Channel uncertain over technology pact

Channel uncertain over technology pact

IBM and Cisco's $US2 billion network hardware and services deal has left local partners unsure of their positions in the new hierarchy.

The two companies ann-ounced last week that Cisco will acquire IBM's routing and intellectual property from its Network Hardware division and purchase IBM technology over the next five years.

IBM Global Services Australia (IBM GSA) and Cisco will also unite to offer services and solutions around e-business and networking projects, and IBM GSA will support Cisco products. The arrangement is still subject to approval by the US Department of Justice.

The deal is seen as recognising IBM's desire to focus on its core competencies in service provision, leaving product marketing and fulfilment to Cisco.

"IBM has recognised that its strengths in networking lie in services rather than product development," explained Terry Walsh, Cisco Australia's new managing director.

This latest announcement follows Cisco's controversial move to partner with KPMG and form KPMG Consulting to attack the high-end services market (ARN, August 18, p1).

But despite reassurances from IBM and Cisco, channel players contacted by ARN are initially wary about the new arrangements.

One reseller, who asked not to be named, said the ann-ouncement has forced him to tear up his business plan.

In the short term, he said it has thrown into doubt a number of tenders where he was pitching IBM against Cisco.

As a result, it appears the impact will be most felt by IBM partners offering service and integration skills based on IBM equipment.

Walsh claims the deal will put IBM on a par with its other service partners, asserting that "if you are an existing IBM customer it would be logical to continue to use it to provide services. But this is not an exclusive deal. Other partners will still provide services on Cisco products," said Walsh.

Yet in a report by IDC's Merv Langby, a Cisco spokesperson suggested that "IBM will become Cisco's primary partner".

Langby said in the future IBM GSA will provide the majority of services on Cisco products, describing the technology and service providers landscape as "very pliable".

"The level of change in the marketplace is so dramatic that mainstream players are forced to reassess and fine-tune all their relationships," he said.

However, one IBM partner expects the deal will open up new opportunities by offering customers the benefit of having two Internet leaders behind their e-business solutions.

Garry Kewish, manager, network solutions at IBM partner Synergy Software, said: "Synergy intends to work closely with IBM and Cisco to put in place a dedicated customer migration plan that will allow our customers to take the fullest advantage of IBM, Cisco and Synergy's strengths in network/ Internet solutions."

Synergy is currently talking with IBM and Cisco about the future structure of its relationship with both vendors. "We are in discussions about the proposed channel migration plan, including several aspects such as training, support and product deployment," said Kewish.

Peter Kazacos, managing director of Kaz Computer Services, was still unsure what impact the deal will have on his business, but as a joint IBM and Cisco partner is not too worried. "We feel we are in a very good position in the transition from one [vendor] to the other," he said.

However, Kazacos is not sure which of the two vendors' product lines will exist in the future. He expects to clarify the situation in discussions with IBM executives this week.

"I think a lot of those decisions have caught them by surprise locally," he said.

Kazacos said his priority is to communicate any changes to his customer base once the vendors have settled on a position.

IBM and Cisco are attempting to both reassure and educate all of their partners.

According to Fred McNeese, director of external communications for IBM, Asia-Pacific, IBM and Cisco will talk to partners individually.

"IBM and Cisco will work together to create a channel migration plan for existing IBM business partners, and we expect to have this completed within 30 days. We will work directly with each partner to help them understand the implications and opportunities this announcement presents," he said.

Walsh expects that Cisco's partner base will remain relatively untouched. "If you are a Cisco partner today you will still sell Cisco products. IBM will become a Cisco partner and undergo a massive training and accreditation program." He was unsure if this training program included IBM partners but said any company wanting to sell Cisco products could become certified to do so.

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