The VCE dissolution: here comes channel disruption

“Partnering is more difficult than acquisitions…Most strategic coalitions have a very high failure rate, worse than acquiring, and yet as a company, we’ve all three been able to do this.”
-John Chambers, 2009

The waves of disruption are starting to break.

Several magazines (see Sources) reported today that EMC is folding VCE into its business and buying out most of Cisco’s stake. Assuming this is true (EMC is having a big announcement tomorrow morning), it is another huge indicator of the massive datacenter disruption that’s coming. While I think that EMC will certainly still promote Vblocks, it’s hard to imagine that they’ll do so as enthusiastically as they did in conjunction with VCE.

Selling Vblocks

VCE has been on a $1.8 billion run rate. Vblock partners tend to love the product because they make a lot of money from selling, installing and upgrading it. One VCE partner told me that every time VMware upgrades vSphere, customers have to upgrade their Vblocks. This is a laborious process often requiring a team of consultants working up to three days to accomplish. It translates to great services business.

I have to admit, I was surprised at how well VCE has done during the past five years. When I initially heard about Acadia (as VCE was initially called), I thought that there was no way this product was going to sell. The idea of getting the server, storage and networking folks to all come together at the same time and agree upon a common platform purchase seemed to be an insurmountable challenge. A year later I was still somewhat skeptical. I even wrote a blog post about the sales incentive problems with misaligned quarter endings.

But I misjudged the desperation many IT staffs felt as they increasingly virtualized their datacenters. They faced huge challenges in deployment time, finger pointing between server and storage manufacturers, and in functional group collaboration. The topnotch salespeople from VCE, along with channel partner support, convinced many of them that “the world’s most advanced converged infrastructure” was an answer to their struggles.

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Working for a channel partner that moved a whole a lot of both Cisco UCS and EMC, I jumped on the Vblock bandwagon and helped facilitate a fair number of sales utilizing ROI analysis. But I always felt that there had to be a more elegant solution to the challenges of hosting a virtualized datacenter than simply integrating separate products as a single SKU. Once I learned about the Nutanix web-scale architecture, I became convinced that this was a vastly superior alternative.

Channel Implications

A Taneja Group report comparing Nutanix with VCE (sponsored by Nutanix) was just released today. The report states, “Taneja has found that the majority of VCE customers adopted Vblocks because they already had active VCE or VCE-partner sales teams coming at them.”

It will be interesting to see how Vblock partners fare without the huge VCE focus and assistance. On the plus side, it’s almost a certainty that they’ll no longer have to promote Cisco’s ACI over VMware’s NSX. On the negative, they can say goodbye to the monetary incentives from the recently established joint channel program between EMC and Cisco.

Not surprisingly, I’d like to see more Vblock partners get on board with web-scale. In my opinion, selling Vblocks in comparison to selling Nutanix is like pushing rope. Even some die-hard very large Vblock customers have now started migrating to web-scale.

The Taneja Group report says it well, “We believe that even data centers that are happy enough with converged systems today will look to hyperconverged systems tomorrow. Better yet, instead of investing in a traditional convergence solution, businesses should consider going directly to a next-generation solution like Nutanix.”

Sources:

Cisco Said to be Selling Most of VCE Stake to EMC. 10/22/2014. Bob Brown. Computerworld.

Report: EMC to Take a Bigger Role in VCE as Cisco Reduces Stake. 10/21/2014. Barb Darrow. Gigamom.

The End of Pretend? Cisco Looks to Partially Exit VCE Joint Venture. 10/21/2014. Ben Kepes. Forbes.

EMC Said to Absorb VCE Joint Venture as Cisco Reduces Stake. 10/21/2014. Dina Bass & Peter Burrows. Bloomberg.

Tech Titans Unite for Private Cloud Push. 11/05/2009. Jennifer Kavur. IT World Canada.

http://www.itworldcanada.com/article/tech-titans-unite-for-private-cloud-push/40087

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