There has been a lot of talk about how Cisco's servers and its move into the data center will burn bridges with HP and other vendors in that space. What is your stance on this competition?
If you look at our relationship with the IBMs and HPs of the world, we've had a very good, long-standing relationship with them for 10 to 15 years in some cases. If you look at a spectrum here between a "partner" as opposed to a "competitor," I'd have to say that, over time, HP has moved over more clearly to the competitor end of the spectrum for us.
I think IBM is a little different situation because, again, they've been a close partner of ours; they're also an open systems player and Cisco is an open systems player. When you look at the possible synergies for us together in the future, I think you can see some of those, especially when you get into IBM software. We have open APIs on the UCS [Unified Computing Systems] platform that we announced here. Those at some point, we're assuming, would go into the IBM engine framework. From a service standpoint, again, IBM and Cisco have many customers in common, so there are going to be places where we work together. Ultimately, if our customers tell us we'll have to work together to keep [them] happy, we're going to work together and make that a positive relationship. How does the data center play affect Cisco channel partners?
From a channel standpoint, it's interesting because for all the partners that we're going after and developing into our unified data center practice, one of the requirements is that they already have previous experience in the server space. We wanted that in particular because this is a different space; it's working on things quite differently than our traditional network partners are used to. So we want experience, and therefore they are going to be partnered already with IBM or HP. That's completely normal for us.
What's the impact on the channel partner in this case? We've had a very positive reaction from all of them because they view the innovations that we are bringing to market in the unified compute space as being very positive for them, and we've seen very little real conflict from their business models with this.
I think it's important to note that the data center space has always been a multi-vendor space. Almost all of our partners carry not only one vendor; they carry multiple vendors in the space, so I really believe it will end up being very positive for partners because they're going to have more choice for their customers. You have emphasized that Cisco's servers are not necessarily about competing in the server market but that Cisco is making an "architectural play." When I think of an architectural strategy, I think of a rip-and-replace scenario. With Cisco's new data center initiatives, are you asking the network engineer to do that?
Get the details on Cisco's channel data center play in our blog
Cisco channel game plan for expanding its data center footprint
Even in core networks, it's typically not a rip-and-replace model. If you look at how networks are upgraded, they're typically on a five-year upgrade cycle on average. It's an evolutionary thing, where you replace portions of the network over time, especially in larger customers -- you don't rip and replace. In the server world -- in the compute world in particular -- the life span of that server is considerably less. We had a couple of partners joke with us in my last breakout here that it's a 12-month cycle for the server business. I think it's longer than that actually; they do have longer life spans than that -- but it does turn quicker than networks, there's no question.
When I look at this, it's more of an evolutionary thing, where as they're going into that cycle, to do the upgrade, now the customer's going to have a brand-new architecture that they can adopt. Fortunately, because the churn cycle on that is lower, we're going to be able to enter the market quicker than we would be able to, for example, with networks. While vendors are saying partners are ready for the data center, we've heard some partners saying they're not. So which partners are ready for the data center?
Some partners will really evaluate themselves, and we try to profile this in such a way that we are attracting and getting partner engagements that can be successful with it. So partners that can be successful with the approach we're taking are ones that already have experience. When I say that, I mean that they have experience, in particular, in network infrastructure, compute/virtualization and storage networking.
If they have experience in all three of those categories, they have the right DNA to become one of our data center partners. If they're lacking experience in any one of the three, it would be much more difficult for them to enter this market and the approach that we're taking. Will Cisco's partner programs for the data center require partners to spend a lot of money on training for data center architectures?
The good news is that the ones who are attracted to this and are going into it with us have a lot of the experience anyway, so the incremental training is arguably relatively small. It's an incremental investment; it's not massive in the grand scheme of things.
What we've done with our specializations is that we've made the training available online. So the partner doesn't have to travel; the partner doesn't have to pay for the class because it's available online. There are proctored exams you have to pay for, but that's beside the point. We're trying to remove as much of the cost from the training aspect of this for partners as possible.
On the newer products -- the UCS products, the compute products -- those are in-person trainings simply because it does take time to get the stuff stabilized and online, so there is a little bit more of a cost with that. Typically, though, the bigger investment they're making is really the time out of office for their individuals, so we try to minimize that as much as possible. How are partners looking at virtualization? Are they ready for it?
The thing that they view most often is the opportunity to bill out services, and it has to do with virtualization assessments. What we've found is that our partners are hired by customers to go out and analyze what's going on in their network, to be able to understand if the applications they have are suitable for virtualization. So the ones that have good experience with virtualization are the ones that have typically brought a partner or an expert in to do an assessment, figure out what needs to be done -- and then they virtualize it.
[When they're not ready] is when they've not done the right number of assessments overall to understand what can and cannot be virtualized. From a partner standpoint, that is the opportunity. That's where they can differentiate themselves; that's where they can go in and sell services. Why are partners investing in the data center?
There are three reasons that partners are going after this space. The most important reason is that they do believe this is a very good route to profitability for them, and the profitability they see being generated is being driven by services they can build based on these new technologies we're launching. They do know how to translate new technology into service opportunity.
The second has to do with strategically expanding their footprint and their existing customer base, and capturing new customers. If they have these capabilities to go in and lower the total cost of ownership of the data center by a significant amount, that gives them the leverage to get in and get their own customers and new customers.
Finally, it's about differentiation. Partners that can go in and implement these new solutions that comprise multiple technologies can clearly differentiate from the competition. What are the stumbling blocks for partners in the data center space?
I'd say that the biggest challenge the partners face right now is really breaking down the silos. Everyone's used to selling in a silo. Changing that is really the most challenging thing.
What we're trying to do to break that silo down is introduce things like the data center architect and data center engineer roles, which train partners across all three of those categories [data center network infrastructure, compute and virtualization, and storage networking]. We're trying to help this and accelerate the convergence in our partner community of these individuals to create that unified data center practice. What do the data center architect and engineer roles involve?
What they are is technical roles. The data center architect is a role that we're taking to market that can design solutions across all three of those buckets. What I mean … is that they have the expertise from an infrastructure standpoint, so they have pre-qualifications that they've taken network infrastructure courses and have expertise there; they have expertise in storage networking, and through the training that we're doing inside of the architect role, we will train on the UCS platform. They also have a background in virtualization. So they have to have multiple requisites just to get in, and then the training that they receive brings it all together.
The engineer, then, is the one that takes that and translates it into all the different bits and pieces and puts the entire solution together.