Scarcity of New Technology Heightens Vendor Conflict

Services-based systems use continues to agitate codified IT standard, causing the decline of the technology world and the value of legacy technologies contracts. Vendors are thus being forced to reassess their product portfolios and adopt new technology development initiatives with the intention of gaining control of markets which were once presided over by company allies. This could ultimately cause greater competition and conflict, and it is important that one oversees the implications of vendor dispute to better understand the effect on business operations, value propositions and long-term prospects.

Cisco, for example, has noted that profit-generating products are gradually being commodified and, as a result, seeks to use virtualization as its catalyst in offering a more varied product portfolio. Cisco is in a cooperative partnership with VMware Inc. and EMC Inc., and all three worked together to virtualize data centers and participated in the creation of vBlock and VCE.

Servers, however, were missing from the the Cisco-VMware-EMC mix, but introducing one (such as IBM or Hewlett-Packard) would have caused conflict between existing collaborators. Cisco thus began its Unified Computing Strategy (introducing its own purpose-built servers), altogether completing VCE - but these also created dispute.

Cisco marketing services then sought both financial and operating control with its own server allies, but this led to them developing new partnerships so they would remain a part of virtualization and data center markets.

Now, VCE has grown to a near-billion-dollar company and Cisco is supposedly unhappy with the arrangement as the former is not evening out fast enough and is being infringed upon by VMware, EMC and other efforts to go to market.

VSPEX, a much larger industry virtualization reference structure, was initiated by VMware and allows end users to browse a variety of hardware vendors, including Cisco, when selecting products. Nicira, a software defined network (SDN), was purchased by VMware and has the ability to frustrate Cisco's business.

Furthermore, EMC is branching out; recently it formed a relationship with Lenovo Group Ltd. in order to create new enterprise and midmarket-ready servers. Having only a small North America server market share, Lenovo has already succeeded in toppling Cisco from the top five server vendors in the world.

Cisco, in defiance, recently rolled-out a cloud structure for providing virtualized networks capable of competing with Nicira technology; the Cisco Edition of OpenStack. The growing conflict with EMC rival NetApp Inc. has also brought FlexPod reference architecture and solutions to the midmarket. The architecture of FlexPod has revoiced the need for NetApp to be purchased by Cisco to successfully compete with the rising networking ambitions of EMC.

As demonstrated, the commodification of technologies is fanning the flames of these disputes. Technology continues to grow and allows itself to be easily absorbed into the marketplace, and vendors need to react to these changing circumstances accordingly. Developing new capabilities and maintaining revenue growth become more important.

Customers should not be expected to pay more for older technology, and so improving and adding features and technologies, companies can increase market potential.

Disputes between companies come as a result of encroachment by outside forces rather than disruptive technologies; the supply of replacement technologies is decreasing, and there do not appear to be many new products available. As some vendors grasp for new opportunities, others are negatively impacted as a direct result.

Declining technology does not fade away quickly and acts as new revenue for vendors. Something that financially benefits Cisco and Microsoft today will make less money tomorrow and be more expensive. For EMC and VMware, buying and selling declining technology will cost them little and make them more money; it will allow these companies to improve upon other products and be noted as replacement revenue in their books.

These conflicts have no foreseeable end according to Channelnomics and, if anything, are set to get worse. When full parity between vendors is reached, everything will be thrown up in the air.

Vendor competition is not necessarily good for the channel and will result in more vendors using their channel partners in conflict. Solution providers will also sacrifice their independence and ability to choose technology suppliers, aggressively implement investments in limited products and market opportunities, and heighten frustrations between vendors. Solution provider costs will increase by default as a result of vendor war.

The presence of vendors in solution provider territory may also happen. It is possible that competition will make some surviving companies stronger and more capable of supporting their partners, but vendors are already providing direct software sales, automated and hosted services and professional services; moving into channel turf.

As new technologies are no longer available in abundance, the landscape is set to change drastically. Adapting to changes will certainly be difficult and costly for all concerned parties, and planning and understanding acquisition strategies and technologies is imperative. (CY) Link