Update: Immediately following my report Cisco put out an official statement on the terminating their relationship with HP.  Reason:  conflicting visions.

I got confirmation today from someone inside Cisco that an internal memo went out announcing that Cisco is dumping HP as a certified partner.  Concurrent with the Cisco internal memo HP makes a move to join forces with QLogic for stackable switches.

According to sources inside Cisco this was the substance of the internal memo (trying to get a copy):

Cisco is going to notify HP that it will not renew its partner contract which expires in April. It says being a certified channel partner provides access to proprietary information such as product roadmaps and partner profitability incentives which we don’t want to provide to HP.  Says that we want to reach an agreement with HP that will provide business continuity for customers so a basic reseller agreement might be the only relationship.

Last November, HP announced it was buying 3Com and I interviewed Marius Haas (listen to interview here).  In that interview Marius basically said that Cisco’s move into servers is a direct competitive threat.

HP Is Making Moves Of Their Own- Partners with QLogic Not Cisco

Timing of the Cisco internal memo was at the same time it was announced that HP will be private labeling QLogic’s stackable SAN solution. I’m waiting to hear from HP, but heard from another source that Cisco didn’t want to play ball with HP on the OEM deal.

Analysts following Cisco say that Cisco is pissing everyone off (just recently Dell), and this is going to cost them a few bucks. However, it’s not the end of the world for Cisco given their huge bankroll of $40 billion in cash, but it puts another crack in their armor. I pinged some of our contributors who know this space cold and their angle is that it’s more of a blow to Brocade than Cisco.

However, this clearly shows the lines drawn between Cisco and HP as competitors.  HP now has a branded stackable SAN solution and it’s a nice move for Qlogic which get access to HP’s massive sales machine and services arm of EDS.  Don’t count out IBM.  It was clear at Mobile World Congress that IBM is partnering up against Cisco as well.

Here is the info on the HP QLogic news that hit today.

In a move designed to expand its global market share in Fibre Channel (FC) switching, QLogic Corp. (Nasdaq:QLGC) today announced that its 5800V and 5802V Series 8Gb FC switches are now available from HP (NYSE:HPQ) as scalable SAN solutions for use with HP’s server and storage portfolios, including HP BladeSystem Virtual Connect, HP StorageWorks Modular Smart Array (MSA) and HP StorageWorks Enterprise Virtual Array (EVA) systems. Branded as the HP StorageWorks SN6000 Stackable 8Gb FC Switches, the switches incorporate QLogic’s unique inter-switch link (ISL) technology, which enables companies to reduce total-cost-of-ownership by up to 43 percent compared to non-stackable alternatives, according to a recent economic value study from Wikibon.

Bigger Picture – The Datacenter Operating System

The datacenter is a battleground for new models. In particular one that is very trendy right now is the optimization of components in the datacenter to construct a datacenter operating system.

HP Labs is doing some amazing research in sustainable datacenters and companies like HP, Cisco, and Juniper are vying to be a complete player in this “new datacenter operating system”.

Pradeep Sindhu, founder of Juniper Networks, was just talking about this trend of the datacenter being a complete system last night at Mobile World Congress.  Going further firms that take a complete systems view of a datacenter are poised to be more innovative says Pradeep.

Big players who have massive datacenters or cloud platoforms (e.g. Google) go great lengths to optimize every part of the datacenter equation. So this stackable switch deal makes sense.

We were just talking on twitter about how any small change in performance on components can yield big change in the economics and sustainability. Experts like Pradeep are saying that this notion of a whole complete datacenter is a systems problem and companies need to think holistically about every part.  It’s all about getting everything to Ethernet and thinking about the datacenter as a system.

HP has the depth and field team to compete with Cisco.  We are starting to see those moves take place.  I’m sure there will be more not less of partnering especially as networking players become systems players and move up the stack.

Moving up the stack is something Cisco has not been strong at.

Update: Here is the official statement from Cisco on dumping HP.

“Over the last few years our relationship with HP has evolved from a partner to companies with different and conflicting visions of how to deliver value to customers. Despite this shift in industry dynamics, HP had remained a Cisco Certified Channel Partner. Being a Cisco Certified Channel Partner has numerous benefits including access to proprietary information (such as product roadmaps) and partner profitability initiatives. Given the evolution of our relationship it simply no longer makes sense to provide these benefits to HP.”