Cisco pulls plug on alliance with HP over 'conflicting visions'

CISCO abruptly pulled out of a long-standing global relationship with Hewlett-Packard last week in what is seen as further evidence of the IT giants ending friendly alliances and partnerships and choosing instead to pursue more mergers and acquisitions.

It follows Cisco's decision earlier this month to end another partnership with Dell that was described as leaving Dell "high and dry and dumped from a great height".

These developments are a concern to thousands of technology firms that service the multinationals' pan-European operations.

Former Microsoft Scotland boss Raymond O'Hare, now running strategic advice company OC Solutions, said: "There is growing evidence that, as tech giants battle it out for supremacy, they are now bringing to a halt 'friendly' alliances and partnerships.

"They are taking a long, hard look at their operations and how the money is being spent, and they are watching each other more closely than ever.

"They are realising that some of those partnerships and alliances of the recent past were pretty woolly at best, not worth the paper they were written on, and given the current climate, have had to go."

HP has long been part of Cisco's certified partner programme allowing one to design data centre equipment working seamlessly with the other's networking systems. However, Cisco's worldwide partner organisation chief Keith Goodwin notified HP that it will not renew its contract when it expires on 30 April.

Goodwin said Cisco will compete with HP for future business after that date, as he describes the two companies as now having "different and conflicting visions of how to deliver value to our customers."

The move by Cisco to walk away from a joint project with Dell involves a halting of the multi-million dollar development of PC blade networking products associated with developing Nexus components.

Scott Fletcher, chief executive of the ANS Group that partners with both companies, is not surprised by the cancellation.

Fletcher said: "It makes sense as it has got its own architecture now and this shows Cisco wants to go it alone."

O'Hare added that there was increased consolidation across the sector. He said the Cisco move indicated that the "previous harmonious round of partnerships" was now being replaced by a pattern of behaviour likely to promote merger, and which was set to precipitate takeover activity.

Cisco's chairman and chief executive John Chambers sees the technology sector consolidating in the hands of a few players and he has promised his company will be among those left standing.

Chambers told the Consumer Electronics Show in Las Vegas that he intends to stay on a steady acquisition course. Cisco's buyout history involves no fewer than 87 companies in the last decade.

Oracle has moved on a dozen or so takeover targets since it closed the deal on PeopleSoft in 2005.

US strategy adviser Christopher Lochhead, former chief marketing officer of Mercury Interactive, warned that consolidation moves are in danger of replacing innovation, on which the sector ultimately depends for its very existence.

When consolidation comes at the expense of innovation "the results can be toxic", with the bottom line being that technology needs to be a growing industry once again.