ongoing drama in the computer industry. Over the past ten years we have seen the growth of the full service, full product line computer company. There are now only half a dozen (if that) companies that sell solutions to customers and they want to sell whole solutions. Servers, networking, storage, software, the whole system plus services. This is what is behind the Cisco Unified Computing initiative and HP's acquisition strategy. Everyone is trying to be IBM. Even software companies are getting into the act. Just look at Oracle and their purchase of Sun and other investments in hardware. It will get harder and harder for independent hardware companies to continue to exist unless they are making OEM equipment for one of the big, full service companies. A few will survive to provide niche products whose revenue stream is too small for the big guns to care about. A few others will get by on overservicing specialty markets. It's like grocery shopping. Most everyone buys from a big supermarket. Sure, you occasionally go out to the specialty market or “all local foods” shop but that's not for everyday purchases.

Next up: Exclusive channel partner programs. Want to sell our stuff? Then you can't sell anyone else's stuff. It's been done in the past and will likely happen again.