A leading US analyst has warned enterprise users to be cautious when dealing with the majority of networking vendors, predicting troubled times ahead for tier-two and tier-three vendors.
In a statement sent to end users and the press, Meta Group analyst Chris Kozup said that tier-two and tier-three network vendors are unable to effectively compete with Cisco. Kozup expects that the enterprise networking market is due for some major consolidation, and in the process Cisco will be able to expand its pricing premium on networking gear.
Helping Kozup come to such a conclusion is the series of recent dramas at Enterasys Networks, where accounting irregularities, an SEC investigation, slumping sales, the resignation of its CEO, COO and vice chairman and a 30 per cent staff cut all point to hard times ahead.
And the hard times are not just going to hit Enterasys, Kozup said. He believes that any number of enterprise networking vendors -- Nortel, Extreme, Avaya, 3Com, and Foundry, for example -- will struggle to compete.
However, Mike Clarke, managing director of 3Com Australia, said there are several effective enterprise networking vendors and that talking down their competencies is a mistake. He said second and third-tier networking vendors will continue to survive and make inroads into the market because customers are concerned about value for money.
"Budgets are not bottomless pits anymore and customers are doing a lot more looking around than 12 months ago," Clarke said. "To say it's a one-horse race is far from correct."
If networking vendors continue to struggle in competing with Cisco, expect hardware and services prices to rise, Kozup said. The upside for any Cisco channel partner is that analysts are telling end users that buying through a Cisco reseller rather than buying direct can yield savings of around 5 to 10 per cent.
Carissa Andrew-Smith, regional marketing and communications manager for Meta Group Australia, said Cisco did not commission the research and does not fund such studies in any way.
When asked whether it was appropriate for an analyst to inform end users that they have little choice but to stick with the market leader, Kozup said his job is to recommend the best solution to clients. "Vendor viability is a very real concern in this market -- let's take 3Com and Marconi as prime examples. Both exited the high-end enterprise ethernet switching and routing markets, and left customers stranded. Vendor viability is the number one selection criterion for our customers when choosing a strategic campus-LAN vendor."
Meanwhile, a number of second and third-tier networking vendors have rebuffed the analyst's findings. To find out more, read the April 24 issue of ARN, out now.