HP taking aim squarely at Cisco – and its undervalued partners

I see HP making some smart moves in its goal to take out Cisco.

Cisco has a vast partner network (some 60,000 worldwide, including 12,000 high-end Certified Partners) and this network accounts for more than 80 percent of Cisco’s product and services revenue ($28B in 2009).  Yet when you talk to an average Cisco partner, they will tell you they make almost nothing on the sale of Cisco’s own products and services, and all their own money on the professional services they offer along with the Cisco products – configuration, installation, and technical support.

This makes sense when a registered partner receives something like a 35% discount on hardware (their cost) or a silver partner 38%.  I have not heard of a single medium to large enterprise who made a hardware purchase with less than a 40-45% discount in three years.  Even factoring in special programs and kick-backs how is a “regular” partner to compete?

One way is to blend secondary market components, even something as simple as optics or memory, in with the sale of new hardware.  With the customer’s approval they both win – the partner can double their margins and the customer saves another few percentage points.  Shhhh… but as a used gear hardware resellers, I have a secret … Cisco’s partners make up one of our best customer verticals.

Another way is to sell a better product – not necessarily technologically better, but better for the resellers as a business.  HP Procurve is aiming to do exactly that.  By limiting the number of partners active in a given deal and by offering more lucrative margins, partners can make twice as much or more selling HP than by selling Cisco.

What would you do?

On a side note, Interop Vegas was April 25-29 in Las Vegas.  Cisco held its partner summit in San Francisco April 26-29.  HP held its Partner Conference April 26-29 in… Las Vegas.  So if you are a big partner you cold have gone to Las Vegas and hit both the HP summit and Interop (with dozens of vendors) in three days, or you could have gone to San Francisco and talk to Cisco…

HP is proving to be a much smarter competitor than Cisco has seen in a long time, and this game is only in the first quarter.

A note from Cisco Subnet editor Julie Bort: I want to address the anonymous comments listed below. Cisco Subnet is a community of bloggers that represent a wide variety of voices in the network community. Blogs are opinion pieces, not necessarily news articles. Network World publishes dozens of news articles each day and they are linked on the main Cisco Subnet page as well as our home page, NetworkWorld.com, and our various research centers pages.

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