(UPDATE 10/10: Cisco denies it all, telling The Register, “VCE customers and partners can be assured that they have the full commitment of Cisco and EMC.”)
CRN reported the story late yesterday, noting that Cisco would supposedly keep its 35 percent stake in VCE and would continue selling its switches and Unified Computing System (UCS) servers to the joint venture.
Miniman says he’s heard no official word about VCE’s future, “but for the last six months to a year, I’ve been hearing rumors Cisco’s not going to put money into it any more.” (Cisco, EMC, and VCE either didn’t comment to CRN or gave them a statement equivalent to a no-comment.)
One reason for the rumor’s popularity is that people have been predicting VCE’s collapse since it started in 2010, assuming Cisco and EMC/VMware couldn’t get along forever. But VCE has grown substantially, with revenues of $1.3 billion last year and a run rate of $1.8 billion this year. It’s now got about 1,500 employees.
“The quietest billion-dollar company I’ve ever seen,” Miniman says. “It’s really been a weird organization that none of us fully understand. But as long as they keep growing, nobody’s going to pull the plug on them.”
VCE has established a sturdy foundation that includes its own software, its own marketing and sales plans, and momentum in the channel, Miniman says.
Profitability has eluded VCE so far, though. SEC filings from EMC and Cisco refer to the companies’ share of VCE’s net losses; for EMC, which owns a 58 percent stake, that amounted to $298 million in 2013. But note that EMC and the other partners sell their products to VCE; in EMC’s case, that can nicely counterbalance its share of VCE’s losses.
As of June, EMC had contributed $1.25 billion in funding to VCE since inception. Cisco, as of August, has contributed $644 million.
What Cisco gets out of that investment is a channel for selling UCS. “The largest configurations of UCS are probably all Vblocks,” purchased in large bundles, Miniman says. Most UCS customers prefer to buy the setup with storage included and already configured, he says. Given its ongoing tensions with EMC and VMware, it wouldn’t be surprising to see Cisco try to line up other storage partners for Vblocks-style bundling.
Cisco also got its way when it comes to software-defined networking (SDN), as last year, VCE announced it would support Cisco’s Application-Centric Infrastructure (ACI). VMware’s NSX can run on Vblocks but doesn’t get direct VCE support.
It’s tempting to assume VMware’s August introduction of EVO might also prompt Cisco to step back from VCE. But EVO isn’t a hardware play for VMware; it’s a reference architecture for converged computing and storage, and the company plans to license it out. VCE could end up being a licensee, in fact.
On EMC’s side, the company announced today a plan to launch five federation-wide products, each apparently bundling products from EMC and its subsidiaries. The first of these is the Federation Software-Defined Data Center, combining VMware’s hypervisior, network management, and NSX with Pivotal’s platform-as-a-service (PaaS), all meant to work with EMC’s storage and data protection.