Although perhaps not yet recognised as a major player in the IP networking industry, IBM is determined to increase its marketshare in this area. And according to IBM's Ron Ercanbrack, vice-president of sales and operations for its worldwide networking group, it is hoping to take a chunk out of Cisco's marketshare while doing so.
According to Ercanbrack, IBM holds a very compelling argument in its commitment to standards, something he believes its principal rival can't match. "My fundamental problem with Cisco is that they don't want to play with the rest of us. When conforming to a set of standards that allow customers to make independent investment decisions about their network hardware, we want to level the playing field like we did in PCs. So what we want to do is set up standards in the industry. Cisco's been invited, and they've chosen not to play."
Levelling the field
Ercanbrack said the formation of the Networking Inter-operability Alliance (NIA) with Bay Networks and 3Com in May last year was a significant step towards creating that level playing field. "We all contribute some money and we have testing labs in a few places. When we make new announcements, such as new routers, we test them with Bay and 3Com products." Cascade and Xylan have also joined the alliance.
Ercanbrack feels that certain Cisco initiatives, such as IOS, do not represent standards-based developments. However, Cisco Systems Australia's managing director Scott Ferguson feels it is important to look at how standards develop. "I think as far as IOS is concerned, I'd compare IOS to TCP/IP a few years ago, where TCP/IP wasn't the recognised standard, it was a de facto standard. And I think in the world of wide area networking IOS is now a de facto standard."
While alliances such as the NIA may contain a certain marketing value, Ercanbrack says customers really do care that their networking solutions are vendor independent. "I think customers do care if it's going to block them from making some alternate decisions in the future. Customers want to know that if they make a decision today on a router that has a value proposition that exceeds what I can offer, they can replace my router and not have to totally re-engineer their network. And that's why I think having a standards base and networking alliances is important for the industry and important for customers."
And while Ercanbrack believes this argument is important for end-users, he also feels it will help IBM in its aim to attract resellers. "First of all most resellers want to do the right thing for the customers, because they want to keep that business. The second thing the reseller wants to know is that they are going to get a decent margin. And the biggest concern that I hear from Cisco's resellers is that Cisco's got 69 per cent gross profit margin, but when I talk to business partners, it's nowhere close to that. You can count on one or two hands the margins that they are getting out of Cisco."
In response, Ferguson said in a two-tier distribution environment it is not uncommon in many cases for resellers to only make margins in the low teens, and added: "We wouldn't have the reseller base that we do and the enthusiasm that we do if we only had a margin you can count on one or two hands."