By Charles King, Pund-IT, Inc. January 13, 2016
Spooking customers for competitive or other advantage is so common in the tech industry that the chief methodologies employed – fear, uncertainty and doubt – have their very own acronym: FUD. The practice and acronym commonly occur when vendors are going through significant transitions, like acquiring another company or being acquired, reorganizing, downsizing employees or losing key executives.
If you’ve been around for a bit, you know the all too common drill. Competing vendors subtly and not so subtly intimate that said changes will leave their honored competitor so hobbled, crippled or utterly broken that its customers are far better off abandoning ship for safer ports, like their own. Industry news outlets hungry for eyeballs pick up the story and run with it, pinging industry pundits for their opinions. Even reputable analyst firms feel the need to chime in, elevating the noise levels to the point that reasonable questions and criticism of the original FUD are all but drowned out.
FUD, lies and VCE
The latest FUD-ish murmurings I’ve been hearing relate to the impact of Dell’s planned acquisition of EMC on the company’s VCE division and converged systems. For those unfamiliar with VCE, it was originally launched in 2009 and organized as an unconventional joint partnership between VMware, Cisco and EMC, along with a minority share held by Intel. The company’s first and primary solutions were Vblocks, highly integrated solutions based on VMware virtualization technologies, Cisco’s UCS servers and Nexus switches and EMC storage.
VCE was one of the first vendors to focus attention on the converged infrastructure segment, and the qualities of its Vblocks and follow-on solutions helped the company take and maintain a majority market share. The company has enjoyed healthy annual growth, achieving $1B annual run rate in 2012, and $2B in 2014. In 2015, EMC acquired majority control of VCE (Cisco retained a 10% share) and made it a new business unit.
After Dell announced its plans to acquire EMC last October, Michael Dell, EMC’s CEO Joe Tucci and Cisco’s CEO Chuck Robbins all vocally supported the deal and stated that the deal would not negatively impact VCE in any way. To that point they affirmed that the three organizations would continue to manufacture and support Vblock solutions leveraging Cisco’s UCS systems and technologies and had no plans to slow or halt development.
If you think that was clear enough for even the meanest intellect to comprehend, you’d be wrong. Virtually since the Dell/EMC deal was first announced, various prognosticators have warned business customers off VCE, claiming that either,
- Dell, obsessed with finding/monetizing new market opportunities, will shoulder Cisco aside and populate Vblocks with its own servers, despite the plaintive whimpering of satisfied VCE customers, and/or
- Cisco, irritated with various indignities committed by its VCE partners, such as VMware’s purchase of software-defined networking innovator, Nicira, would abandon VCE, take its UCS toys and go home in a huff.
Not at all surprisingly, many of these same naysayers criticized VCE shortly after its launch, claiming that IT industry strategic partnerships were inevitably doomed to failure. Apparently, they believe that whatever they lack in imagination and analytical ability can be somehow made up by altering the facts to fit their analyses.
The business/strategy case against VCE FUD
Besides the fact that Dell, EMC and Cisco have all unequivocally rejected doomsayers’ bleak scenarios, critics’ arguments concerning VCE make no sense from either a strategic or business point of view. Why so?
- Vblocks are, by definition, Cisco-based systems – Since its founding, VCE has emphatically branded Vblocks as solutions leveraging Cisco technologies. When the company began developing solutions using other server and networking platforms, it created specific brands to go with them – VxRack and VSPEX Blue. Not only would populating Vblocks with Dell hardware confuse VCE satisfied customers, it would dilute years of successful branding efforts and dilute Dell’s investment.
- Dell won’t change a winning formula – Michael Dell and company have proven themselves among the IT industry’s best and most successful pragmatists. Yes, Dell does want to increase sales of its servers. No, threatening the industry’s best known and most successful converged system platform is not the way to go about it, especially when doing so could undermine or threaten the largest acquisition in IT history.
- Cisco needs VCE – Cisco doesn’t break out its UCS server revenues according to source. However, VCE Vblocks are rumored to contribute a sizable portion of the total – enough so that losing those sales would likely drop Cisco firmly into 5th place (instead of being in a near 4th place tie with Lenovo) among enterprise server vendors. Doing so would also lower the steady double digit YoY growth of UCS sales into unimpressive low single digits.
- Lying CEOs are bad for business – In the echo chamber of online news which never forgets, fibbing is seldom forgiven but woe betide the executive caught in an outright lie. By going on the record, Michael Dell, Joe Tucci and Chuck Robbins have all firmly committed themselves to a future where Cisco-based Vblocks will continue to be available from VCE. If these three guys fail to keep so clear a promise, how can customers justify continuing to invest millions of dollars in their products and services?
Skepticism and honest differences of opinion are signs of healthy businesses and markets, and are especially important in rapidly evolving industries, including Information Technology. But analyses that ignore the stated intentions of key executives, dismiss settled strategies and defy simple business logic are impossible to justify or support.
When analysis runs off the rails of logic, it usually ends up in a fetid ditch similar to those occupied by fear, uncertainly and doubt. As such, businesses would do well to treat rumors like those currently swirling around VCE as suspect, and demand a full accounting by those holding unfounded opinions and espousing simplistic FUD.
© 2016 Pund-IT, Inc. All rights reserved.